[Federal Register Volume 85, Number 104 (Friday, May 29, 2020)]
[Proposed Rules]
[Pages 32460-32975]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-10122]



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Vol. 85

Friday,

No. 104

May 29, 2020

Part II





Department of Health and Human Services





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Centers for Medicare & Medicaid Services





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





 Medicare Program; Hospital Inpatient Prospective Payment Systems for 
Acute Care Hospitals and the Long Term Care Hospital Prospective 
Payment System and Proposed Policy Changes and Fiscal Year 2021 Rates; 
Quality Reporting and Medicare and Medicaid Promoting Interoperability 
Programs Requirements for Eligible Hospitals and Critical Access 
Hospitals; Proposed Rule

  Federal Register / Vol. 85 , No. 104 / Friday, May 29, 2020 / 
Proposed Rules  

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 405, 412, 413, 417, 476, 480, 484, and 495

[CMS-1735-P]
RIN 0938-AU11


Medicare Program; Hospital Inpatient Prospective Payment Systems 
for Acute Care Hospitals and the Long-Term Care Hospital Prospective 
Payment System and Proposed Policy Changes and Fiscal Year 2021 Rates; 
Quality Reporting and Medicare and Medicaid Promoting Interoperability 
Programs Requirements for Eligible Hospitals and Critical Access 
Hospitals

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

ACTION: Proposed rule.

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SUMMARY: We are proposing to revise the Medicare hospital inpatient 
prospective payment systems (IPPS) for operating and capital-related 
costs of acute care hospitals to implement changes arising from our 
continuing experience with these systems for FY 2021 and to implement 
certain recent legislation. We also are proposing to make changes 
relating to Medicare graduate medical education (GME) for 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 2021. We are proposing to update the 
payment policies and the annual payment rates for the Medicare 
prospective payment system (PPS) for inpatient hospital services 
provided by long-term care hospitals (LTCHs) for FY 2021. In this FY 
2021 IPPS/LTCH PPS proposed rule, we are proposing changes to the new 
technology add-on payment pathway for certain antimicrobial products 
and other changes to new technology add-on payment policies, and to 
collect market-based rate information on the Medicare cost report for 
cost reporting periods ending on or after January 1, 2021, and 
requesting comment on a potential market based MS-DRG relative weight 
methodology beginning in FY 2024 that we may adopt in this rulemaking. 
We are proposing to establish new requirements or revise existing 
requirements for quality reporting by acute care hospitals and PPS-
exempt cancer hospitals. We also are proposing to establish new 
requirements and revise existing requirements for eligible hospitals 
and critical access hospitals (CAHs) participating in the Medicare and 
Medicaid Promoting Interoperability Programs. We are providing 
estimated and newly established performance standards for the Hospital 
Value-Based Purchasing (VBP) Program, and proposing updated policies 
for the Hospital Readmissions Reduction Program and the Hospital-
Acquired Condition (HAC) Reduction Program.

DATES: To be assured consideration, comments must be received at one of 
the addresses provided in the ADDRESSES section, no later than 5 p.m. 
EDT on July 10, 2020.

ADDRESSES: In commenting, please refer to file code CMS-1735-P. Because 
of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission.
    Comments, including mass comment submissions, must be submitted in 
one of the following three ways (please choose only one of the ways 
listed):
    1. Electronically. You may (and we encourage you to) submit 
electronic comments on this regulation to http://www.regulations.gov. 
Follow the instructions under the ``submit a comment'' tab.
    2. By regular mail. You may mail written comments to the following 
address ONLY: Centers for Medicare & Medicaid Services, Department of 
Health and Human Services, Attention: CMS-1735-P, P.O. Box 8013, 
Baltimore, MD 21244-1850.
    Please allow sufficient time for mailed comments to be received 
before the close of the comment period.
    3. By express or overnight mail. You may send written comments via 
express or overnight mail to the following address ONLY: Centers for 
Medicare & Medicaid Services, Department of Health and Human Services, 
Attention: CMS-1735-P, Mail Stop C4-26-05, 7500 Security Boulevard, 
Baltimore, MD 21244-1850.
    For information on viewing public comments, we refer readers to the 
beginning of the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT: Donald Thompson, (410) 786-4487, and 
Michele Hudson, (410) 786-4487, Operating Prospective Payment, MS-DRGs, 
Wage Index, New Medical Service and Technology Add-On Payments, 
Hospital Geographic Reclassifications, Graduate Medical Education, 
Capital Prospective Payment, Excluded Hospitals, Medicare 
Disproportionate Share Hospital (DSH) Payment Adjustment, Medicare-
Dependent Small Rural Hospital (MDH) Program, Low-Volume Hospital 
Payment Adjustment, and Critical Access Hospital (CAH) Issues.
    Michele Hudson, (410) 786-4487 and Emily Lipkin, (410) 786-3633, 
Long-Term Care Hospital Prospective Payment System and MS-LTC-DRG 
Relative Weights Issues.
    Emily Forrest, (202) 205-1922, Market Based Data Collection and 
Potential Market Based MS-DRG Relative Weight Methodology Issues.
    Siddhartha Mazumdar, (410) 786-6673, Rural Community Hospital 
Demonstration Program Issues.
    Jeris Smith, (410) 786-0110, Frontier Community Health Integration 
Project Demonstration Issues.
    Erin Patton, (410) 786-2437, Hospital Readmissions Reduction 
Program--Administration Issues.
    James Poyer, (410) 786-2261, Hospital Readmissions Reduction 
Program--Readmissions--Measures Issues.
    Michael Brea, (410) 786-4961, Hospital-Acquired Condition Reduction 
Program--Administration Issues.
    Annese Abdullah-Mclaughlin, (410) 786-2995, Hospital-Acquired 
Condition Reduction Program--Measures Issues.
    Julia Venanzi, (410) 786-1471 and Katrina Hoadley, (410) 786-8490, 
Hospital Inpatient Quality Reporting Program.
    Julia Venanzi, (410) 786-1471 and Pamela Brown (410) 786-3940, 
Hospital Value-Based Purchasing Program.
    Katrina Hoadley, (410) 786-8490, Hospital Inpatient Quality 
Reporting and Hospital Value-Based Purchasing--Measures Issues Except 
Hospital Consumer Assessment of Healthcare Providers and Systems 
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.
    Erin Patton, (410) 786-2437 and Ronique Evans, (410) 786-1000, PPS-
Exempt Cancer Hospital Quality Reporting Issues.
    Mary Pratt, (410) 786-6867, Long-Term Care Hospital Quality Data 
Reporting Issues.
    Dylan Podson (410) 786-5031, Jessica Warren (410) 786-7519, and 
Elizabeth Holland, (410) 786-1309, Promoting Interoperability Programs.
    Steve Rubio, (410) 786-1782, Reimbursement for Submission of 
Patient Records to Beneficiary and Family Centered Care Quality 
Improvement Organizations (BFCC-QIOs) in Electronic Format.

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    Maude Shepard, (410) 786-5598, Provider Reimbursement Review Board 
Electronic Filing.
    Kellie Shannon, (410) 786-0416 and Bob Kuhl, (443) 896-8410, 
Medicare Bad Debt.

SUPPLEMENTARY INFORMATION: 
    Inspection of Public Comments: All comments received before the 
close of the comment period are available for viewing by the public, 
including any personally identifiable or confidential business 
information that is included in a comment. We post all comments 
received before the close of the comment period on the following 
website as soon as possible after they have been received: http://www.regulations.gov/. Follow the search instructions on that website to 
view public comments.

Tables Available Through the Internet on the CMS Website

    The IPPS tables for this FY 2021 proposed rule are available 
through the internet on the CMS website at: https://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 2021 IPPS 
Proposed Rule Home Page'' or ``Acute Inpatient--Files for Download.'' 
The LTCH PPS tables for this FY 2021 proposed rule are available 
through the internet on the CMS website at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/LongTermCareHospitalPPS/index.html under the list item for Regulation Number CMS-1735-P. For 
further details on the contents of the tables referenced in this 
proposed rule, we refer readers to section VI. of the Addendum to this 
FY 2021 IPPS/LTCH PPS proposed rule.
    Readers who experience any problems accessing any of the tables 
that are posted on the CMS websites, as previously identified, should 
contact Michael Treitel at (410) 786-4552.

I. Executive Summary and Background

A. Executive Summary

1. Purpose and Legal Authority
    This FY 2021 IPPS/LTCH PPS proposed rule would make payment and 
policy changes under the Medicare inpatient prospective payment systems 
(IPPS) for operating and capital-related costs of acute care hospitals 
as well as for certain hospitals and hospital units excluded from the 
IPPS. In addition, it would make payment and policy changes for 
inpatient hospital services provided by long-term care hospitals 
(LTCHs) under the long-term care hospital prospective payment system 
(LTCH PPS). This proposed rule also would make policy changes to 
programs associated with Medicare IPPS hospitals, IPPS-excluded 
hospitals, and LTCHs. In this FY 2021 proposed rule, we are continuing 
policies to address wage index disparities impacting low wage index 
hospitals; and including proposals related to new technology add-on 
payments for certain antimicrobial products, other proposals related to 
new technology add-on payments, and to collect market-based rate 
information on the Medicare cost report for cost reporting periods 
ending on or after January 1, 2021, and requesting comment on a 
potential market based MS-DRG relative weight methodology beginning in 
FY 2024 that we may adopt in this rulemaking.
    We are proposing to establish new requirements and revise existing 
requirements for quality reporting by acute care hospitals and PPS-
exempt cancer hospitals that participate in Medicare. We also are 
proposing to establish new requirements and revise existing 
requirements for eligible hospitals and CAHs participating in the 
Medicare and Medicaid Promoting Interoperability Programs.
    We are providing estimated and newly established performance 
standards for the Hospital Value-Based Purchasing (VBP) Program, and 
proposing updated policies for the Hospital Readmissions Reduction 
Program and the Hospital-Acquired Condition (HAC) Reduction Program.
    Under various statutory authorities, we either discuss continued 
program implementation or are proposing to make changes to the Medicare 
IPPS, to the LTCH PPS, and to other related payment methodologies and 
programs for FY 2021 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 Public Law (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, which provides for the 
establishment of 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, 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 amended by section 15002 of 
the 21st

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Century Cures Act, which establishes the Hospital Readmissions 
Reduction Program. Under the program, payments for discharges from an 
applicable hospital as defined under section 1886(d) of the Act will be 
reduced to account for certain excess readmissions. Section 15002 of 
the 21st Century Cures Act directs the Secretary to compare hospitals 
with respect to the number of their Medicare-Medicaid dual-eligible 
beneficiaries (dual-eligibles) 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; 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. 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 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. Waiver of the 60-Day Delayed Effective Date for the Final Rule
    The United States is responding to an outbreak of respiratory 
disease caused by a novel (new) coronavirus that has now been detected 
in more than 190 locations internationally, including in all 50 States 
and the District of Columbia. The virus has been named ``SARS-CoV-2'' 
and the disease it causes has been named ``coronavirus disease 2019'' 
(abbreviated ``COVID-19'').
    Due to the significant devotion of resources to the COVID-19 
response, as discussed and for the reasons discussed in section XI.D. 
of the preamble of this propose rule, we are hereby waiving the 60-day 
delay in the effective date of the final rule, and replacing it with a 
30-day delay in the effective date of the final rule.
3. Summary of the Major Provisions
    The following is a summary of the major provisions in this proposed 
rule. In general, these major provisions are being proposed as part of 
the annual update to the payment policies and payment rates, consistent 
with the applicable statutory provisions. A general summary of the 
proposed changes in this proposed rule is presented in section I.D. of 
the preamble of this proposed rule.
a. Proposed 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 2021, we are proposing to make an adjustment of 
+ 0.5 percent to the standardized amount.
b. Proposed Changes to the New Technology Add-On Payment Policy for 
Certain Antimicrobial Products
    In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42292 through 
42297), we established an alternative inpatient new technology add-on 
payment pathway for certain antimicrobial products in light of the 
significant concerns related to the ongoing public health crisis 
represented by antimicrobial resistance. Under this alternative 
pathway, if a medical product receives the FDA's Qualified Infectious 
Disease Product (QIDP) designation and received FDA marketing 
authorization, such a product will be considered new and not 
substantially similar to an existing technology for purposes of new 
technology add-on payment under the IPPS and will not need to meet the 
requirement that it represent an advance that substantially improves, 
relative to technologies previously available, the diagnosis or 
treatment of Medicare beneficiaries.
    In light of recent information that continues to highlight the 
significant concerns and impacts related to antimicrobial resistance 
and emphasizes the continued importance of this issue both with respect 
to Medicare beneficiaries and public health overall, we are proposing 
changes to the new technology add-on payment policy for certain 
antimicrobials for FY 2021.
    As discussed in section II.G.9.b. of the preamble of this proposed 
rule, we are proposing to expand our alternative new technology add-on 
payment pathway for QIDPs to include products approved through FDA's 
Limited Population Pathway for Antibacterial and Antifungal Drugs (LPAD 
pathway). Under this proposal, for applications received for new 
technology add-on payments for FY 2022 and subsequent fiscal years, if 
an antimicrobial product is approved through FDA's LPAD pathway, it 
will be considered new and not substantially similar to an existing 
technology for purposes of the new technology add-on payment under the 
IPPS, and will not need to meet the requirement that it represent an 
advance that substantially improves, relative to technologies 
previously available, the diagnosis or treatment of Medicare 
beneficiaries.
    Under current policy, a new technology must receive FDA marketing

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authorization (for example, approval or clearance) by July 1 to be 
considered in the final rule in order to allow complete review and 
consideration of all the information to determine if the technology 
meets the new technology add-on payment criteria. For the reasons 
discussed in section II.G.9.c. of the preamble of this proposed rule, 
we are proposing to provide for conditional new technology add-on 
payment approval for products designated as QIDPs that do not receive 
FDA marketing authorization by July 1 and products that do not receive 
approval through FDA's LPAD pathway by July 1 but otherwise meet the 
applicable add-on payment criteria. Under this proposal, cases 
involving eligible antimicrobial products would begin receiving the new 
technology add-on payment sooner, effective for discharges the quarter 
after the date of FDA marketing authorization provided that the 
technology receives FDA marketing authorization by July 1 of the 
particular fiscal year for which the applicant applied for new 
technology add-on payments.
c. Continuation of the Low Wage Index Hospital Policy
    To help mitigate wage index disparities between high wage and low 
hospitals, in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42326 through 
42332), we adopted a policy to provide an opportunity for certain low 
wage index hospitals to increase employee compensation by increasing 
the wage index values for certain hospitals with low wage index values 
(the low wage index hospital policy). This policy was adopted in a 
budget neutral manner through an adjustment applied to the standardized 
amounts for all hospitals. We also indicated that this policy would be 
effective for at least 4 years, beginning in FY 2020, in order to allow 
employee compensation increases implemented by these hospitals 
sufficient time to be reflected in the wage index calculation. 
Therefore, for FY 2021, we are continuing the low wage index hospital 
policy, and also applying this policy in a budget neutral manner by 
proposing an adjustment to the standardized amounts.
d. Proposed DSH Payment Adjustment and Additional Payment for 
Uncompensated Care
    Section 3133 of the Affordable Care Act modified the Medicare 
disproportionate share hospital (DSH) payment methodology beginning in 
FY 2014. Under section 1886(r) of the Act, which was added by section 
3133 of the Affordable Care Act, starting in FY 2014, DSHs receive 25 
percent of the amount they previously would have received under the 
statutory formula for Medicare DSH payments in section 1886(d)(5)(F) of 
the Act. The remaining amount, equal to 75 percent of the amount that 
otherwise would have been paid as Medicare DSH payments, is paid as 
additional payments after the amount is reduced for changes in the 
percentage of individuals that are uninsured. Each Medicare DSH will 
receive an additional payment based on its share of the total amount of 
uncompensated care for all Medicare DSHs for a given time period.
    In this proposed rule, we set forth our proposed estimates of the 
three factors used to determine uncompensated care payments for FY 
2021. We are proposing to continue 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. In addition, we are proposing to use a single year of data on 
uncompensated care costs from Worksheet S-10 of the FY 2017 cost 
reports to calculate Factor 3 in the FY 2021 methodology for all 
eligible hospitals with the exception of Indian Health Service (IHS) 
and Tribal hospitals and Puerto Rico hospitals. For IHS and Tribal 
hospitals and Puerto Rico hospitals we are proposing to continue to use 
the low-income insured days proxy to calculate Factor 3 for these 
hospitals for 1 more year. Furthermore, we are proposing to calculate 
Factor 3 for all subsequent fiscal years for all eligible hospitals, 
except IHS and Tribal hospitals, using the most recent available single 
year of audited Worksheet S-10 data. We are also making other 
methodological proposals for calculating Factor 3 for FY 2021.
e. Reduction of Hospital Payments for Excess Readmissions
    We are proposing to make changes to policies for the Hospital 
Readmissions Reduction Program, which was established under section 
1886(q) of the Act, as 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 2017 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), elective primary total hip arthroplasty/total knee 
arthroplasty (THA/TKA), and coronary artery bypass graft (CABG) 
surgery. In this FY 2021 IPPS/LTCH PPS proposed rule, we are proposing 
the following policies: (1) To automatically adopt applicable periods 
beginning with the FY 2023 program year and all subsequent program 
years, unless otherwise specified by the Secretary; and (2) to update 
the definition of applicable period at 42 CFR 412.152 to align with 
this proposal.
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. In 
this FY 2021 IPPS/LTCH PPS proposed rule, we are providing estimated 
and newly established performance standards for certain measures for 
the FY 2023 program year, the FY 2024 program year, the FY 2025 program 
year, and the FY 2026 program year.
g. Hospital-Acquired Condition (HAC) Reduction Program
    Section 1886(p) of the 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 hospitals that rank 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. In this FY 2021 IPPS/LTCH PPS proposed rule, we are proposing the 
following policies: (1) To automatically adopt applicable periods 
beginning with the FY 2023 program year and all subsequent program 
years, unless otherwise specified by the secretary, (2) to make 
refinements to the process for validation of HAC Reduction Program 
measure data in alignment with the Hospital IQR Program validation 
proposals; and (3) to update the definition of applicable period at 42 
CFR 412.170 to align with the proposal to automatically adopt 
applicable periods.
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

[[Page 32464]]

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 FY 2021 IPPS/LTCH PPS proposed rule, we are proposing 
reporting, submission, and public display requirements for eCQMs, 
including policies to: (1) Progressively increase the numbers of 
quarters of eCQM data reported, from one self-selected quarter of data 
to four quarters of data over a 3-year period, by requiring hospitals 
to report: (a) Two quarters of data for the CY 2021 reporting period/FY 
2023 payment determination; (b) three quarters of data for the CY 2022 
reporting period/FY 2024 payment determination; and (c) four quarters 
of data beginning with the CY 2023 reporting period/FY 2025 payment 
determination and for subsequent years, while continuing to allow 
hospitals to report: (i) Three self-selected eCQMs, and (ii) the Safe 
Use of Opioids eCQM; and (2) begin public display of eCQM data 
beginning with data reported by hospitals for the CY 2021 reporting 
period and for subsequent years. The eCQM-related proposals are in 
alignment with proposals under the Promoting Interoperability Program. 
We also are proposing to expand the requirement to use EHR technology 
certified to the 2015 Edition for submitting data on not only the 
previously finalized Hybrid Hospital-Wide Readmission measure, but all 
hybrid measures in the Hospital IQR Program.
    We also are proposing to make several changes to streamline 
validation processes under the Hospital IQR Program. We are proposing 
to: (1) Require the use of electronic file submissions via a CMS-
approved secure file transmission process and no longer allow the 
submission of paper copies of medical records or copies on digital 
portable media such as CD, DVD, or flash drive; (2) combine the 
validation processes for chart-abstracted measures and eCQMs by: (a) 
Aligning data submission quarters; (b) combining hospital selection, 
including: (i) Reducing the pool of hospitals randomly selected for 
chart-abstracted measure validation; and (ii) integrating and applying 
targeting criteria for eCQM validation; (c) removing previous exclusion 
criteria; and (d) combining scoring processes by providing one combined 
validation score for the validation of chart-abstracted measures and 
eCQMs with the eCQM portion of the combined score weighted at zero; and 
(3) formalize the process for conducting educational reviews for eCQM 
validation in alignment with current processes for providing feedback 
for chart-abstracted validation results.
h. PPS-Exempt Cancer Hospital Quality Reporting Program
    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.
    In this FY 2021 IPPS/LTCH PPS proposed rule, we are proposing to 
refine two existing program measures, Catheter-associated Urinary Tract 
infection (CAUTI) (NQF #0138) and Central Line-associated Bloodstream 
Infection (CLABSI) (NQF #0139), to adopt the updated SIR calculation 
methodology developed by the Center for Disease Control and Prevention 
(CDC) that calculates rates using updated HAI baseline data that are 
further stratified by patient location. We are also proposing to 
publicly display the refined versions of the measures beginning in the 
fall of CY 2022.
i. Medicare and Medicaid Promoting Interoperability Programs
    For purposes of an increased level of stability, reducing the 
burden on eligible hospitals and CAHs, and clarifying certain existing 
policies, we are proposing several changes to the Medicare Promoting 
Interoperability Program. Specifically, we are proposing: (1) An EHR 
reporting period of a minimum of any continuous 90-day period in CY 
2022 for new and returning participants (eligible hospitals and CAHs); 
(2) to maintain the Electronic Prescribing Objective's Query of PDMP 
measure as optional and worth 5 bonus points in CY 2021; (3) to modify 
the name of the Support Electronic Referral Loops by Receiving and 
Incorporating Health Information measure; (4) to progressively increase 
the number of quarters for which hospitals are required to report eCQM 
data, from the current requirement of one self-selected calendar 
quarter of data, to four calendar quarters of data, over a 3-year 
period. Specifically, we propose to require: (a) 2 self-selected 
calendar quarters of data for the CY 2021 reporting period; (b) 3 self-
selected calendar quarters of data for the CY 2022 reporting period; 
and (c) 4 self-selected calendar quarters of data beginning with the CY 
2023 reporting period, where the proposed submission period for the 
Medicare Promoting Interoperability Program would be the 2 months 
following the close of the CY 2023 (ending February 28, 2024); (5) to 
begin publicly reporting eCQM performance data beginning with the eCQM 
data reported by eligible hospitals and CAHs for the reporting period 
in CY 2021 on the Hospital Compare and/or data.medicare.gov websites or 
successor websites; (6) to correct errors and amend regulation text 
under 495.104(c)(5)(viii)(B) through (D) regarding transition factors 
under section 1886(n)(2)(E)(i) for the incentive payments for Puerto 
Rico eligible hospitals; and (7) to correct errors and amend regulation 
text under Sec.  495.20(e)(5)(iii) and (l)(11)(ii)(C)(1) for regulatory 
citations for the ONC certification criteria. We are amending our 
regulation texts as necessary to incorporate these proposed changes.
j. Market-Based MS-DRG Relative Weight Proposed Data Collection and 
Potential Change in Methodology for Calculating MS-DRG Relative Weights
    As discussed in section IV.P. of the preamble of this proposed 
rule, in order to reduce the Medicare program's reliance on the 
hospital chargemaster, thereby advancing the critical goals of 
Executive Orders 13813, Promoting Healthcare Choice and Competition 
Across the United States and 13890, Protecting and Improving Medicare 
for Our Nation's Seniors, and to support the development of a market-
based approach to payment under the Medicare FFS system, we are 
proposing that hospitals would be required to report certain market-
based payment rate information on their Medicare cost report for cost 
reporting periods ending on or after January 1, 2021, to be used in a 
potential change to the methodology for calculating the IPPS MS-DRG 
relative weights to reflect relative market-based pricing
    We are specifically proposing that hospitals would report on the 
Medicare cost report: (1) The median payer-specific negotiated charge 
that the hospital has negotiated with all of its Medicare Advantage 
(MA) organizations (also referred to as MA organizations) payers, by 
MS-DRG; and (2) the median payer-specific negotiated charge the 
hospital has negotiated with all of its third-party payers, which would 
include MA organizations, by MS-DRG. The market-based rate information 
we are proposing to collect on the Medicare cost report would be the 
median of the payer-specific negotiated charges by MS-DRG, as described 
previously, for a hospital's MA organization payers and all of its 
third party payers. The payer-

[[Page 32465]]

specific negotiated charges used by hospitals to calculate these 
medians would be the payer-specific negotiated charges for service 
packages that hospitals are required to make public under the 
requirements we finalized in the Hospital Price Transparency Final Rule 
(84 FR 65524) that can be cross-walked to an MS-DRG. We believe that 
because hospitals are already required to publically report payer-
specific negotiated charges, in accordance with the Hospital Price 
Transparency Final Rule, that the additional calculation and reporting 
of the median payer-specific negotiated charge will be less burdensome 
for hospitals.
    We are also seeking comment on a potential change to the 
methodology for calculating the IPPS MS-DRG relative weights to 
incorporate this market-based rate information, beginning in FY 2024, 
which we may consider adopting in the FY 2021 IPPS/LTCH PPS final rule. 
This potential MS-DRG relative weight methodology would utilize the 
proposed median payer-specific negotiated charge information, collected 
on the cost report, for calculating the MS-DRG relative weights.
4. Summary of Costs and Benefits
     Proposed 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 percentage point 
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 percentage point by section 15005 
of the 21st Century Cures Act.) For FY 2021, we are proposing to make 
an adjustment of +0.5 percentage point to the standardized amount 
consistent with the MACRA.
     Proposed Changes to the New Technology Add-On 
Payment Policy for Certain Antimicrobial Products. In light of recent 
information that continues to highlight the significant concerns and 
impacts related to antimicrobial resistance and emphasizes the 
continued importance of this issue both with respect to Medicare 
beneficiaries and public health overall, we are proposing changes to 
the new technology add-on payment policy for certain antimicrobials for 
FY 2021. We are proposing to expand our alternative new technology add-
on payment pathway for QIDPs to include products approved through FDA's 
Limited Population Pathway for Antibacterial and Antifungal Drugs (LPAD 
pathway). Under this proposal, for applications received for new 
technology add-on payments for FY 2022 and subsequent fiscal years, if 
an antimicrobial product is approved through FDA's LPAD pathway, it 
will be considered new and not substantially similar to an existing 
technology for purposes of the new technology add-on payment under the 
IPPS, and will not need to meet the requirement that it represent an 
advance that substantially improves, relative to technologies 
previously available, the diagnosis or treatment of Medicare 
beneficiaries.
    We are also proposing to provide for conditional new technology 
add-on payment approval for products designated as QIDPs that do not 
receive FDA marketing authorization by July 1 and products that do not 
receive approval through FDA's LPAD pathway by July 1 (the current 
deadline for consideration in the final rule) but otherwise meet the 
applicable add-on payment criteria. Under this proposal, cases 
involving eligible antimicrobial products would begin receiving the new 
technology add-on payment sooner, effective for discharges the quarter 
after the date of FDA marketing authorization provided that the 
technology receives FDA marketing authorization by July 1 of the 
particular fiscal year for which the applicant applied for new 
technology add-on payments. Given the relatively recent introduction of 
the FDA's LPAD pathway there have not been any drugs that were approved 
under the FDA's LPAD pathway that applied for a new technology add-on 
payment under the IPPS. If all of the future LPADs that would have 
applied for new technology add-on payments would have been approved 
under existing criteria, this proposal has no impact relative to 
current policy. To the extent that there are future LPADs that are the 
subject of applications for new technology add-on payments, and those 
applications would have been denied under the current new technology 
add-on payment criteria, this proposal is a cost, but that cost is not 
estimable. Therefore, it is not possible to quantify the impact of 
these proposed policies.
     Wage Index Disparities Between High and Low Wage Index 
Hospitals. As discussed in section III.G.3. of the preamble of this 
proposed rule, we are continuing to reduce the disparity between high 
and low wage index hospitals by increasing the wage index values for 
certain hospitals with low wage index values and proposing to apply a 
budget neutrality adjustment to the standardized amount so that 
increase is implemented in a budget neutral manner.
     Proposed Medicare DSH Payment Adjustment and Additional 
Payment for Uncompensated Care. For FY 2021, we are proposing to update 
our estimates of the three factors used to determine uncompensated care 
payments. We are proposing to continue to use uninsured estimates 
produced by OACT as part of the development of the NHEA in the 
calculation of Factor 2. We also are proposing to use a single year of 
data on uncompensated care costs from Worksheet S-10 for FY 2017 to 
determine Factor 3 for FY 2021. To determine the amount of 
uncompensated care for purposes of calculating Factor 3 for Puerto Rico 
hospitals and Indian Health Service and Tribal hospitals, we are 
proposing to continue to use only data regarding low-income insured 
days for FY 2013. We project that the amount available to distribute as 
payments for uncompensated care for FY 2021 would decrease by 
approximately $534 million, as compared to our estimate of the 
uncompensated care payments that will be distributed in FY 2020. The 
payments have redistributive effects, based on a hospital's 
uncompensated care amount relative to the uncompensated care amount for 
all hospitals that are projected to be eligible to receive Medicare DSH 
payments, and the calculated payment amount is not directly tied to a 
hospital's number of discharges.
     Proposed Update to the LTCH PPS Payment Rates and Other 
Payment Policies. Based on the best available data for the 360 LTCHs in 
our database, we estimate that the proposed changes to the payment 
rates and factors that we present in the preamble of and Addendum to 
this proposed rule, which reflect the end of the transition of the 
statutory application of the site neutral payment rate and the proposed 
update to the LTCH PPS standard Federal payment rate for FY 2021, would 
result in an estimated decrease in payments in FY 2021 of approximately 
$36 million.
     Changes to the Hospital Readmissions Reduction Program. 
For FY 2021 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), elective primary total 
hip arthroplasty/total knee arthroplasty (THA/TKA), and coronary artery 
bypass graft (CABG) surgery. For the proposed rule, we are not 
providing updated estimates based on the proxy file due to timing. 
Instead, we reiterate the information contained in the FY 2020 IPPS/
LTCH PPS final rule, in

[[Page 32466]]

which we estimated that 2,583 hospitals would have their base operating 
DRG payments reduced by their FY 2020 hospital-specific payment 
adjustment factors. As a result, we estimated that the Hospital 
Readmissions Reduction Program will save approximately $563 million in 
FY 2020. We will update these estimates in the FY 2021 IPPS/LTCH PPS 
final rule as the data become available.
     Value-Based Incentive Payments under the Hospital VBP 
Program. We estimate that there will be no net financial impact to 
participating hospitals under the Hospital VBP Program for the FY 2021 
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 
2021 program year and, therefore, the estimated amount available for 
value-based incentive payments for FY 2021 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. We are making no changes to 
the scoring methodology, which will continue to use the Winsorized z-
score and equal measure weights approaches to determine the worst-
performing quartile of hospitals. Any significant impact due to the HAC 
Reduction Program changes for FY 2021, including which hospitals will 
receive the adjustment, will depend on the actual experience of 
hospitals in the Program.
     Changes to the Hospital Inpatient Quality Reporting (IQR) 
Program. Across 3,300 IPPS hospitals, we estimate that our proposed 
changes for the Hospital IQR Program in this proposed rule would result 
in a total information collection burden increase of 6,533 hours 
associated with our proposed policies and updated burden estimates and 
a total cost increase of approximately $253,480, across a 4-year period 
from the CY 2021 reporting period/FY 2023 payment determination through 
the CY 2024 reporting period/FY 2026 payment determination.
     Changes to the Medicare and Medicaid Promoting 
Interoperability Programs. If our proposals are finalized, we estimate 
a minor net reduction in burden hours due to correcting a previously 
mistaken burden calculation in last year's final rule, as well as a 
slight increase in total cost for the Medicare Promoting 
Interoperability Program for CY 2021. Unrelated to any of this rule's 
Promoting Interoperability Program proposals, the increased alteration 
to the annual information collection's total cost is due to utilizing 
an updated hourly wage rate for the necessary hospital staff involved 
in attesting to the objectives and measures under 42 CFR 495.24(e). The 
Bureau of Labor Statistics (BLS) recently released a 2018 wage rate 
which, compared to the 2017 rates used in FY 2020 IPPS/LTCH PPS final 
rule, would result in an estimated increase of $21,022.32 for the 
annual information collection burden (total cost) in FY 2021. 
Therefore, multiplying the total annual burden of 21,450 hours by the 
2018 BLS labor cost of $69.34, we estimate the Promoting 
Interoperability Program's total cost to be $1,487,343 for the CY 2021 
EHR reporting period (21,450 hours x $69.34).
     Market-Based MS-DRG Relative Weight Proposed 
Data Collection and Potential Change in Methodology for Calculating MS-
DRG Relative Weights. In section IV.P.4. of the preamble of this 
proposed rule, we are seeking comment on a potential methodology for 
estimating the MS-DRG relative weights beginning in FY 2024 based on 
the median payer-specific negotiated charge information we are 
proposing to collect on the cost report and which we may consider 
adopting in the FY 2021 IPPS/LTCH PPS final rule. We note that the 
estimated total annual burden hours for this proposal are as follows: 
3,189 hospitals times 15 hours per hospital equals 47,835 annual burden 
hours and $3,096,838. We refer readers to section XI.B.11. of the 
preamble of this proposed rule for further analysis of this assessment.

B. Background Summary

1. Acute Care Hospital Inpatient Prospective Payment System (IPPS)
    Section 1886(d) of the 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 beginning on October 1, 2013, that considers the 
amount of uncompensated care furnished by the hospital relative to all 
other qualifying hospitals.
    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. In general, 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. In addition, certain transformative new devices and certain 
antimicrobial products may qualify under an alternative inpatient new 
technology add-on payment pathway by demonstrating that, absent an add-
on payment, they 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.

[[Page 32467]]

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. For discharges occurring on 
or after October 1, 2007, but before October 1, 2022, an MDH receives 
the higher of the Federal rate or the Federal rate plus 75 percent of 
the amount by which the Federal rate is exceeded by the highest of its 
FY 1982, FY 1987, or FY 2002 hospital-specific rate. MDHs are a major 
source of care for Medicare beneficiaries in their areas. Section 
1886(d)(5)(G)(iv) of the Act defines an MDH as a hospital that is 
located in a rural area (or, as amended by the Bipartisan Budget Act of 
2018, a hospital located in a State with no rural area that meets 
certain statutory criteria), has not more than 100 beds, is not an SCH, 
and has a high percentage of Medicare discharges (not less than 60 
percent of its inpatient days or discharges in its cost reporting year 
beginning in FY 1987 or in two of its three most recently settled 
Medicare cost reporting years).
    Section 1886(g) of the Act requires the Secretary to pay for the 
capital-related costs of inpatient hospital services in accordance with 
a prospective payment system established by the Secretary. The basic 
methodology for determining capital prospective payments is set forth 
in our regulations at 42 CFR 412.308 and 412.312. Under the capital 
IPPS, payments are adjusted by the same DRG for the case as they are 
under the operating IPPS. Capital IPPS payments are also adjusted for 
IME and DSH, similar to the adjustments made under the operating IPPS. 
In addition, hospitals may receive outlier payments for those cases 
that have unusually high costs.
    The existing regulations governing payments to hospitals under the 
IPPS are located in 42 CFR part 412, subparts A through M.
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). 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, effective for LTCH's cost 
reporting periods beginning in FY 2016 cost reporting period, 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.
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.

[[Page 32468]]

C. Summary of Provisions of Recent Legislation That Would Be 
Implemented in This Proposed Rule

1. Improving Medicare Post-Acute Care Transformation Act of 2014 
(IMPACT Act) (Pub. L. 113-185)
    The Improving Medicare Post-Acute Care Transformation Act of 2014 
(IMPACT Act) (Pub. L. 113-185), enacted on October 6, 2014, made a 
number of changes that affect the Long Term Care Hospital Quality 
Reporting Program (LTCH QRP). In this proposed rule, there are no 
proposals or updates to the LTCH Quality Reporting Program. We are 
continuing to maintain 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.
2. 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.
3. Further Consolidated Appropriations Act, 2020 (Pub. L. 116-94)
    Section 108 of the Further Consolidated Appropriations Act, 2020 
(Pub. L. 116-94) provides that, effective for cost reporting periods 
beginning on or after October 1, 2020, payment to a subsection (d) 
hospital that furnishes an allogeneic hematopoietic stem cell 
transplant for hematopoietic stem cell acquisition shall be made on a 
reasonable cost basis, and that the Secretary shall specify the items 
included in such hematopoietic stem cell acquisition in rulemaking. 
This statutory provision also requires that, beginning in FY 2021, the 
payments made based on reasonable cost for the acquisition costs of 
allogeneic hematopoietic stem cells be made in a budget neutral manner.

D. Summary of the Provisions of This Proposed Rule

    In this proposed rule, we set forth proposed payment and policy 
changes to the Medicare IPPS for FY 2021 operating costs and 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 2021.
    The following is a general summary of the changes that we are 
proposing to make in this proposed rule.
1. Proposed Changes to MS-DRG Classifications and Recalibrations of 
Relative Weights
    In section II. of the preamble of this proposed rule, we include--
     Proposed changes to MS-DRG classifications based on our 
yearly review for FY 2021.
     Proposed adjustment to the standardized amounts under 
section 1886(d) of the Act for FY 2021 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 2021 status of new 
technologies approved for add-on payments for FY 2020, a presentation 
of our evaluation and analysis of the FY 2021 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) for applications not submitted under an alternative pathway, 
and a discussion of the proposed status of FY 2021 new technology 
applicants under the alternative pathways for certain medical devices 
and certain antimicrobial products.
     Proposed revision to the new technology add-on payment 
policy where the coding associated with an application for new 
technology add-on payments or a previously approved technology that may 
continue to receive new technology add-on payments is proposed to be 
assigned to a proposed new MS-DRG.
     Proposed changes to the timing of the IPPS new technology 
add-on payment for certain antimicrobial products, and proposed 
expansion of the alternative pathway for certain antimicrobial 
products.
2. Proposed Changes to the Hospital Wage Index for Acute Care Hospitals
    In section III. of the preamble of this proposed rule we propose 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:
     Proposed changes in the labor market area delineations 
based on revisions to the OMB Core Based Statistical Area (CBSA) 
delineations and proposed policies related to the proposed changes in 
CBSAs.
     The proposed FY 2021 wage index update using wage data 
from cost reporting periods beginning in FY 2017.
     Calculation, analysis, and implementation of the proposed 
occupational mix adjustment to the wage index for acute care hospitals 
for FY 2021 based on the 2016 Occupational Mix Survey.
     Proposed application of the rural floor and the frontier 
State floor, and continuation of the low wage index hospital policy.
     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.
     Proposed change to Lugar county assignments.
     Proposed adjustment to the wage index for acute care 
hospitals for FY 2021 based on commuting patterns of hospital employees 
who reside in a county and work in a different area with a higher wage 
index.
     Proposed labor-related share for the proposed FY 2021 wage 
index.
3. Other Decisions and Proposed Changes to the IPPS for Operating Costs
    In section IV. of the preamble of this proposed rule, we discuss 
proposed changes or clarifications of a number of the provisions of the 
regulations in 42 CFR parts 412 and 413, including the following:
     Proposed changes to MS-DRGs subject to the post-acute care 
transfer policy and special payment policy.
     Proposed inpatient hospital update for FY 2021.
     Proposed amendment to address short cost reporting periods 
during applicable timeframe for establishment of service area for SCHs.
     Proposed updated national and regional case-mix values and 
discharges for purposes of determining RRC status, and proposed 
amendment for hospital cost reporting periods that are longer or 
shorter than 12 months.

[[Page 32469]]

     The statutorily required IME adjustment factor for FY 
2021.
     Proposed changes to the methodologies for determining 
Medicare DSH payments and the additional payments for uncompensated 
care.
     Proposed changes to payment for allogeneic hematopoietic 
stem cell acquisition costs.
     Proposed payment adjustment for chimeric antigen receptor 
(CAR) T-cell therapy clinical trial cases.
     Proposed requirements for payment adjustments under the 
Hospital Readmissions Reduction Program for FY 2021.
     The provision of estimated and newly established 
performance standards for the calculation 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 2021.
     Proposed policy changes related to medical residents 
affected by residency program or teaching hospital closure.
     Discussion of and proposals relating to the implementation 
of the Rural Community Hospital Demonstration Program in FY 2021.
     Proposal to collect market-based rate information on the 
Medicare cost report for cost reporting periods ending on or after 
January 1, 2021, and request for comment on a potential market-based 
MS-DRG relative weight methodology beginning in FY 2024, that we may 
adopt in this rulemaking.
4. Proposed FY 2021 Policy Governing the IPPS for Capital-Related Costs
    In section V. of the preamble to this proposed rule, we discuss the 
proposed payment policy requirements for capital-related costs and 
capital payments to hospitals for FY 2021.
5. Proposed Changes to the Payment Rates for Certain Excluded 
Hospitals: Rate-of-Increase Percentages
    In section VI. of the preamble of this proposed rule, we discuss--
     Proposed changes to payments to certain excluded hospitals 
for FY 2021.
     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 this proposed rule, we set 
forth--
     Proposed changes to the LTCH PPS Federal payment rates, 
factors, and other payment rate policies under the LTCH PPS for FY 
2021.
     Proposed rebasing and revising of the LTCH PPS market 
basket.
7. Proposed Changes Relating to Quality Data Reporting for Specific 
Providers and Suppliers
    In section VIII. of the preamble of this 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).
     The FY 2021 requirements under the LTCH Quality Reporting 
Program (LTCH QRP).
     Proposed changes to requirements pertaining to eligible 
hospitals and CAHs participating in the Medicare and Medicaid Promoting 
Interoperability Programs.
8. Other Proposals Included in This Proposed Rule
    Section IX. of the preamble to this proposed rule includes the 
following proposals:
     Proposed changes pertaining to the submission format 
requirements and reimbursement rates for patient records sent to the 
Beneficiary and Family Centered Care Quality Improvement Organizations 
(BFCC-QIOs).
     Proposed changes pertaining to allowing for mandatory 
electronic filing of Provider Reimbursement Review Board appeals.
     Proposed changes pertaining to and codification of certain 
longstanding Medicare Bad Debt policies.
9. Other Provisions of This Proposed Rule
    Section X. of the preamble preamble to this proposed rule includes 
our discussion of the MedPAC Recommendations.
    Section XI. of the preamble to this proposed rule includes the 
following:
     A descriptive listing of the public use files associated 
with the proposed rule.
     The collection of information requirements for entities 
based on our proposals.
     Information regarding our responses to public comments.
     Waiver of the 60-day delay in effective date for the final 
rule.
10. 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 2021 prospective payment rates for 
operating costs and capital-related costs for acute care hospitals. We 
are proposing to establish the threshold amounts for outlier cases. In 
addition, in section IV. of the Addendum to the proposed rule, we 
address the update factors for determining the rate-of-increase limits 
for cost reporting periods beginning in FY 2021 for certain hospitals 
excluded from the IPPS.
11. 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 2021 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 
2021. We are proposing to establish the adjustment for wage levels, 
including the proposed changes in the CBSAs based on revisions to the 
OMB labor market area delineations and a proposed adjustment to reflect 
the expected increases in wages under the IPPS low wage index hospital 
policy. We are proposing to establish the adjustments for 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.
12. Impact Analysis
    In Appendix A of this proposed rule, we set forth an analysis of 
the impact the proposed changes would have on affected acute care 
hospitals, CAHs, LTCHs, PCHs and other entities.
13. 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 provide our recommendations of the 
appropriate percentage changes for FY 2021 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

[[Page 32470]]

services provided for LTCH PPS discharges.
14. 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 2020 recommendations concerning hospital inpatient 
payment policies address the update factor for hospital inpatient 
operating costs and capital-related costs for hospitals under the IPPS. 
We address these recommendations in Appendix B of this proposed rule. 
For further information relating specifically to the MedPAC March 2020 
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.

E. Advancing Health Information Exchange

    The Department of Health and Human Services (HHS) has a number of 
initiatives designed to encourage and support the adoption of 
interoperable health information technology and to promote nationwide 
health information exchange to improve health care and patient access 
to their health information. The Office of the National Coordinator for 
Health Information Technology (ONC) and CMS work collaboratively to 
advance interoperability across settings of care, including post-acute 
care.
    To further interoperability in across all care settings, CMS 
continues to explore opportunities to advance electronic exchange of 
patient information across payers, providers and with patients, 
including developing systems that use nationally recognized health IT 
standards such as Logical Observation Identifier Names and Codes 
(LOINC), Systemized Nomenclature of Medicine-Clinical Terms (SNOMED), 
and Fast Healthcare Interoperability Recourses (FHIR). In addition, CMS 
and ONC are collaborating with industry stakeholders via the Post-Acute 
Care Interoperability Workgroup (PACIO) (to develop FHIR-based 
standards for post-acute care (PAC) assessment content, which could 
support the exchange and reuse of patient http://pacioproject.org/) 
assessment data derived from the Minimum Data Set (MDS), Inpatient 
Rehabilitation Facility-Patient Assessment Instrument (IRF-PAI), Long 
Term Care Hospital Continuity Assessment Record and Evaluation Data Set 
(LTCH CARE data set), Outcome Assessment Information Set (OASIS) 
assessment tools, and other sources. The Data Element Library (DEL) 
(https://del.cms.gov/DELWeb/pubHome) continues to be updated and serves 
as the authoritative resource for PAC assessment data elements and 
their associated mappings to health IT standards. These interoperable 
data elements can reduce provider burden by allowing the use and 
exchange of healthcare data, support provider exchange of electronic 
health information for care coordination, person-centered care, and 
support real-time, data driven, clinical decision-making. Standards in 
the DEL (https://del.cms.gov/) can be referenced on the CMS website and 
in the ONC Interoperability Standards Advisory (ISA). The 2020 ISA is 
available at https://www.healthit.gov/isa.
    In the September 30, 2019 Federal Register, we published a final 
rule titled, ``Medicare and Medicaid Programs; Revisions to 
Requirements for Discharge Planning for Hospitals, Critical Access 
Hospitals, and Home Health Agencies, and Hospital and Critical Access 
Hospital Changes to Promote Innovation, Flexibility, and Improvement in 
Patient Care'' (84 FR 51836) (``Discharge Planning final rule''), that 
revises the discharge planning requirements that hospitals (including 
psychiatric hospitals, long-term care hospitals, and inpatient 
rehabilitation facilities), critical access hospitals (CAHs), and home 
health agencies, must meet to participate in Medicare and Medicaid 
programs. It also revises one provision regarding patient rights in 
hospitals. The rule supports our interoperability efforts by promoting 
the exchange of patient information between health care settings, and 
by ensuring that a patient's necessary medical information is 
transferred with the patient after discharge from a hospital, CAH, or 
post-acute care services provider. For more information on the 
discharge planning requirements, please visit the final rule at: 
https://www.federalregister.gov/documents/2019/09/30/2019-20732/medicare-and-medicaid-programs-revisions-to-requirements-for-discharge-planning-for-hospitals.
    We invite providers to learn more about these important 
developments and how they are likely to affect LTCHs and encourage the 
electronic exchange of health data across care settings and with 
patients.

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

A. Background

    Section 1886(d) of the Act specifies that the Secretary shall 
establish a classification system (referred to as diagnosis-related 
groups (DRGs)) for inpatient discharges and adjust payments under the 
IPPS based on appropriate weighting factors assigned to each DRG. 
(Beginning in FY 2008, CMS adopted the Medicare-Severity DRGs (MS-DRGs) 
to better recognize severity of illness and resource use based on case 
complexity.) 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. Adoption of the MS-DRGs and MS-DRG Reclassifications

    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).
    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 2020 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; 82 FR 38010 through 38085, 83 FR 41158 through 41258, and 84 FR 
42058 through 42165, respectively).

[[Page 32471]]

C. Proposed FY 2021 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 American Taxpayer Relief Act of 2012 (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. Adjustments Made for FY 2018, FY 2019, and FY 2020 as Required Under 
Section 414 of Public Law 114-10 (MACRA) and Section 15005 of Public 
Law 114-255
    As stated in the FY 2017 IPPS/LTCH PPS final rule (81 FR 56785), 
once the recoupment required under section 631 of the ATRA was 
complete, we had anticipated making a single positive adjustment in FY 
2018 to offset the reductions required to recoup the $11 billion under 
section 631 of the ATRA. However, section 414 of the MACRA (which was 
enacted on April 16, 2015) replaced the single positive adjustment we 
intended to make in FY 2018 with a 0.5 percentage point positive 
adjustment for each of FYs 2018 through 2023. In the FY 2017 
rulemaking, we indicated that we would address the adjustments for FY 
2018 and later fiscal years in future rulemaking. Section 15005 of the 
21st Century Cures Act (Pub. L. 114-255), which was enacted on December 
13, 2016, amended section 7(b)(1)(B) of the TMA, as amended by section 
631 of the ATRA and section 414 of the MACRA, to reduce the adjustment 
for FY 2018 from a 0.5 percentage point positive adjustment to a 0.4588 
percentage point positive adjustment. 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. In the FY 2019 
IPPS/LTCH PPS final rule (83 FR 41157) and in the FY 2020 IPPS/LTCH PPS 
final rule (84 FR 42057), consistent with the requirements of section 
414 of the MACRA, we implemented 0.5 percentage point positive 
adjustments to the standardized amount for FY 2019 and FY 2020, 
respectively. We indicated that the FY 2018, FY 2019, and FY 2020 
adjustments were permanent adjustments to payment rates. We also stated 
that we plan to propose future adjustments required under section 414 
of the MACRA for FYs 2021 through 2023 in future rulemaking.
3. Proposed Adjustment for FY 2021
    Consistent with the requirements of section 414 of the MACRA, we 
are proposing to implement a 0.5 percentage point positive adjustment 
to the standardized amount for FY 2021. This would constitute a 
permanent adjustment to payment rates. We plan to propose future 
adjustments required under section 414 of the MACRA for FYs 2022 
through 2023 in future rulemaking.

D. Proposed Changes to Specific MS-DRG Classifications

1. Discussion of Changes to Coding System and Basis for Proposed FY 
2021 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

[[Page 32472]]

Reporting. For a detailed discussion of the conversion of the MS-DRGs 
to ICD-10, we refer readers to the FY 2017 IPPS/LTCH PPS final rule (81 
FR 56787 through 56789).
b. Basis for Proposed FY 2021 MS-DRG Updates
    Given the need for more time to carefully evaluate requests and 
propose updates, as discussed in the FY 2018 IPPS/LTCH PPS final rule 
(82 FR 38010), we changed the deadline to request updates to the MS-
DRGs to November 1 of each year, which provided an additional 5 weeks 
for the data analysis and review process. Interested parties had to 
submit any comments and suggestions for FY 2021 by November 1, 2019, 
and the comments that were submitted in a timely manner for FY 2021 are 
discussed in this section of the preamble of this proposed rule. As we 
discuss in the sections that follow, we may not be able to fully 
consider all of the requests that we receive for the upcoming fiscal 
year. We have found that, with the implementation of ICD-10, some types 
of requested changes to the MS-DRG classifications require more 
extensive research to identify and analyze all of the data that are 
relevant to evaluating the potential change. We note in the discussion 
that follows those topics for which further research and analysis are 
required, and which we will continue to consider in connection with 
future rulemaking.
    With the continued increase in the number and complexity of the 
requested changes to the MS-DRG classifications since the adoption of 
ICD-10 MS-DRGs, and in order to consider as many requests as possible, 
more time is needed to carefully evaluate the requested changes, 
analyze claims data, and consider any proposed updates. Therefore, we 
are changing the deadline to request changes to the MS-DRGs to October 
20th of each year to allow for additional time for the review and 
consideration of any proposed updates. Interested parties should submit 
any comments and suggestions for FY 2022 by October 20, 2020 via the 
CMS MS-DRG Classification Change Request Mailbox located at: 
[email protected].
    Based on public comments received in response to the FY 2020 IPPS/
LTCH PPS proposed rule, we are providing a test version of the ICD-10 
MS-DRG GROUPER Software, Version 38, so that the public can better 
analyze and understand the impact of the proposals included in this 
proposed rule. We note that this test software reflects the proposed 
GROUPER logic for FY 2021. Therefore, it includes the new diagnosis and 
procedure codes that are effective for FY 2021 as reflected in Table 
6A.--New Diagnosis Codes--FY 2021 and Table 6B.--New Procedure Codes--
FY 2021 associated with this proposed rule and does not include the 
diagnosis codes that are invalid beginning in FY 2021 as reflected in 
Table 6C.--Invalid Diagnosis Codes--FY 2021 associated with this 
proposed rule. We note that there are not any procedure codes that have 
been designated as invalid for FY 2021 at the time of the development 
of this proposed rule. These tables are not published in the Addendum 
to this proposed 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 proposed rule. Because the diagnosis codes no longer 
valid for FY 2021 are not reflected in the test software, we are making 
available a supplemental file in Table 6P.1a that includes the mapped 
Version 38 FY 2021 ICD-10-CM codes and the deleted Version 37 FY 2020 
ICD-10-CM codes that should be used for testing purposes with users' 
available claims data. Therefore, users will have access to the test 
software allowing them to build case examples that reflect the 
proposals included in this proposed rule. In addition, users will be 
able to view the draft version of the ICD-10 MS-DRG Definitions Manual, 
Version 38.
    The test version of the ICD-10 MS-DRG GROUPER Software, Version 38, 
the draft version of the ICD-10 MS-DRG Definitions Manual, Version 38, 
and the supplemental mapping file in Table 6P.1a of FY 2020 and FY 2021 
ICD-10-CM diagnosis codes are available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software.
    Following are the changes that we are proposing to the MS-DRGs for 
FY 2021. We are inviting public comments on each of the MS-DRG 
classification proposed changes, as well as our proposals to maintain 
certain existing MS-DRG classifications discussed in this proposed 
rule. In some cases, we are proposing changes to the MS-DRG 
classifications based on our analysis of claims data and consultation 
with our clinical advisors. In other cases, we are proposing to 
maintain the existing MS-DRG classifications based on our analysis of 
claims data and consultation with our clinical advisors. For this FY 
2021 IPPS/LTCH PPS proposed rule, our MS-DRG analysis was based on ICD-
10 claims data from the September 2019 update of the FY 2019 MedPAR 
file, which contains hospital bills received through September 30, 
2019, for discharges occurring through September 30, 2019. In our 
discussion of the proposed MS-DRG reclassification changes, we refer to 
these claims data as the ``September 2019 update of the FY 2019 MedPAR 
file.''
    As explained in previous rulemaking (76 FR 51487), in deciding 
whether to propose to make further modifications to the MS-DRGs for 
particular circumstances brought to our attention, we consider whether 
the resource consumption and clinical characteristics of the patients 
with a given set of conditions are significantly different than the 
remaining patients represented in the MS-DRG. We evaluate patient care 
costs using average costs and lengths of stay and rely on the judgment 
of our clinical advisors to determine whether patients are clinically 
distinct or similar to other patients represented in the MS-DRG. In 
evaluating resource costs, we consider both the absolute and percentage 
differences in average costs 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.
    Beginning with this FY 2021 IPPS/LTCH PPS proposed rule, we are 
proposing to expand the previously

[[Page 32473]]

listed criteria to also include the NonCC subgroup. We believe that 
applying these criteria to the NonCC subgroup would better reflect 
resource stratification and also promote stability in the relative 
weights by avoiding low volume counts for the NonCC level MS-DRGs.
    Specifically, in our analysis of the MS-DRG classification requests 
for FY 2021 that we received by November 1, 2019, as well as any 
additional analyses that were conducted in connection with those 
requests, we applied these criteria to each of the MCC, CC and NonCC 
subgroups, as described in the following table. We are providing the 
following table to better illustrate all five criteria and how they are 
applied for each CC subgroup, including their application to the NonCC 
subgroup beginning with this FY 2021 proposed rule. We have revised the 
order in which the criteria are presented for illustrative purposes.
[GRAPHIC] [TIFF OMITTED] TP29MY20.000

    In general, once the decision has been made to propose to make 
further modifications to the MS-DRGs as described previously, such as 
creating a new base MS-DRG, or in our evaluation of a specific MS-DRG 
classification request to split (or subdivide) an existing base MS-DRG 
into severity levels, all five criteria must be met for the base MS-DRG 
to be split (or subdivided) by a CC subgroup. We note that in our 
analysis of requests to create a new MS-DRG, we evaluate the most 
recent year of MedPAR claims data available. For example, we stated 
earlier that for this FY 2021 IPPS/LTCH PPS proposed rule, our MS-DRG 
analysis was based on ICD-10 claims data from the September 2019 update 
of the FY 2019 MedPAR file. However, in our evaluation of requests to 
split an existing base MS-DRG into severity levels, as noted in prior 
rulemaking (80 FR 49368), we analyze the most recent 2 years of data. 
This analysis includes 2 years of MedPAR claims data to compare the 
data results from 1 year to the next to avoid making determinations 
about whether additional severity levels are warranted based on an 
isolated year's data fluctuation and also, to validate that the 
established severity levels within a base MS-DRG are supported. The 
first step in our process of evaluating if the creation of a new CC 
subgroup within a base MS-DRG is warranted is to determine if all the 
criteria are satisfied for a three way split. If the criteria fail, the 
next step is to determine if the criteria are satisfied for a two way 
split. If the criteria for both of the two way splits fail, then a 
split (or CC subgroup) would generally not be warranted for that base 
MS-DRG. If the three way split fails on any one of the five criteria 
and all five criteria for both two way splits (1_23 and 12_3) are met, 
we would apply the two way split with the highest R2 value. We note 
that if the request to split (or subdivide) an existing base MS-DRG 
into severity levels specifies the request is for either one of the two 
way splits (1_23 or 12_3), in response to the specific request, we will 
evaluate the criteria for both of the two way splits, however we do not 
also evaluate the criteria for a three way split.
2. Pre-MDC
a. Bone Marrow Transplants
    We received two separate requests that involve the MS-DRGs where 
bone marrow transplant procedures are assigned. The first request was 
to redesignate MS-DRG 014 (Allogeneic Bone Marrow Transplant), MS-DRG 
016 (Autologous Bone Marrow Transplant with CC/MCC or T-Cell 
Immunotherapy), and MS-DRG 017 (Autologous Bone Marrow Transplant 
without CC/MCC) from surgical MS-DRGs to medical MS-DRGs. According to 
the requestor, bone marrow transplant procedures involve a transfusion 
of donor cells and do not involve a surgical procedure or require the 
resources of an operating room (O.R.). The second request involving 
bone marrow transplant procedures was to split MS-DRG 014 (Allogeneic 
Bone Marrow Transplant) into two severity levels, based on the presence 
of a MCC. In this section of this rule, we discuss each request in more 
detail.
    With regard to the first request, the requestor noted that the 
logic for MS-DRG 014 consists of ICD-10-PCS procedure codes describing 
allogeneic bone marrow transplants that are designated as non-operating 
room (non-O.R.) procedures. The requestor also noted that the logic for 
MS-DRGs 016 and 017 includes ICD-10-PCS procedure codes describing 
autologous bone marrow transplants where certain

[[Page 32474]]

procedure codes are designated as O.R. and other procedure codes are 
designated as non-O.R. procedures. The requestor stated that 
redesignating the bone marrow transplant MS-DRGs from surgical to 
medical would clinically align with the resources utilized in the 
performance of these procedures.
    The requestor is correct that bone marrow transplant procedures are 
currently assigned to MS-DRGs 014, 016, and 017 which are classified as 
surgical MS-DRGs under the Pre-MDC category for the ICD-10 MS-DRGs. The 
requestor is also correct that the logic for MS-DRG 014 consists of 
ICD-10-PCS procedure codes describing allogeneic bone marrow 
transplants that are designated as non-operating room (non-O.R.) 
procedures and that the logic for MS-DRGs 016 and 017 includes ICD-10-
PCS procedure codes describing autologous bone marrow transplants where 
certain procedure codes are designated as O.R. procedures and other 
procedure codes are designated as non-O.R. procedures. We refer the 
reader to the ICD-10 MS-DRG Definitions Manual Version 37 which is 
available via the internet on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software for complete documentation of the GROUPER 
logic for MS-DRGs 014, 016, and 017.
    We consulted with our clinical advisors and they agreed that bone 
marrow transplant procedures are similar to a blood transfusion 
procedure, do not utilize the resources of an operating room, and are 
not surgical procedures. Our clinical advisors concurred that bone 
marrow transplants are medical procedures and it is more accurate to 
designate the MS-DRGs to which these procedures are assigned as medical 
MS-DRGs versus surgical MS-DRGs. Therefore, we are proposing to 
redesignate MS-DRGs 014, 016, and 017 as medical MS-DRGs effective 
October 1, 2020 for FY 2021.
    As noted previously, the logic for MS-DRGs 016 and 017 includes 
ICD-10-PCS procedure codes describing autologous bone marrow 
transplants and related procedures where certain procedure codes are 
designated as O.R. and other procedure codes are designated as non-O.R. 
procedures. During our review of the bone marrow transplant procedures 
assigned to these MS-DRGs we identified the following 8 procedure codes 
that are currently designated as O.R procedures.
[GRAPHIC] [TIFF OMITTED] TP29MY20.001

    In connection with our proposal to designate the MS-DRGs to which 
these procedures are assigned as medical, as well as for clinical 
consistency with the other procedure codes describing bone marrow 
transplant procedures, we are proposing to redesignate the listed ICD-
10-PCS procedure codes from O.R. to non-O.R. procedures, affecting 
their current MS-DRG assignment for MS-DRGs 016 and 017, effective 
October 1, 2020 for FY 2021.
    As noted earlier in this section, we also received a request to 
split MS-DRG 014 (Allogeneic Bone Marrow Transplant) into two severity 
levels, based on the presence of a MCC. For FY 2020, the requestor had 
requested that MS-DRG 014 be split into two new MS-DRGs according to 
donor source. For the reasons discussed in the FY 2020 IPPS/LTCH PPS 
proposed rule (84 FR 19176 through 19180) and the FY 2020 IPPS/LTCH PPS 
final rule (84 FR 42067 through 42072), we did not propose to split MS-
DRG 014 into two new MS-DRGs according to donor source. However, 
according to the requestor, a single (base) MS-DRG for allogeneic bone 
marrow and stem cell transplants continues to not be as clinically or 
resource homogeneous as it could be. The requestor conducted its own 
analysis and stated the results revealed it was appropriate to split 
MS-DRG 014 based on the presence of a MCC.
    We examined claims data from the September 2019 update of the FY 
2019 MedPAR file for MS-DRG 014. There were 962 cases found in MS-DRG 
014 with an average length of stay of 26.7 days and average costs of 
$89,586.
    Consistent with our established process, we conducted an analysis 
of MS-DRG 014 to determine if the criteria to create subgroups were 
met. The process for conducting this type of analysis includes 
examining 2 years of MedPAR claims data to compare the data results 
from 1 year to the next to avoid making determinations about whether 
additional severity levels are warranted based on an isolated year's 
data fluctuation and also, to validate that the established severity 
levels within a base MS-DRG are supported. Therefore, we reviewed the 
claims data for base MS-DRG 014 using the September 2018 update of the 
FY 2018 MedPAR file and the September 2019 update of the FY 2019 MedPAR 
file, which were used in our analysis of claims data for MS-DRG 
reclassification requests for FY 2020 and FY 2021. Our findings are 
shown in the table.

[[Page 32475]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.002

    We applied the criteria to create subgroups for each of the two-way 
severity level splits. As discussed in section II.D.1.b., beginning 
with this FY 2021 IPPS/LTCH PPS proposed rule, we are proposing to 
expand the previously listed criteria to also include the NonCC group. 
The criterion that there be at least 500 cases for each subgroup failed 
due to low volume, as shown in the table for both years. Specifically, 
for the ``with MCC'' and ``without MCC'' (CC+NonCC) split, there were 
only 183 (141+42) cases in the ``without MCC'' subgroup based on the 
data in the FY 2019 MedPAR file and only 175 (140+35) cases in the 
``without MCC'' subgroup based on the data in the FY 2018 MedPAR file. 
For the ``with CC/MCC'' and ``without CC/MCC'' (NonCC) split, there 
were only 42 cases in the NonCC subgroup based on the data in the FY 
2019 MedPAR file and only 35 cases in the NonCC subgroup based on the 
data in the FY 2018 MedPAR file. The claims data do not support a two-
way severity level split for MS-DRG 014, therefore, we are proposing to 
maintain the current structure of MS-DRG 014 for FY 2021.
b. Chimeric Antigen Receptor (CAR) T-Cell Therapies
    We received several requests to create a new MS-DRG for procedures 
involving CAR T-cell therapies. The requestors stated that creation of 
a new MS-DRG would improve payment for CAR T-cell therapies in the 
inpatient setting. Some requestors noted that cases involving CAR T-
cell therapies will no longer be eligible for new technology add-on 
payments in FY 2021 and that this would significantly reduce the 
overall payment for cases involving CAR T-cell therapies. Some 
requestors also noted that in the absence of the creation of a new MS-
DRG for procedures involving CAR T-cell therapies, outlier payments for 
these cases would increase significantly, which would increase the 
share of total outlier payments that are attributable to CAR T-cell 
therapies.
    The requestors stated that the new MS-DRG for CAR T-cell therapies 
should include cases that report 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) or XW043C3 (Introduction of engineered autologous 
chimeric antigen receptor t-cell immunotherapy into central vein, 
percutaneous approach, new technology group 3).
    Given the high cost of the CAR T-cell product, some requestors 
provided recommendations related to the differential treatment of cases 
where the CAR T-cell product was provided without cost as part of a 
clinical trial to ensure that the payment amount for the newly created 
MS-DRG for CAR T-cell therapy cases would appropriately reflect the 
average cost hospitals incur for providing CAR T-cell therapy outside 
of a clinical trial. For example, some requestors suggested that CMS 
make minor adjustments to its usual ratesetting methodology to exclude 
clinical trial claims from the calculation of the relative weight for 
any MS-DRG for CAR T-cell therapies. One requestor noted that these 
adjustments are consistent with CMS' general authority under sections 
1886(d)(4)(B) and (C) of the Act. Some requestors also suggested that 
CMS apply an offset to the MS-DRG payment in cases where the provider 
does not incur the cost of the CAR T-cell therapy.
    Currently, procedures involving CAR T-cell therapies are identified 
with ICD-10-PCS procedure codes XW033C3 and XW043C3, which became 
effective October 1, 2017. In the FY 2019 IPPS/LTCH PPS final rule, we 
finalized 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 the FY 2019 IPPS/LTCH PPS final rule for a complete 
discussion of these final policies (83 FR 41172 through 41174).
    As noted, the current procedure codes for CAR T-cell therapies both 
became effective October 1, 2017. In the FY 2019 IPPS/LTCH PPS final 
rule (83 FR 41172 through 41174), we indicated that we believed we 
should collect more comprehensive clinical and cost data before 
considering assignment of a new MS-DRG to these therapies. We stated in 
the FY 2020 IPPS/LTCH PPS proposed rule that, while the September 2018 
update of the FY 2018 MedPAR data file does contain some claims that 
include those procedure codes that identify CAR T-cell therapies, the 
number of cases is limited, and the submitted costs vary widely due to 
differences in provider billing and charging practices for this 
therapy. Therefore, while those claims could potentially be used to 
create relative weights for a new MS-DRG, we stated that we did not 
have the comprehensive clinical and cost data that we generally believe 
are needed to do so. Furthermore, we stated in the FY 2020 IPPS/LTCH 
PPS proposed rule that given the relative newness of CAR T-cell therapy 
and our proposal to continue new technology add-on payments for FY 2020 
for the two CAR T-cell therapies that currently have FDA approval 
(KYMRIAHTM and YESCARTATM), at the time we 
believed it was premature to consider creation of a new MS-DRG 
specifically for cases involving CAR T-cell therapy for FY 2020. We 
stated that in future years we would have additional data that could be 
used to evaluate the potential creation of a new MS-DRG specifically 
for cases involving CAR T-cell therapies.
    We now have more data upon which to evaluate a new MS-DRG 
specifically for cases involving CAR T-cell therapies. We agree with 
the requestors it is appropriate to consider the development of a new 
MS-DRG using the data that is now available. We examined the claims 
data from the September 2019 update of the FY 2019 MedPAR data file for 
cases that reported ICD-10-PCS procedure codes XW033C3 or XW043C3. For 
purposes of this analysis, we identified clinical trial cases as claims 
with ICD-10-CM diagnosis code Z00.6 (Encounter for examination for 
normal comparison and control in clinical research program) which is 
reported only for clinical trial cases, or with standardized drug 
charges of less than $373,000, which is the average sales price of 
KYMRIAH and YESCARTA, which are the two CAR T-cell medicines approved 
to treat relapsed/refractory diffuse large B-cell lymphoma as of the 
time of the

[[Page 32476]]

development of this proposed rule. We distinguished between clinical 
trial and non-clinical trial cases in this analysis because we agree 
with the requestors who indicated that given the high cost of the CAR 
T-cell product, it is appropriate to distinguish cases where the CAR T-
cell product was provided without cost as part of a clinical trial so 
that the analysis appropriately reflects the resources required to 
provide CAR T-cell therapy outside of a clinical trial. We also note 
that we included cases that would have been identified as statistical 
outliers under our usual process when examined as part of MS-DRG 016 
due to the extreme cost differences between the CAR T-cell therapy 
claims and other claims in MS-DRG 016, but would not be identified as 
statistical outliers when examining CAR T-cell therapy claims only. Our 
findings are shown in the table.
[GRAPHIC] [TIFF OMITTED] TP29MY20.003

    As shown in the table, we found 2,212 cases in MS-DRG 016, with an 
average length of stay of 18.2 days and average costs of $55,001. Of 
these 2,212 cases, 262 cases reported ICD-10-PCS procedure codes 
XW033C3 or XW043C3; these cases had an average length of stay of 16.3 
days and average costs of $127,408. Of these 262 cases, 94 were 
identified as non-clinical trial cases; these cases had an average 
length of stay of 17.2 days and average costs of $274,952. The 
remaining 168 cases were identified as clinical trial cases; these 
cases had an average length of stay of 15.8 days and average costs of 
$44,853.
    The data indicate that the average costs for the non-clinical trial 
cases that reported ICD-10-PCS procedure codes XW033C3 or XW043C3 are 
almost five times higher than the average costs for all cases in MS-DRG 
016. Our clinical advisors also believe that the cases reporting ICD-
10-PCS procedure codes XW033C3 or XW043C3 can be clinically 
differentiated from other cases that group to MS-DRG 016, which 
includes procedures involving autologous bone marrow transplants, once 
the CAR T-cell therapy itself is taken into account in the comparison.
    As described earlier in this section, in deciding whether to 
propose to make modifications to the MS-DRGs for particular 
circumstances brought to our attention, we consider a variety of 
factors pertaining to resource consumption and clinical 
characteristics. While we generally prefer not to create a new MS-DRG 
unless it would include a substantial number of cases, our clinical 
advisors believe that the vast discrepancy in resource consumption as 
reflected in the claims data analysis and the clinical differences 
warrant the creation of a new MS-DRG. We are therefore proposing to 
assign cases reporting ICD-10-PCS procedure codes XW033C3 or XW043C3 to 
a proposed new MS-DRG 018 (Chimeric Antigen Receptor (CAR) T-cell 
Immunotherapy). If additional procedure codes describing CAR-T cell 
therapies are approved and finalized, we would use our established 
process to assign these procedure codes to the most appropriate MS-DRG. 
Because these cases would no longer group to MS-DRG 016, we are 
proposing to revise the title for MS-DRG 016 from ``Autologous Bone 
Marrow Transplant with CC/MCC or T-cell Immunotherapy'' to ``Autologous 
Bone Marrow Transplant with CC/MCC.'' We refer readers to section 
II.E.2.b. of the preamble of this proposed rule for a discussion of the 
proposed relative weight calculation for the proposed new MS-DRG 018 
for CAR T-cell Therapy, and to section IV.I. of the preamble of this 
proposed rule for a discussion of the proposed payment adjustment for 
CAR T-cell clinical trial cases.
3. MDC 1 (Diseases and Disorders of the Nervous System)
a. Carotid Artery Stent Procedures
    In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42078), we finalized 
our proposal to reassign 96 ICD-10-PCS procedure codes describing 
dilation of carotid artery with an intraluminal device(s) from MS-DRGs 
037, 038, and 039 (Extracranial Procedures with MCC, with CC, and 
without CC/MCC, respectively) to MS-DRGs 034, 035, and 036 (Carotid 
Artery Stent Procedures with MCC, with CC, and without CC/MCC, 
respectively). We received a request to review six ICD-10-PCS procedure 
codes describing dilation of a carotid artery (common, internal or 
external) with drug eluting intraluminal devices(s) using an open 
approach that are currently assigned to the logic for case assignment 
to MS-DRGs 037, 038, and 039 that were not included in the list of 
codes finalized for reassignment in the FY 2020 IPPS/LTCH PPS final 
rule. The six codes are identified in the following table.

[[Page 32477]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.004

    The logic for case assignment to MS-DRGs 034, 035, and 036 as 
displayed in the ICD-10 MS-DRG Version 37 Definitions Manual, available 
via the internet on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software.html is comprised of a list of logic which 
includes procedure codes for operating room procedures involving 
dilation of a carotid artery (common, internal or external) with 
intraluminal device(s). All of the ICD-10-PCS procedure codes in the 
logic list assigned to MS-DRGs 034, 035, and 036 describe dilation of a 
carotid artery with an intraluminal device.
    We examined claims data from the September 2019 update of the FY 
2019 MedPAR file for MS-DRGs 034, 035, and 036 which only include those 
procedure codes that describe procedures that involve dilation of a 
carotid artery with an intraluminal device. Our findings are reported 
in the table.
[GRAPHIC] [TIFF OMITTED] TP29MY20.005

    As shown in the table, we found a total of 1,259 cases in MS-DRG 
034 with an average length of stay of 6.9 days and average costs of 
$28,668. We found a total of 3,367 cases in MS-DRG 035 with an average 
length of stay of 3.0 days and average costs of $17,114. We found a 
total of 4,769 cases in MS-DRG 036 with an average length of stay of 
1.4 days and average costs of $13,501.
    We then examined claims data from the September 2019 update of the 
FY 2019 MedPAR file for MS-DRGs 037, 038, and 039 and identified cases 
reporting any one of the 6 procedure codes listed in the table 
previously to determine the volume of cases impacted and if the average 
length of stay and average costs are consistent with the average length 
of stay and average costs for MS-DRGs 034, 035 and 036. Our finding are 
shown in the following table.

[[Page 32478]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.006

    As shown in the table, we found a total of 3,331 cases with an 
average length of stay of 7.3 days and average costs of $24,155 in MS-
DRG 037. There were 6 cases reporting at least one of the 6 procedure 
codes that describe dilation of the carotid artery with an intraluminal 
device using an open approach in MS-DRG 037 with an average length of 
stay of 7 days and average costs of $22,272. For MS-DRG 038, we found a 
total of 11,021 cases with an average length of stay of 3 days and 
average costs of $12,306. There were 33 cases reporting at least one of 
the 6 procedure codes that describe dilation of the carotid artery with 
an intraluminal device in MS-DRG 038 with an average length of stay of 
2.3 days and average costs of $16,777. For MS-DRG 039, we found a total 
of 20,854 cases with an average length of stay of 1.4 days and average 
costs of $8,463. There were 26 cases reporting at least one of the 6 
procedure codes that describe dilation of the carotid artery with an 
intraluminal device in MS-DRG 039 with an average length of stay of 1.2 
days and average costs of $14,981.
    The data analysis shows that for the cases in MS-DRGs 037, 038, and 
039 reporting ICD-10-PCS codes 037H04Z, 037J04Z, 037K04Z, 037L04Z, 
037M04Z, or 037N04Z, the average length of stay is shorter and the 
average costs are higher than the average length of stay and average 
costs (with the exception of the average costs for the 6 cases in MS-
DRG 037 which are slightly less) in the FY 2019 MedPAR file for MS-DRGs 
037, 038, and 039 respectively. The data analysis also shows for the 
cases in MS-DRGs 037, 038, and 039 reporting ICD-10-PCS codes 037H04Z, 
037J04Z, 037K04Z, 037L04Z, 037M04Z, and 037N04Z the average length of 
stay and the average costs are in-line with the average length of stay 
and average costs in the FY 2019 MedPAR file for MS-DRGs 034, 035, and 
036 respectively.
    As noted in the FY 2020 IPPS/LTCH PPS proposed rule (84 FR 19184) 
and final rule (84 FR 42077), our clinical advisors stated that MS-DRGs 
034, 035 and 036 are defined to include only those procedure codes that 
describe procedures that involve dilation of a carotid artery with an 
intraluminal device.
    Therefore, we are proposing to reassign the procedure codes listed 
in the table from MS-DRGs 037, 038, and 039 that describe procedures 
that involve dilation of the carotid artery with an intraluminal device 
to MS-DRGs 034, 035, and 036.
    In addition to our analysis of the claims data from the September 
2019 MedPAR file for MS-DRGs 037, 038, and 039, we conducted an 
examination of all the MS-DRGs where any one of the 6 procedure codes 
listed previously were also reported to determine if any one of the 6 
procedure codes were included in any other MS-DRG outside of MDC 01, to 
further assess the current MS-DRG assignments. Our findings are shown 
in the following table.

[[Page 32479]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.007

    As shown in the table, we found one case reporting any one of these 
6 procedure codes in each of MS-DRGs 023, 027, 035, 219, 233, 235 and 
252. We note that all of the listed MS-DRGs are assigned to MDC 01 with 
one exception: MS-DRG 252 (Other Vascular Procedures with MCC) in MDC05 
(Diseases and Disorders of the Circulatory System). As a result, we 
reviewed the logic list for MS-DRGs 252, 253, and 254 (Other Vascular 
Procedures with MCC, with CC, and without CC/MCC, respectively) in MDC 
05 and found 36 ICD-10-PCS codes for procedures that describe dilation 
of the carotid artery with an intraluminal device with an open approach 
that are not currently assigned in MDC 01. The 36 ICD-10-PCS codes are 
listed in the following table.
BILLING CODE 4120-01-P

[[Page 32480]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.008


[[Page 32481]]


[GRAPHIC] [TIFF OMITTED] TP29MY20.009

BILLING CODE 4120-01-C
    We then examined the claims data to determine if there were other 
MS-DRGs in which one of the 36 procedure codes listed in the table were 
reported. We found 8 cases that grouped to MS-DRGs 981, 982, and 983 
(Extensive O.R. Procedure Unrelated to Principal Diagnosis with MCC, 
with CC, and without CC/MCC, respectively) when a principal diagnosis 
from MDC 01 was reported with one of the procedure codes in the table 
that describes dilation of a carotid artery with an intraluminal 
device, open approach.
    As noted previously, in the FY 2020 IPPS/LTCH PPS proposed rule (84 
FR 19184) and final rule (84 FR 42077), our clinical advisors stated 
that MS-DRGs 034, 035, and 036 are defined to include those procedure 
codes that describe procedures that involve dilation of a carotid 
artery with an intraluminal device. Our clinical advisors support 
adding the 36 ICD-10-PCS codes identified in the table to MS-DRGs 034, 
035, and 036 in MDC 01 for consistency to align with the definition of 
MS-DRGs 034, 035, and 036 and also to permit proper case assignment 
when a principal diagnosis from MDC 01 is reported with one of the 
procedure codes in the table that describes dilation of a carotid 
artery with an intraluminal device, open approach.
    Therefore, for FY 2021, we are also proposing to add the 36 ICD-10-
PCS codes identified in the table that are currently assigned in MDC 05 
to MS-DRGs 252, 253, and 254 to the GROUPER logic for MS-DRGs 034, 035, 
and 036 in MDC 01.
b. Epilepsy with Neurostimulator
    We received a request to reassign cases describing the insertion of 
a neurostimulator generator into the skull in combination with the 
insertion of a neurostimulator lead into the brain from 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) to MS-DRG 021 (Intracranial Vascular 
Procedures with PDX Hemorrhage with CC) or to reassign

[[Page 32482]]

these cases to another MS-DRG for more appropriate payment. The 
Responsive Neurostimulator (RNS(copyright)) System, a 
cranially implanted neurostimulator that is a treatment option for 
persons diagnosed with medically intractable epilepsy, is identified by 
the reporting of an ICD-10-PCS code combination capturing a 
neurostimulator generator inserted into the skull with the insertion of 
a neurostimulator lead into the brain and cases are assigned to MS-DRG 
023 when reported with a principal diagnosis of epilepsy.
    As discussed in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38015 
through 38019), we finalized our proposal to reassign all cases with a 
principal diagnosis of epilepsy and one of the following ICD-10-PCS 
code combinations capturing cases with a neurostimulator generator 
inserted into the skull with the insertion of a neurostimulator lead 
into the brain (including cases involving the use of the 
RNS(copyright) neurostimulator) to MS-DRG 023 even if there 
is no MCC reported:
     0NH00NZ (Insertion of neurostimulator generator into 
skull, open approach), in combination with 00H00MZ (Insertion of 
neurostimulator lead into brain, open approach).
     0NH00NZ (Insertion of neurostimulator generator into 
skull, open approach), in combination with 00H03MZ (Insertion of 
neurostimulator lead into brain, percutaneous approach).
     0NH00NZ (Insertion of neurostimulator generator into 
skull, open approach), in combination with 00H04MZ (Insertion of 
neurostimulator lead into brain, percutaneous endoscopic approach).
    We also finalized our proposed change to the title of MS-DRG 023 
from ``Craniotomy with Major Device Implant or Acute Complex Central 
Nervous System (CNS) Principal Diagnosis (PDX) with MCC or Chemo 
Implant'' to ``Craniotomy with Major Device Implant or Acute Complex 
Central Nervous System (CNS) Principal Diagnosis (PDX) with MCC or 
Chemotherapy Implant or Epilepsy with Neurostimulator'' to reflect the 
modifications to the MS-DRG structure.
    The requestor acknowledged the refinements made to MS-DRG 023 
effective for FY 2018, but stated that despite the previously-mentioned 
changes, cases describing the insertion of a neurostimulator generator 
into the skull in combination with the insertion of a neurostimulator 
lead into the brain continue to be underpaid. The requestor performed 
its own analysis and stated that it found that the average costs of 
cases describing the insertion of the RNS(copyright) 
neurostimulator were significantly higher than the average costs of all 
cases in their current assignment to MS-DRG 023, and as a result, cases 
describing the insertion of the RNS(copyright) 
neurostimulator are not being adequately reimbursed. The requestor 
suggested the following two options for MS-DRG assignment updates: (1) 
Reassign cases describing the insertion of a neurostimulator generator 
into the skull in combination with the insertion of a neurostimulator 
lead into the brain from MS-DRG 023 to MS-DRG 021 with a change in 
title to ``lntracranial Vascular Procedures with PDX Hemorrhage with CC 
or Epilepsy with Neurostimulator;'' or (2) reassign cases describing 
the insertion of a neurostimulator generator into the skull in 
combination with the insertion of a neurostimulator lead into the brain 
to another higher paying MS-DRG that would provide adequate 
reimbursement. The requestor stated its belief that MS-DRG 021 is a 
better fit in terms of average costs and clinical coherence for 
reassignment of RNS(copyright) System cases and recognized 
that there is likely still not enough volume to warrant the creation of 
new MS-DRGs for cases describing the insertion of the 
RNS(copyright) neurostimulator.
    We examined claims data from the September 2019 update of the FY 
2019 MedPAR file for all cases in MS-DRG 023 and compared the results 
to cases representing a neurostimulator generator inserted into the 
skull with the insertion of a neurostimulator lead into the brain 
(including cases involving the use of the RNS(copyright) 
neurostimulator) that had a principal diagnosis of epilepsy in MS-DRG 
023. The following table shows our findings:
[GRAPHIC] [TIFF OMITTED] TP29MY20.010

    As shown in the table, for MS-DRG 023, we identified a total of 
11,938 cases, with an average length of stay of 9.8 days and average 
costs of $40,264. Of the 11,938 cases in MS-DRG 023, there were 81 
cases describing a neurostimulator generator inserted into the skull 
with the insertion of a neurostimulator lead into the brain (including 
cases involving the use of the RNS(copyright) 
neurostimulator) that had a principal diagnosis of epilepsy with an 
average length of stay of 3.3 days and average costs of $52,362. Our 
clinical advisors reviewed these data, and agreed with the requestor 
that the number of cases is too small to warrant the creation of a new 
MS-DRG for these cases, for the reasons discussed in the FY 2018 IPPS/
LTCH PPS final rule (82 FR 38015 through 38019).
    We also examined the reassignment of cases describing a 
neurostimulator generator inserted into the skull with the insertion of 
a neurostimulator lead into the brain (including cases involving the 
use of the RNS(copyright) neurostimulator) to MS-DRGs 020, 
021, and 022 (Intracranial Vascular Procedures with PDX Hemorrhage with 
MCC, with CC, and without CC/MCC, respectively). While the request was 
to reassign these cases to MS-DRG 021, MS-DRG 021 is specifically 
differentiated according to the presence of a secondary diagnosis with 
a severity level designation of a complication or comorbidity (CC). 
Cases with a neurostimulator generator inserted into the skull with the 
insertion of a neurostimulator lead into the brain (including cases 
involving the use of the RNS(copyright) neurostimulator) do 
not always involve the presence of a secondary diagnosis with a 
severity level designation of a complication or comorbidity (CC), and 
therefore we reviewed data for all three MS-DRGs. The following table 
shows our findings:

[[Page 32483]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.011

    As shown in the table, for MS-DRG 020, there were a total of 1,623 
cases with an average length of stay of 16.1 days and average costs of 
$75,668. For MS-DRG 021, there were a total of 409 cases with an 
average length of stay of 12.3 days and average costs of $55,123. For 
MS-DRG 022, there were a total of 131 cases with an average length of 
stay of 6.3 days and average costs of $35,599.
    While the cases in MS-DRG 023 describing a neurostimulator 
generator inserted into the skull with the insertion of a 
neurostimulator lead into the brain (including cases involving the use 
of the RNS(copyright) neurostimulator) and a principal 
diagnosis of epilepsy have average costs that are similar to the 
average costs of cases in MS-DRG 021 ($52,362 compared to $55,123), 
they have an average length of stay that is 9 days shorter (3.3 days 
compared to 12.3 days), similar to our findings as summarized in the FY 
2018 IPPS/LTCH PPS final rule. Our clinical advisors reviewed the 
clinical issues and the claims data, and did not support reassigning 
the cases describing a neurostimulator generator inserted into the 
skull with the insertion of a neurostimulator lead into the brain 
(including cases involving the use of the RNS(copyright) 
neurostimulator) and a principal diagnosis of epilepsy from MS-DRG 023 
to MS-DRGs 020, 021 or 022. As discussed in the FY 2018 IPPS/LTCH PPS 
final rule, the cases in MS-DRGs 020, 021 and 022 have a principal 
diagnosis of a hemorrhage. The RNS(copyright) 
neurostimulator generators are not used to treat patients with 
diagnosis of a hemorrhage. Our clinical advisors continue to believe 
that it is inappropriate to reassign cases representing a principal 
diagnosis of epilepsy to a MS-DRG that contains cases that represent 
the treatment of intracranial hemorrhage, as discussed in the FY 2018 
IPPS/LTCH PPS final rule (82 FR 38015 through 38019). They also stated 
that the differences in average length of stay and average costs based 
on the more recent data continue to support this recommendation.
    We then explored alternative options, as was requested. We noted 
that the 81 cases describing a neurostimulator generator inserted into 
the skull with the insertion of a neurostimulator lead into the brain 
(including cases involving the use of the RNS(copyright) 
neurostimulator) and a principal diagnosis of epilepsy had an average 
length of stay of 3.3 days and average costs of $52,362, as compared to 
the 11,938 cases in MS-DRG 023 that had an average length of stay of 
9.8 days and average costs of $40,264. While these neurostimulator 
cases had average costs that were $12,098 higher than the average costs 
of all cases in MS-DRG 023, there were only a total of 81 cases. There 
may have been other factors contributing to the higher costs.
    We further analyzed the data to identify those cases describing a 
neurostimulator generator inserted into the skull with the insertion of 
a neurostimulator lead into the brain (including cases involving the 
use of the RNS(copyright) neurostimulator), with at least 
one other procedure designated as an O.R. procedure, and a principal 
diagnosis of epilepsy. 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. Our data findings for MS-DRG 023 
demonstrate that of the 81 cases describing a neurostimulator generator 
inserted into the skull with the insertion of a neurostimulator lead 
into the brain (including cases involving the use of the 
RNS(copyright) neurostimulator) and a principal diagnosis of 
epilepsy, 19 reported at least one other procedure designated as an 
O.R. procedure, and had higher average costs ($72,995 versus $52,362) 
compared to the average costs of all cases in this subset of MS-DRG 
023.
    We also reviewed the cases reporting procedures describing a 
neurostimulator generator inserted into the skull with the insertion of 
a neurostimulator lead into the brain (including cases involving the 
use of the RNS(copyright) neurostimulator), and a principal 
diagnosis of epilepsy to identify the secondary diagnosis CC and/or MCC 
conditions reported in conjunction with these procedures that also may 
be contributing to the higher average costs for these cases. We 
reviewed the claims data to identify the number (frequency) and types 
of principal and secondary diagnosis CC and/or MCC conditions that were 
reported. Our findings for the cases reporting secondary diagnosis MCC 
and CC conditions, followed by the top 10 secondary diagnosis MCC and 
secondary diagnosis CC conditions that were reported within the claims 
data for this subset of cases are shown in the following tables:
[GRAPHIC] [TIFF OMITTED] TP29MY20.012


[[Page 32484]]


[GRAPHIC] [TIFF OMITTED] TP29MY20.013

[GRAPHIC] [TIFF OMITTED] TP29MY20.267

    While the results of the claims analysis as previously summarized 
indicate that the average costs of cases reporting a neurostimulator 
generator inserted into the skull with the insertion of a 
neurostimulator lead into the brain (including cases involving the use 
of the RNS(copyright) neurostimulator), and a principal 
diagnosis of epilepsy are higher compared to the average costs for all 
cases in their assigned MS-DRG, we cannot ascertain from the claims 
data the resource use specifically attributable to the procedure during 
a hospital stay. These data show cases reporting a neurostimulator 
generator inserted into the skull with the insertion of a 
neurostimulator lead into the brain (including cases involving the use 
of the RNS(copyright) neurostimulator), and a principal 
diagnosis of epilepsy, can present greater treatment difficulty, and 
have a need for additional intervention with other O.R. procedures. 
When reviewing consumption of hospital resources for this subset of 
cases, the claims data also clearly shows that the patients typically 
have multiple MCC and CC conditions, and the increased costs appear to 
be attributable to the severity of illness of the patient.
    In summary, we believe that further analysis of cases reporting a 
neurostimulator generator inserted into the skull with the insertion of 
a neurostimulator lead into the brain (including cases involving the 
use of the RNS(copyright) neurostimulator), and a principal 
diagnosis of epilepsy is needed prior to proposing any further 
reassignment of these cases to ensure clinical coherence between these 
cases and the other cases with which they may potentially be grouped. 
We expect that, in future years, we would have additional data that 
exhibit an increased number of cases that could be used to evaluate the 
potential reassignment of cases reporting a neurostimulator generator 
inserted into the skull with the insertion of a neurostimulator lead 
into the brain (including cases involving the use of the 
RNS(copyright) neurostimulator), and a principal diagnosis 
of epilepsy. Therefore, we are not proposing to reassign cases 
describing a neurostimulator generator inserted into the skull with the 
insertion of a neurostimulator lead into the brain (including cases 
involving the use of the RNS(copyright) neurostimulator) 
from MS-DRG 023 to MS-DRG 021. We are also not proposing to reassign 
Responsive Neurostimulator (RNS(copyright)) System cases to 
another MS-DRG at this time.
4. MDC 3 (Diseases and Disorders of Ear, Nose and Throat): 
Temporomandibular Joint Replacements
    We received a request to consider reassignment of ICD-10-PCS 
procedure codes 0RRC0JZ (Replacement of right temporomandibular joint 
with synthetic substitute, open approach) and 0RRD0JZ (Replacement of 
left temporomandibular joint with synthetic substitute, open approach) 
from MS-DRGs 133 and 134 (Other Ear, Nose, Mouth and Throat O.R. 
Procedures with and without CC/MCC, respectively) to MS-DRGs 131 and 
132 (Cranial and Facial Procedures with and without CC/MCC, 
respectively) in MDC 03.
    The requestor stated that it is inaccurate for procedure codes 
0RRC0JZ and 0RRD0JZ that identify and describe replacement of the 
temporomandibular joint (TMJ), which involves excision of the TMJ 
followed by replacement with a prosthesis, to group to MS-DRGs 133 and 
134 while excision of the TMJ alone, identified by procedure codes 
0RBC0ZZ (Excision of right temporomandibular joint, open approach) and 
0RBD0ZZ (Excision of left temporomandibular joint, open

[[Page 32485]]

approach), groups to the higher weighted MS-DRGs 131 and 132. According 
to the requestor, reassignment of procedure codes 0RRC0JZ and 0RRD0JZ 
to the higher weighted MS-DRGs 131 and 132 is reasonable and the MS-DRG 
title of ``Cranial and Facial Procedures'' is more appropriate. 
However, the requestor also stated that the cost of the prosthesis 
would continue to be underpaid, despite that recommended reassignment. 
As an alternative option, the requestor suggested CMS analyze if there 
may be other higher weighted MS-DRGs that could more appropriately 
compensate providers for a TMJ replacement with prosthesis procedure.
    In addition, the requestor recommended that we analyze all 
procedures involving the mandible and maxilla and consider reassignment 
of those procedure codes from MS-DRGs 129 (Major Head and Neck 
Procedures with CC/MCC or Major Device) and 130 (Major Head and Neck 
Procedures without CC/MCC) to MS-DRGs 131 and 132 because the codes 
describe procedures that are performed on facial and cranial 
structures. Finally, the requestor also suggested another option that 
included modifying the surgical hierarchy for MDC 03 by sequencing MS-
DRGs 131 and 132 above MS-DRGs 129 and 130, which the requestor 
asserted would provide for more appropriate payment to providers for 
the performance of multiple facial procedures.
    In this section of this proposed rule, we discuss these separate 
but related requests that involve procedures currently assigned to MS-
DRGs 129, 130, 131, 132, 133 and 134 in MDC 03.
    To analyze the request involving temporomandibular joint 
replacements, we first identified the ICD-10-PCS procedure codes that 
describe the excision or replacement of a temporomandibular joint as 
shown in the following table.
[GRAPHIC] [TIFF OMITTED] TP29MY20.014

    The requestor is correct that procedure codes 0RRC0JZ and 0RRD0JZ 
that describe replacement of the right and left TMJ with a prosthesis 
(synthetic substitute) by an open approach group to MS-DRGs 133 and 134 
and procedure codes 0RBC0ZZ and 0RBD0ZZ that describe excision of the 
right and left TMJ alone by an open approach group to the higher 
weighted MS-DRGs 131 and 132. We also note that the corresponding 
related codes as previously listed in the table that describe different 
approaches (excision procedures) or different types of tissue 
substitute (replacement procedures) are also assigned to the same 
respective MS-DRGs.
    We examined claims data from the September 2019 update of the FY 
2019 MedPAR file for MS-DRGs 133 and 134 to identify cases reporting 
ICD-10-PCS codes 0RRC0JZ or 0RRD0JZ. Our findings are shown in the 
following table.
[GRAPHIC] [TIFF OMITTED] TP29MY20.015


[[Page 32486]]


    In MS-DRG 133, we found a total of 1,757 cases with an average 
length of stay of 5.6 days and average costs of $15,337. Of those 1,757 
cases, there were 13 cases reporting ICD-10-PCS code 0RRC0JZ or 
0RRD0JZ, with an average length of stay of 3.1 days and average costs 
of $21,677. In MS-DRG 134, we found a total of 849 cases with an 
average length of stay of 2.5 days and average costs of $9,512. Of 
those 849 cases, there were 23 cases reporting ICD-10-PCS code 0RRC0JZ 
or 0RRD0JZ, with an average length of stay of 2.1 days and average 
costs of $20,430. The analysis shows that cases reporting ICD-10-PCS 
procedure codes 0RRC0JZ or 0RRD0JZ in MS-DRGs 133 and 134 have higher 
average costs ($21,677 versus $15,337 and $20,430 versus $9,512, 
respectively) and shorter lengths of stay (3.1 days versus 5.6 days and 
2.1 days versus 2.5 days, respectively) compared to all the cases in 
their assigned MS-DRG.
    We also examined claims data from the September 2019 update of the 
FY 2019 MedPAR file for MS-DRGs 131 and 132. Our findings are shown in 
the following table.
[GRAPHIC] [TIFF OMITTED] TP29MY20.016

    In MS-DRG 131, we found a total of 1,181 cases with an average 
length of stay of 5.4 days and average costs of $18,875. In MS-DRG 132, 
we found a total of 464 cases with an average length of stay of 2.5 
days and average costs of $11,558.
    Overall, the data analysis shows that the average costs for the 
cases reporting procedure codes 0RRC0JZ and 0RRD0JZ in MS-DRGs 133 and 
134 are more aligned with the average costs for all the cases in MS-DRG 
131 ($21,677 and $20,430, respectively versus $18,875) compared to MS-
DRG 132 where the average costs are not significantly different than 
the average costs of all the cases in MS-DRG 134 ($11,558 versus 
$9,512). Our clinical advisors agreed that the replacement of a TMJ 
with prosthesis procedures (codes 0RRC0JZ or 0RRD0JZ) are more resource 
intensive and are clinically distinct from the cases reporting 
procedure codes 0RBC0ZZ and 0RBD0ZZ that involve excision of the TMJ 
alone. They also agreed that procedure codes 0RRC0JZ and 0RRD0JZ should 
be reassigned to a higher weighted MS-DRG. However, they recommended we 
conduct further claims analysis to identify if there are other MS-DRGs 
in MDC 03 where cases reporting these procedure codes may also be found 
and to compare that data.
    As previously noted, the requestor had also recommended that we 
analyze all procedures involving the mandible and maxilla and consider 
reassignment of those procedure codes from MS-DRGs 129 and 130 to MS-
DRGs 131 and 132. The requestor did not provide a specific list of the 
procedure codes involving the mandible and maxilla, therefore, we 
reviewed the list of procedure codes in MS-DRGs 129 and 130 and 
identified the following 26 procedure codes describing procedures 
performed on the mandible. There were no procedure codes describing 
procedures performed on the maxilla in MS-DRGs 129 and 130.

[[Page 32487]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.017

    Based on the advice of our clinical advisors as previously 
discussed, we conducted additional analyses for MDC 03 using the same 
FY 2019 MedPAR data file and found cases reporting procedure code 
0RRC0JZ or 0RRD0JZ for the replacement of a TMJ with prosthesis 
procedure in MS-DRGs 129, 130, 131, and 132. As discussed in section 
II.D.15. of this proposed rule, cases with multiple procedures are 
assigned to the highest surgical class in the hierarchy to which one of 
the procedures is assigned. For example, if procedure code 0RRC0JZ 
which is assigned to the logic for MS-DRGs 133 and 134 is reported on a 
claim with procedure code 0NSR04Z (Reposition maxilla with internal 
fixation device, open approach), which is assigned to the logic for MS-
DRGs 131 and 132, the case will group to MS-DRG 131 or 132 (depending 
on the presence of a CC or MCC) when reported with a principal 
diagnosis from MDC 03 because MS-DRGs 131 and 132 are sequenced higher 
in the surgical hierarchy than MS-DRGs 133 and 134. Therefore, since 
MS-DRGs 129, 130, 131, and 132 are sequenced higher in the surgical 
hierarchy than MS-DRGs 133 and 134 in MDC 03, cases reporting procedure 
code 0RRC0JZ or 0RRD0JZ along with another O.R. procedure that is 
currently assigned to one of those MS-DRGs in the GROUPER logic results 
in case assignment to one of those higher surgical class MS-DRGs. We 
also identified cases reporting procedures performed on the mandible 
from the previously discussed list of procedure codes in MS-DRGs 129 
and 130. Our findings are shown in the following table.
[GRAPHIC] [TIFF OMITTED] TP29MY20.018


[[Page 32488]]


    As shown in the table, for MS-DRG 129, there was a total of 2,080 
cases with average length of stay of 5.2 days and average costs of 
$18,091. Of these 2,080 cases, there were 3 cases reporting a TMJ 
replacement with prosthesis procedure (code 0RRC0JZ or 0RRD0JZ) with an 
average length of stay of 3 days and average costs of $33,581 and 592 
cases reporting a mandible procedure with average length of stay of 6.9 
days and average costs of $21,258. For MS-DRG 130, there was a total of 
948 cases with average length of stay of 2.7 days and average costs of 
$11,092. Of these 948 cases, there were 5 cases reporting a TMJ 
replacement with prosthesis procedure (code 0RRC0JZ or 0RRD0JZ) with an 
average length of stay of 3.4 days and average costs of $27,396 and 202 
cases reporting a mandible procedure with average length of stay of 3.5 
days and average costs of $14,712. For MS-DRG 131, there was a total of 
1,181 cases with average length of stay of 5.4 days and average costs 
of $18,875. Of these 1,181 cases there were 4 cases reporting a TMJ 
replacement with prosthesis procedure (code 0RRC0JZ or 0RRD0JZ) with an 
average length of stay of 7.3 days and average costs of $31,151. For 
MS-DRG 132, there was a total of 464 cases with average length of stay 
of 2.5 days and average costs of $11,558. Of these 464 cases, there 
were 10 cases reporting a TMJ replacement with prosthesis procedure 
(code 0RRC0JZ or 0RRD0JZ) with an average length of stay of 3.1 days 
and average costs of $24,099.
    The data analysis demonstrates that the average costs of cases 
reporting procedure code 0RRC0JZ or 0RRD0JZ for the replacement of a 
TMJ with prosthesis procedure in MS-DRGs 129, 130, 131, and 132 and the 
cases reporting procedures performed on the mandible in MS-DRGs 129 and 
130 have higher average costs compared to all the cases in their 
assigned MS-DRGs. While the volume of the cases reporting procedure 
code 0RRC0JZ or 0RRD0JZ was low with a total of 22 cases across MS-DRGs 
129, 130, 131, and 132, similar to the analysis results for MS-DRGs 133 
and 134 described earlier, the average costs for the cases are higher 
($33,581 versus $18,091; $27,396 versus $11,092; $31,151 versus 
$18,875; and $24,099 versus $11,558) affirming that replacement of a 
TMJ with prosthesis procedures are more costly. The analysis also 
demonstrates that the average length of stay for cases reporting 
procedure code 0RRC0JZ or 0RRD0JZ across MS-DRGs 130, 131, and 132 is 
longer (3.4 days versus 2.7 days; 7.3 days versus 5.4 days; and 3.1 
days versus 2.5 days) compared to all the cases in their assigned MS-
DRGs. For MS-DRG 129, we found that the average length of stay was 
shorter (3 days versus 5.2 days) for cases reporting procedure code 
0RRC0JZ or 0RRD0JZ. The data demonstrated similar results for the cases 
reporting procedures performed on the mandible in MS-DRGs 129 and 130, 
where the average costs for the cases are higher ($21,258 versus 
$18,091 and $14,712 versus $11,092, respectively) and the average 
length of stay was longer (6.9 days versus 5.2 days and 3.5 days versus 
2.7 days, respectively) compared to all the cases in their assigned MS-
DRG.
    The analysis of MS-DRGs 129, 130, 131, and 132 further demonstrated 
that the average length of stay and average costs for all cases were 
almost identical for each of the subgroups. For example, MS-DRG 129 is 
defined as ``with CC/MCC or major device'' and MS-DRG 131 is defined as 
``with CC/MCC'' while MS-DRGs 130 and 132 are both defined as ``without 
CC/MCC''. For all of the cases in MS-DRG 129, we found that the average 
length of stay was 5.2 days with an average cost of $18,091, and for 
all of the cases in MS-DRG 131, the average length of stay was 5.4 days 
with an average cost of $18,875. Similarly, for all of the cases in MS-
DRG 130, we found that the average length of stay was 2.7 days with an 
average cost of $11,092, and for MS-DRG 132, we found the average 
length of stay was 2.5 days with an average cost of $11,558.
    As a result of the data analysis performed for MS-DRGs 129, 130, 
131, and 132, including the analysis of the procedures describing 
replacement of a TMJ with prosthesis in MS-DRGs 133 and 134, as well as 
considering the requestor's suggestion that we examine the 
appropriateness of modifying the surgical hierarchy for MDC 03 by 
sequencing MS-DRGs 131 and 132 above MS-DRGs 129 and 130 to enable more 
appropriate payment for the performance of multiple facial procedures, 
our clinical advisors recommended evaluating all the procedures 
currently assigned to MS-DRGs 129, 130, 131, 132, 133, and 134 to 
compare costs, complexity of service and clinical coherence to assess 
any potential reassignment of these procedures. We refer the reader to 
the ICD-10 MS-DRG Definitions Manual Version 37, which is available via 
the internet on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software, for complete documentation of the GROUPER 
logic for MS-DRGs 129, 130, 131, 132, 133, and 134.
    We examined claims data from the September 2019 update of the FY 
2019 MedPAR file for cases reporting any of the procedure codes that 
are currently assigned to MS-DRGs 129, 130, 131, 132, 133, or 134. We 
refer the reader to Table 6P.2d associated with this proposed rule 
(which is available via the internet on the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index/ for the detailed analysis. We note that if a 
procedure code that is currently assigned to MS-DRGs 129, 130, 131, 
132, 133, or 134 is not displayed it is because there were no cases 
found reporting that code in the assigned MS-DRG.
    The data analysis shows that there is wide variation in the volume, 
length of stay, and average costs of cases reporting procedures 
currently assigned to MS-DRGs 129, 130, 131, 132, 133, and 134. There 
were several instances in which only one case was found to report a 
procedure code from MS-DRG 129, 130, 131, 132, 133, or 134, and the 
average length of stay for these specific cases ranged from 1 day to 31 
days. For example, in MS-DRG 131, we found one case reporting procedure 
code 0NB70ZZ (Excision of occipital bone, open approach) with an 
average length of stay of 31 days which we consider to be an outlier in 
comparison to all the other cases reported in that MS-DRG with an 
average length of stay of 5.4 days. Overall, the average costs of cases 
in MS-DRGs 129 and 130 range from $4,970 to $38,217, the average costs 
of cases in MS-DRGs 131 and 132 range from $4,022 to $69,558 and the 
average costs of cases in MS-DRGs 133 and 134 range from $1,089 to 
$87,569. As noted previously, the data demonstrate there appear to be 
similar utilization of hospital resources specifically for cases 
reported in MS-DRGs 129, 130, 131 and 132.
    The highest volume of cases was reported in MS-DRGs 129 and 130 for 
the procedure codes describing resection of the right and left neck 
lymphatic. For MS-DRG 129, there was a total of 750 cases reporting 
procedure code 07T10ZZ (Resection of right neck lymphatic, open 
approach) with an average length of stay of 4.7 days and average costs 
of $17,155 and there was a total of 679 cases reporting procedure code 
07T20ZZ (Resection of left neck lymphatic, open approach) with an 
average length of stay of 4.8 days and average costs of $17,857. For 
MS-DRG 130, there was a total of 358 cases reporting procedure code 
07T10ZZ with an average length of stay of 2.6 days and average costs of 
$10,432 and there was

[[Page 32489]]

a total of 331 cases reporting procedure code 07T20ZZ with an average 
length of stay of 2.5 days and average costs of $10,467. For MS-DRGs 
131 and 132, the highest volume of cases was reported for the procedure 
codes describing repositioning of the maxilla with internal fixation 
and repositioning of the right and left mandible with internal 
fixation. For MS-DRG 131, there was a total of 186 cases reporting 
procedure code 0NSR04Z (Reposition maxilla with internal fixation 
device, open approach) with an average length of stay of 5.1 days and 
average costs of $20,500; a total of 114 cases reporting procedure code 
0NST04Z (Reposition right mandible with internal fixation device, open 
approach) with an average length of stay of 5.7 days and average costs 
of $18,710, and a total of 219 cases reporting procedure code 0NSV04Z 
(Reposition left mandible with internal fixation device, open approach) 
with an average length of stay of 6.0 days and average costs of 
$20,202. For MS-DRG 132, there was a total of 84 cases reporting 
procedure code 0NSR04Z with an average length of stay of 2.1 days and 
average costs of $12,991 and a total of 101 cases reporting procedure 
code 0NSV04Z with an average length of stay of 2.8 days and average 
costs of $11,386. For MS-DRGs 133 and 134, the highest volume of cases 
was reported for the procedure codes describing excision of the facial 
nerve or nasal turbinate. For MS-DRG 133, there was a total of 60 cases 
reporting procedure code 09BL8ZZ (Excision of nasal turbinate, via 
natural or artificial opening endoscopic) with an average length of 
stay of 6.6 days and average costs of $21,253 and for MS-DRG 134, there 
was a total of 50 cases reporting procedure code 00BM0ZZ (Excision of 
facial nerve, open approach) with an average length of stay of 1.4 days 
and average costs of $8,048.
    Our clinical advisors reviewed the procedures currently assigned to 
MS-DRGs 129, 130, 131, 132, 133, and 134 to identify the patient 
attributes that currently define each of these procedures and to group 
them with respect to complexity of service and resource intensity. For 
example, procedures that we believe represent greater treatment 
difficulty and reflect a class of patients who are similar clinically 
with regard to consumption of hospital resources were grouped 
separately from procedures that we believe to be less complex but still 
reflect patients who are similar clinically with regard to consumption 
of hospital resources. This approach differentiated the more complex 
and invasive procedures, such as resection of cervical lymph nodes, 
repositioning of facial bones, and excision of mandible procedures from 
the less complex and less invasive procedures such as excisions 
(biopsies) of lymph nodes and facial nerves, drainage procedures of the 
upper respiratory system, and tonsillectomies.
    After this comprehensive review of all the procedures currently 
assigned to MS-DRGs 129, 130, 131, 132, 133, and 134, in combination 
with the results of the data analysis discussed previously, our 
clinical advisors support distinguishing the procedures currently 
assigned to those MS-DRGs by clinical intensity, complexity of service 
and resource utilization and also support restructuring of these MS-
DRGs accordingly. We note that during the analysis of the procedures 
currently assigned to MS-DRGs 129 and 130, we recognized the special 
logic defined as ``Major Device Implant'' for MS-DRG 129 that 
identifies procedures describing the insertion of a cochlear implant or 
other hearing device. Our clinical advisors supported the removal of 
this special logic from the definition for assignment to any proposed 
modifications to the MS-DRGs, noting the costs of the device have 
stabilized over time and the procedures can be appropriately grouped 
along with other procedures involving devices in any restructured 
proposed MS-DRGs. We also identified 2 procedure codes currently 
assigned to MS-DRGs 131 and 132, 00J00ZZ (Inspection of brain, open 
approach) and 0WJ10ZZ (Inspection of cranial cavity, open approach), 
that our clinical advisors agreed should not be included in any 
proposed modifications to the MS-DRGs in MDC 03, stating that they are 
appropriately assigned to MS-DRGs in MDC 01 (Diseases and Disorders of 
the Nervous System). We further note that during our analysis of the 
procedures currently assigned to MS-DRGs 133 and 134, we found 338 
procedure codes that were inadvertently included as a result of 
replication during our transition from the ICD-9 to ICD-10 based MS-
DRGs. We refer the reader to Table 6P.2c for a detailed list of these 
procedure codes that describe procedures performed on various sites, 
such as the esophagus, stomach, intestine, skin, and thumb that, our 
clinical advisors agree should be removed from the definition for 
assignment to any proposed modifications to the MS-DRGs under MDC 03.
    As a result of our review, we are proposing the deletion of MS-DRGs 
129, 130, 131, 132, 133, and 134, and the creation of six new MS-DRGs. 
Currently, MS-DRGs 129, 131, and 133 are defined as base MS-DRGs, each 
of which is split by a two-way severity level subgroup. Our proposal 
includes the creation of two new base MS-DRGs with a three-way severity 
level split. Our clinical advisors suggested that based on the analysis 
of procedures currently assigned to MS-DRGs 129, 130, 131, 132, 133, 
and 134 as described previously, only 2 base MS-DRGs were needed, each 
divided into 3 levels according to the presence of a CC or MCC. The 
proposed MS-DRGs were developed consistent with the analysis to 
differentiate the more complex and invasive procedures from the less 
complex and less invasive procedures. As noted previously, our analysis 
of MS-DRGs 129, 130, 131, and 132 demonstrated that the average length 
of stay and average costs for all cases were almost identical for each 
of the severity level subgroups and therefore, the procedures assigned 
to these MS-DRGs were initially reviewed together as one clinical group 
and then evaluated further in comparison to the procedures currently 
assigned to MS-DRGs 133 and 134. The objective was to better 
differentiate procedures by treatment difficulty, clinical similarity, 
and resource use, and to propose a more appropriate restructuring. For 
example, based on this analysis, in some instances, we are proposing to 
reassign procedures described by procedure codes that are currently 
assigned to MS-DRGs 129 and 130 or MS-DRGs 131 and 132 to what is being 
defined as the less complex MS-DRGs. We believe the resulting proposed 
MS-DRG assignments are more clinically homogeneous, coherent and better 
reflect hospital resource use.
    We applied the criteria to create subgroups for the three-way 
severity level split for the proposed new MS-DRGs and found that all 
five criteria were met. For the proposed new MS-DRGs, there is at least 
(1) 500 cases in the MCC group, the CC group and the NonCC group; (2) 5 
percent of the cases in the MCC group, the CC group and the NonCC 
group; (3) a 20 percent difference in average costs between the MCC 
group, the CC group and the NonCC group; (4) a $2,000 difference in 
average costs between the MCC group, the CC group and the NonCC group; 
and (5) a 3-percent reduction in cost variance, indicating that the 
proposed severity level splits increase the explanatory power of the 
base MS-DRG in capturing differences in expected cost between the 
proposed MS-DRG severity level splits by at least 3 percent and thus 
improve the overall accuracy of the

[[Page 32490]]

IPPS payment system. The following table reflects our simulation for 
the proposed new MS-DRGs with a three-way severity level split. Our 
findings represent what we would expect under the proposed 
modifications and proposed new MS-DRGs, based on claims data in the FY 
2019 MedPAR file.
[GRAPHIC] [TIFF OMITTED] TP29MY20.019

    We are proposing to create two new base MS-DRGs, 140 and 143, with 
a three-way severity level split for proposed new MS-DRGs 140, 141, and 
142 (Major Head and Neck Procedures with MCC, with CC, and without CC/
MCC, respectively) and proposed new MS-DRGs 143, 144, and 145 (Other 
Ear, Nose, Mouth And Throat O.R. Procedures with MCC, with CC, and 
without CC/MCC, respectively).
    We refer the reader to Table 6P.2a and Table 6P.2b for the list of 
procedure codes we are proposing for reassignment from MS-DRGs 129, 
130, 131, 132, 133, and 134 to each of the proposed new MS-DRGs. As 
noted, we are also proposing the removal of procedure codes 00J00ZZ and 
0WJ10ZZ, and the 338 procedure codes listed in Table 6P.2c from the 
logic for MDC 03.
    We note that discussion of the surgical hierarchy for the proposed 
modifications is discussed in section II.D.15. of this proposed rule.
5. MDC 5 (Diseases and Disorders of the Circulatory System)
a. Left Atrial Appendage Closure (LAAC)
    In the FY 2016 IPPS/LTCH PPS final rule (80 FR 49363 through 49367) 
we finalized our proposal to create two new MS-DRGs to classify 
percutaneous intracardiac procedures. Specifically, we created MS-DRGs 
273 and 274 (Percutaneous Intracardiac Procedures with and without MCC, 
respectfully) for cases reporting procedure codes describing cardiac 
ablation and other percutaneous intracardiac procedures. In that 
discussion, as FY 2016 was the first year of our transition from the 
ICD-9 based MS-DRGs to the ICD-10 based MS-DRGs, we provided a list of 
the ICD-9-CM procedure codes that identify and describe the cardiac 
ablation procedures and other percutaneous intracardiac procedures that 
were the subject of that MS-DRG classification change request, one of 
which was ICD-9-CM procedure code 37.90 (Insertion of left atrial 
appendage device).
    Separately, we also discussed a request we received for new 
technology add-on payments for the WATCHMANTM Left Atrial 
Appendage Closure (LAAC) device (80 FR 49480 through 49488). In that 
discussion, we noted that effective October 1, 2004 (FY 2005), ICD-9-CM 
procedure code 37.90 (Insertion of left atrial appendage device) was 
created to identify and describe procedures using the 
WATCHMANTM Left Atrial Appendage (LAA) Closure Technology 
and that under ICD-10-PCS, procedure code 02L73DK (Occlusion of left 
atrial appendage with intraluminal device, percutaneous approach) is 
the comparable translation. We also noted that at the time of the new 
technology request, under the ICD-9 based MS-DRGs, procedure code 37.90 
was assigned to MS-DRGs 250 and 251 (Percutaneous Cardiovascular 
Procedures without Coronary Artery Stent with MCC and without MCC, 
respectively). We further noted that, as stated previously, we 
finalized our proposal to assign procedures performed within the heart 
chambers using intracardiac techniques, including those identified by 
ICD-9-CM procedure code 37.90, and its comparable ICD-10-PCS code 
translations (that specifically identify a percutaneous or percutaneous 
endoscopic approach), including 02L73DK, to new MS-DRGs 273 and 274.
    For this FY 2021 IPPS/LTCH PPS proposed rule, we received two 
separate, but related requests involving the procedure codes that 
describe the technology that is utilized in the performance of LAAC 
procedures. The first request was to reassign ICD-10-PCS procedure code 
02L73DK (Occlusion of left atrial appendage with intraluminal device, 
percutaneous approach) that identifies the WATCHMANTM Left 
Atrial Appendage Closure (LAAC) device, from MS-DRG 274 (Percutaneous 
Intracardiac Procedures without MCC) to MS-DRG 273 (Percutaneous 
Intracardiac Procedures with MCC) and revise the title for MS-DRG 273 
to ``Percutaneous Intracardiac Procedures with MCC or Major Device 
Implant for Left Atrial Appendage Closure Procedures''. Cases involving 
LAAC procedures with a percutaneous or percutaneous endoscopic 
approach, including cases reporting ICD-10-PCS procedure code 02L73DK, 
are currently assigned to MS-DRGs 273 and 274.
    According to the requestor's analysis, the average cost for LAAC 
procedures reporting ICD-10-PCS procedure code 02L73DK is $3,405 higher 
than the average cost for all cases in MS-DRG 274. The requestor stated 
that based on its analysis, this requested reassignment would have 
minimal impact on MS-DRGs 273 and 274 and would ensure adequate 
payments and better resource

[[Page 32491]]

coherency. The requestor stated that cases reporting procedure codes 
describing a LAAC procedure with procedure code 02L73DK within MS-DRG 
274 are more clinically similar and costs are more closely aligned to 
cases within MS-DRG 273.
    We examined claims data from the September 2019 update of the FY 
2019 MedPAR file for MS-DRGs 273 and 274 to identify cases reporting 
ICD-10-PCS procedure code 02L73DK. Our findings are shown in the 
following table.
[GRAPHIC] [TIFF OMITTED] TP29MY20.020

    In MS-DRG 273, we found a total of 7,048 cases with an average 
length of stay of 6.1 days and average costs of $28,100. Of those 7,048 
cases, there were 1,126 cases reporting ICD-10-PCS procedure code 
02L73DK, with an average length of stay of 2.7 days and average costs 
of $29,504. In MS-DRG 274, we found a total of 24,319 cases with an 
average length of stay of 2.0 days and average costs of $24,048. Of 
those 24,319 cases, there were 13,423 cases reporting ICD-10-PCS 
procedure code 02L73DK, with an average length of stay of 1.2 days and 
average costs of $25,846.
    The data analysis demonstrates that the average costs of the cases 
reporting procedure code 02L73DK in MS-DRG 274 are slightly higher than 
the average costs of all the cases in MS-DRG 274 ($25,846 versus 
$24,048), with a difference of approximately $1,798, however, the 
average length of stay for cases reporting procedure code 02L73DK in 
MS-DRG 274 is shorter compared to all the cases in MS-DRG 274 (1.2 days 
versus 2 days). If we were to reassign cases reporting procedure code 
02L73DK from MS-DRG 274 to MS-DRG 273, we would be assigning cases with 
an average length of stay of 1.2 days to a MS-DRG with an average 
length of stay of 6.1 days, which our clinical advisors did not 
support. The average costs of the cases reporting procedure code 
02L73DK in MS-DRG 274 ($25,846) compared to the average costs of all 
the cases in MS-DRG 273 ($28,100) show a difference of $2,254. Our 
clinical advisors did not support reassigning the 13,423 cases 
reporting procedure code 02L73DK without an MCC from MS-DRG 274 to MS-
DRG 273, which includes cases reporting a MCC, noting that it would 
impact the average costs for all cases in this MS-DRG. Lastly, our 
clinical advisors expressed concern regarding making proposed MS-DRG 
changes based on a specific, single technology (WATCHMANTM 
Left Atrial Appendage Closure (LAAC) device), identified by only one 
unique procedure code versus considering proposed changes based on a 
group of related procedure codes that can be reported to describe that 
same type or class of technology, which is more consistent with the 
intent of the MS-DRGs. Therefore, for these reasons, we are not 
proposing to reassign cases reporting ICD-10-PCS procedure code 02L73DK 
(Occlusion of left atrial appendage with intraluminal device, 
percutaneous approach) from MS-DRG 274 to MS-DRG 273.
    The second request was to create a new MS-DRG specific to all left 
atrial appendage closure (LAAC) procedures or to map all LAAC 
procedures to a different cardiovascular MS-DRG that has payment rates 
aligned with procedural costs. The requestor stated that by creating a 
new MS-DRG specific to all LAAC procedures or mapping all LAAC 
procedures to a different cardiovascular MS-DRG, the MS-DRG would more 
appropriately recognize the clinical characteristics and cost 
differences in LAAC cases.
    The 9 ICD-10-PCS procedure codes that describe LAAC procedures and 
their corresponding MS-DRG assignment are listed in the following 
table.
[GRAPHIC] [TIFF OMITTED] TP29MY20.021

    Currently, the MS-DRG assignments for these procedure codes are 
based on the surgical approach: open approach, percutaneous approach, 
or percutaneous endoscopic approach. Procedures describing an open 
approach are assigned to MS-DRGs 250 and 251 (Percutaneous 
Cardiovascular Procedures without Coronary Artery Stent with and 
without MCC, respectively); while procedures describing a percutaneous 
or percutaneous endoscopic approach are assigned to MS-DRGs 273 and 274 
(Percutaneous Intracardiac Procedures

[[Page 32492]]

with and without MCC, respectfully). Of the nine listed ICD-10-PCS 
procedure codes, three (02L70CK, 02L70DK, and 02l70ZK) describe an open 
approach and are currently assigned to MS-DRG 250 and 251, and six 
(02L73CK, 02L73DK, 02L73ZK, 02L74CK, 02L74DK, 02L74ZK) describe a 
percutaneous or percutaneous endoscopic approach and are currently 
assigned to MS-DRG 273 and 274.
    We examined claims data from the September 2019 update of the FY 
2019 MedPAR file for cases reporting LAAC procedures with an open 
approach in MS-DRGs 250 and 251. Our findings are shown in the 
following table.
[GRAPHIC] [TIFF OMITTED] TP29MY20.022

    In MS-DRG 250, we found a total of 4,192 cases with an average 
length of stay of 5.0 days and average costs of $18,807. Of those 4,192 
cases, there were 21 cases reporting a LAAC procedure with an open 
approach, with an average length of stay of 7.0 days and average costs 
of $44,012. In MS-DRG 251, we found a total of 4,941 cases with an 
average length of stay of 2.6 days and average costs of $12,535. Of 
those 4,941 cases, there were 74 cases reporting a LAAC procedure with 
an open approach, with an average length of stay of 3.4 days and 
average costs of $22,711. The analysis shows that the cases reporting a 
LAAC procedure with an open approach in MS-DRGs 250 and 251 have higher 
average costs compared to all cases in MS-DRGs 250 and 251 ($44,012 
versus $18,807 and $22,711 versus $12,535, respectively). The analysis 
also shows that the average length of stay for cases reporting a LAAC 
procedure with an open approach in MS-DRGs 250 and 251 is longer 
compared to all cases in MS-DRGs 250 and 251 (7.0 days versus 5.0 days 
and 3.4 days versus 2.6 days, respectively). Overall, there were a 
total of 95 (21+74) cases reporting a LAAC procedure with an open 
approach in MS-DRGs 250 and 251 with an average length of stay of 4.2 
days and average costs of $27,420. Based on the results of the claims 
data described previously, we conducted further analysis for the 95 
cases reporting a LAAC procedure with an open approach in MS-DRGs 250 
and 251 to determine if there were additional factors that may be 
contributing to the higher average costs and longer length of stay. Of 
those 95 cases, we found a total of 20 cases in which there was another 
O.R. procedure reported on the claim that is also currently assigned to 
MS-DRGs 250 and MS-DRG 251 and believed to be influencing the average 
costs and average length of stay, as shown in the following tables.

[[Page 32493]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.023

    As shown in the table, for MS-DRG 250, there were a total of 8 
cases reporting another O.R. procedure with a LAAC procedure with an 
open approach with an average length of stay of 8.9 days and average 
costs of $63,653. The data shows that the average length of stay for 
these 8 cases range from 4.0 days to 15.0 days and the average costs 
range from $20,650 to $235,720.
    Overall, the data demonstrates that the 8 cases reporting another 
O.R. procedure with a LAAC procedure with an open approach in MS-DRG 
250 have a longer length of stay (8.9 days versus 7 days) and higher 
average costs ($63,653 versus $44,012) compared to all 21 cases 
reporting a LAAC procedure with an open approach in MS-DRG 250.

[[Page 32494]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.024

    As shown in the table, for MS-DRG 251, there were a total of 12 
cases reporting another O.R. procedure with a LAAC procedure with an 
open approach with an average length of stay of 6.5 days and average 
costs of $31,560. The data shows that the average length of stay for 
these 12 cases range from 1.0 day to 18.0 days and the average costs 
range from $11,052 to $89,682.
    Overall, the data demonstrates that the 12 cases reporting another 
O.R. procedure with a LAAC procedure with an open approach in MS-DRG 
251 have a longer average length of stay (6.5 days versus 3.4 days) and 
higher average costs ($31,560 versus $22,711) compared to all 74 cases 
reporting a LAAC procedure with an open approach in MS-DRG 251. The 
results of our claims analysis for the 20 cases reporting a LAAC 
procedure with an open approach and another O.R. procedure in MS-DRGs 
250 and 251 indicate that the longer average length of stay and higher 
average costs of the 95 cases reporting a LAAC procedure with an open 
approach in MS-DRGs 250 and 251 may be attributed to the resource 
consumption of the additional O.R. procedures reported in the subset of 
20 cases. The claims analysis also shows that the majority of the cases 
reporting a LAAC procedure with an open approach in MS-DRGs 250 and 251 
(75 cases out of 95 cases) were without another O.R. procedure.
    As noted in the discussion previously, with respect to the first 
LAAC MS-DRG request, our analysis of MS-DRG 273 found a total of 7,048 
cases with an average length of stay of 6.1 days and average costs of 
$28,100 and our analysis of MS-DRG 274 found a total of 24,319 cases 
with an average length of stay of 2.0 days and average costs of 
$24,048. The average costs and average length of stay for cases 
reporting a LAAC procedure with an open approach in MS-DRGs 250 and 251 
($44,012 and $22,711, respectively) and (7.0 days and 3.4 days, 
respectively) appear to be generally more aligned with the average 
costs and average length of stay for all cases in MS-DRGs 273 and 274 
($28,100 and $24,048, respectively) and (6.1 days and 2.0 days, 
respectively) as compared to all cases in MS-DRGs 250 and 251 with 
average costs of $18,807 and $12,535, respectively and an average 
length of stay of 5.0 days and 2.6 days, respectively. In addition, as 
also noted previously, the second LAAC MS-DRG request was to create a 
new MS-DRG specific to all left atrial appendage closure (LAAC) 
procedures or to map all LAAC procedures to a different cardiovascular 
MS-DRG that has payment rates aligned with procedural costs. Our 
clinical advisors suggested that because our review of the cases 
reporting a LAAC procedure with an open approach in MS-DRGs 250 and 251 
demonstrated that these procedures are primarily performed in the 
absence of another O.R. procedure and generally are not performed with 
a more intensive open chest procedure, that we should

[[Page 32495]]

evaluate cases reporting LAAC procedures with the other approaches in 
their assigned MS-DRGs.
    We then examined claims data from the September 2019 update of the 
FY 2019 MedPAR file for cases reporting LAAC procedures with a 
percutaneous or percutaneous endoscopic approach in MS-DRGs 273 and 
274. Our findings are shown in the following table.
[GRAPHIC] [TIFF OMITTED] TP29MY20.025

    In MS-DRG 273, we found a total of 7,048 cases with an average 
length of stay of 6.1 days and average costs of $28,100. Of those 7,048 
cases, there were 1,180 cases reporting a LAAC procedure with a 
percutaneous or percutaneous endoscopic approach, with an average 
length of stay of 2.9 days and average costs of $29,591. In MS-DRG 274, 
we found a total of 24,319 cases with an average length of stay of 2.0 
days and average costs of $24,048. Of those 24,319 cases, there were 
13,774 cases reporting a LAAC procedure with a percutaneous or 
percutaneous endoscopic approach, with an average length of stay of 1.2 
days and average costs of $25,765.
    The analysis shows that the cases reporting a LAAC procedure with a 
percutaneous or percutaneous endoscopic approach in MS-DRGs 273 and 274 
have very similar average costs compared to all the cases in MS-DRGs 
273 and 274 ($29,591 versus $28,100 and $25,765 versus $24,048, 
respectively). The analysis also shows that the average length of stay 
for cases reporting a LAAC procedure with a percutaneous or 
percutaneous endoscopic approach in MS-DRGs 273 and 274 is shorter 
compared to all cases in MS-DRGs 273 and 274 (2.9 days versus 6.1 days 
and 1.2 days versus 2.0 days, respectively). Overall, there were a 
total of 14,954 (1,180 + 13,774) cases reporting a LAAC procedure with 
a percutaneous or percutaneous endoscopic approach in MS-DRGs 273 and 
274 with an average length of stay of 1.3 days and average costs of 
$26,067.
    Our clinical advisors did not support creating a new MS-DRG for all 
LAAC procedures for FY 2021. Rather, our clinical advisors believe that 
ICD-10-PCS codes 02L70CK, 02L70DK, and 02L70ZK that describe a LAAC 
procedure with an open approach are more suitably grouped to MS-DRGs 
273 and 274. They stated this reassignment would allow all LAAC 
procedures to be grouped together under the same MS-DRGs and would 
improve clinical coherence. We note that all the procedure codes 
describing LAAC procedures are designated as non-O.R. procedures that 
affect the MS-DRG to which they are assigned. Therefore, we are 
proposing to reassign ICD-10-PCS codes 02L70CK, 02L70DK, and 02L70ZK 
from MS-DRGs 250 and 251 (Percutaneous Cardiovascular Procedures 
without Coronary Artery Stent with and without MCC, respectively) to 
MS-DRGs 273 and 274 (Percutaneous Intracardiac Procedures with and 
without MCC, respectively).
b. Endovascular Cardiac Valve Replacement and Supplement Procedures
    We received a request to revise MS-DRGs 266 and 267 (Endovascular 
Cardiac Valve Replacement and Supplement Procedures with and without 
MCC, respectively) by removing the current two-way severity level split 
and creating a base MS-DRG without any severity level splits. According 
to the requestor, patients treated with an endovascular cardiac valve 
replacement procedure have severe heart failure due to a valvular 
disorder, which may be documented as either an exacerbation of heart 
failure or as chronic severe heart failure.
    The requestor noted that in the cases reporting an endovascular 
cardiac valve replacement procedure, a secondary diagnosis code 
describing the specific type of heart failure may be the only MCC 
reported on the claim and in instances where the heart failure 
diagnosis code is reported as the principal diagnosis on a claim, it is 
disregarded from acting as a MCC. In both scenarios, the requestor 
reported that the heart failure is treated with the endovascular 
cardiac valve replacement procedure, fluid balance, and medication.
    The requestor also stated that providers are challenged in reaching 
a consensus regarding this subset of patients' symptoms that may be 
helpful in establishing a diagnosis for exacerbation of heart failure 
versus chronic severe heart failure and stated that a single, base MS-
DRG would assist in the calculation of costs and charges more reliably, 
regardless of the diagnosis reported in combination with the 
endovascular cardiac valve replacement procedure.
    We examined claims data from the September 2019 update of the FY 
2019 MedPAR file for MS-DRGs 266 and 267. Our findings are shown in the 
following table.

[[Page 32496]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.026

    As shown in the table, there was a total of 19,012 cases with an 
average length of stay of 5.3 days and average costs of $50,879 in MS-
DRG 266. For MS-DRG 267, there was a total of 27,084 cases with an 
average length of stay of 2.1 days and average costs of $40,471. To 
evaluate the request to create a single MS-DRG for cases reporting 
endovascular cardiac valve procedures, we conducted an analysis of base 
MS-DRG 266. This analysis includes 2 years of MedPAR claims data to 
compare the data results from 1 year to the next to avoid making 
determinations about whether additional severity levels are warranted 
based on an isolated year's data fluctuation and also, to validate that 
the established severity levels within a base MS-DRG are supported. 
Therefore, we reviewed the claims data for base MS-DRG 266 using the 
September 2018 update of the FY 2018 MedPAR file and the September 2019 
update of the FY 2019 MedPAR file, which were used in our analysis of 
claims data for MS-DRG reclassification requests for FY 2020 and FY 
2021. Our findings are shown in the table.
[GRAPHIC] [TIFF OMITTED] TP29MY20.027

    As shown in the table, the data reflect that the criteria for a 
two-way split (``with MCC'' and ``without MCC'') are satisfied using 
both the data from the September 2018 update of the FY 2018 MedPAR file 
and the data from the September 2019 update of the FY 2019 MedPAR file: 
(1) At least 500 cases are in the MCC group and in the without MCC 
subgroup; (2) at least 5 percent of the cases in the MS-DRG are in the 
MCC group and in the without MCC subgroup; (3) at least a 20 percent 
difference in average costs between the MCC group and the without MCC 
group; (4) at least a $2,000 difference in average costs between the 
MCC group and the without MCC group; and (5) at least a 3-percent 
reduction in cost variance, indicating that the current severity level 
splits increase the explanatory power of the base MS-DRG in capturing 
differences in expected cost between the current MS-DRG severity level 
splits by at least 3 percent and thus improve the overall accuracy of 
the IPPS payment system. Our clinical advisors also did not agree with 
the requestor's assertion that a single, base MS-DRG would assist in 
calculating costs more reliably. As shown in the claims data and stated 
previously, the criteria are satisfied for the current two-way split. 
We further note that the basis for the MS-DRGs is to better recognize 
severity and complexity of services, which is accomplished through the 
CC subgroups.
    Based on the results of our analysis, for FY 2021, we are proposing 
to maintain the current structure of MS-DRGs 266 and 267 with a two-way 
severity level split and not create a single, base MS-DRG.
c. Insertion of Cardiac Contractility Modulation Device
    We received a request to review the MS-DRG assignment for cases 
that identify patients who receive a cardiac contractility modulation 
(CCM) device system for congestive heart failure. CCM is indicated for 
patients with moderate to severe heart failure resulting from either 
ischemic or non-ischemic cardiomyopathy. CCM utilizes electrical 
signals which are intended to enhance the strength of the heart and 
overall cardiac performance. CCM delivery device systems consist of a 
programmable implantable pulse generator (IPG) and three leads which 
are implanted in the heart. One lead is implanted into the right atrium 
and the other two leads are inserted into the right ventricle. The lead 
in the right atrium detects atrial electric signals and transmits them 
to the IPG. The IPG, which is usually implanted into the subcutaneous 
pocket of the pectoral region and secured to the fascia with a non-
absorbable suture, processes the atrial signal and generates the CCM 
signals which are transmitted to the right ventricle via the two 
ventricular leads. According to the requestor, MS-DRGs 222, 223, 224, 
225, 226, and 227 (Cardiac Defibrillator Implant with and without 
Cardiac Catheterization with and without AMI/HF/Shock with and without 
MCC, respectively) include code combinations or ``code pairs'' 
describing the insertion of contractility modulation devices. Currently 
however, the MS-DRG GROUPER logic requires the combination of the CCM 
device codes and a left ventricular lead to map to MS-DRGs 222, 223, 
224, 225, 226 and 227. The requestor stated the CCM device is 
contraindicated in patients with a left ventricular lead. Therefore, 
using the current V37 MS-DRG GROUPER logic, no case involving insertion 
of the CCM system can be appropriately mapped to MS-DRGs 222, 223, 224, 
225, 226 and 227. Instead, the cases map to MS-DRG 245 (AICD Generator 
Procedures). According to the requestor, to date, the procedure has 
been performed on an outpatient basis, but it is expected that some 
Medicare patients will receive CCM devices on an inpatient basis. The 
requestor asked that CMS revise the MS-DRG GROUPER logic to group cases 
reporting the use of the CCM device appropriately.
    The ICD-10-PCS procedure code pairs currently assigned to MS-DRGs

[[Page 32497]]

222, 223, 224, 225, 226 and 227 that identify the insertion of 
contractility modulation devices are shown in the following table:
[GRAPHIC] [TIFF OMITTED] TP29MY20.028

    Based on our analysis of cases reporting ICD-10-PCS procedure codes 
for CCM device systems, we agree with the requestor that a procedure 
code pair for the insertion of a CCM device and right ventricular and/
or right atrial lead does not exist in the logic for MS-DRGs 222, 223, 
224, 225, 226 and 227. Our analysis indicates that the ICD-10-PCS 
procedure code combinations for right ventricular and/or right atrial 
lead insertion with insertion of contractility modulation devices were 
inadvertently excluded from MS-DRGs 222, 223, 224, 225, 226 and 227 as 
a result of replicating the ICD-9 based MS-DRGs.
    We examined claims data from the September 2019 update of the FY 
2019 MedPAR file for MS-DRG 245 and identified the subset of cases 
within MS-DRG 245 reporting procedure codes for the insertion of a 
rechargeable CCM device and the insertion of right ventricular and/or 
right atrium lead. We found zero cases in MS-DRG 245 reporting a 
procedure code combination that identifies the insertion of 
contractility modulation device and the insertion of a cardiac lead 
into the right ventricle and/or right atrium lead.
    Our clinical advisors agree that insertion of a rechargeable CCM 
system always involves placement of a right-sided lead, and that the 
code combinations that currently exist in the MS-DRG GROUPER logic are 
considered clinically invalid. We again examined claims data from the 
September 2019 update of the FY 2019 MedPAR file for MS-DRGs 222, 223, 
224, 225, 226 and 227 for this subset of cases to determine if there 
were any cases that reported one of the 12 clinically invalid code 
combinations that exist in the GROUPER logic. Because the combinations 
of codes that describe the insertion of a rechargeable CCM device and 
the insertion of left ventricular lead are considered clinically 
invalid procedures, we would not expect these code combinations to be 
reported in any claims data. We found zero cases across MS-DRGs 222, 
223, 224, 225, 226 and 227 reporting the clinically invalid procedure 
combination that identifies the insertion of contractility modulation 
device and the insertion of a cardiac lead into the left ventricle.
    While our analysis did not identify any cases reporting a procedure 
code combination for the insertion of contractility modulation device 
and the

[[Page 32498]]

insertion of a cardiac lead into right ventricle or right atrium, 
recognizing that it is expected that some Medicare patients will 
receive CCM devices on an inpatient basis, we are proposing to add the 
following 24 ICD-10-PCS code combinations to MS-DRGs 222, 223, 224, 
225, 226 and 227. We are also proposing to delete the 12 clinically 
invalid code combinations from the GROUPER logic of MS-DRGs 222, 223, 
224, 225, 226 and 227 that describe the insertion of contractility 
modulation device and the insertion of a cardiac lead into the left 
ventricle.
BILLING CODE 4120-01-P

[[Page 32499]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.029


[[Page 32500]]


[GRAPHIC] [TIFF OMITTED] TP29MY20.030

BILLING CODE 4120-01-C
6. MDC 6 (Diseases and Disorders of the Digestive System): Acute 
Appendicitis
    We received a request to add ICD-10-CM diagnosis code K35.20 (Acute 
appendicitis with generalized peritonitis, without abscess) to the list 
of complicated principal diagnoses that group to MS-DRGs 338, 339 and 
340 (Appendectomy with Complicated Principal Diagnosis with MCC, with 
CC, and without CC/MCC, respectively) so that all ruptured/perforated 
appendicitis codes in MDC 06 (Diseases and Disorders of the Digestive 
System) group to MS-DRGs 338, 339, and 340. ICD-10-CM diagnosis code 
K35.20 currently groups to MS-DRGs 341, 342, and 343 (Appendectomy 
without Complicated Principal Diagnosis with MCC, with CC, and without 
CC/MCC, respectively). Under current coding conventions, the following 
inclusion term for subcategory

[[Page 32501]]

K35.2 (Acute appendicitis with generalized peritonitis) is: 
Appendicitis (acute) with generalized (diffuse) peritonitis following 
rupture or perforation of the appendix. The requestor also noted that 
diagnosis code K35.32 (Acute appendicitis with perforation and 
localized peritonitis, without abscess) currently groups to MS-DRGs 
338, 339, and 340, however, diagnosis code K35.20 which describes a 
generalized, more extensive form of peritonitis does not. The requestor 
stated that ICD-10-CM diagnosis code K35.20 is the only ruptured 
appendicitis code not included in the list of complicated principal 
diagnosis codes for MS-DRGs 338, 339 and 340 and stated that it is 
clinically appropriate for all ruptured/perforated appendicitis 
diagnosis codes to group to MS-DRGs 338, 339 and 340.
    We analyzed claims data from the September 2019 update of the FY 
2019 MedPAR file for cases in MS-DRGs 341, 342, and 343 and claims 
reporting ICD-10-CM diagnosis code K35.20 as a principal diagnosis. Our 
findings are shown in the following table.
[GRAPHIC] [TIFF OMITTED] TP29MY20.031

    As shown in the table, we found a total of 718 cases with an 
average length of stay of 5.9 days and average costs of $17,270 in MS-
DRG 341. Of those 718 cases, there were 62 cases reporting a principal 
diagnosis code of K35.20 with an average length of stay of 7.8 days, 
and average costs of $20,244. We found a total of 2,184 cases with an 
average length of stay of 3.4 days and average costs of $10,611 in MS-
DRG 342. Of those 2,184 cases there were 183 cases reporting a 
principal diagnosis code of K35.20 with an average length of stay of 
4.2 days, and average costs of $10,952. We found a total of 2,329 cases 
with an average length of stay of 2.0 days and average costs of $8,298 
in MS-DRG 343. Of those 2,329 cases, there were 137 cases reporting a 
principal diagnosis code of K35.20 with an average length of stay of 
2.6 days, and average costs of $8,088.
    We also analyzed claims data from the September 2019 update of the 
FY 2019 MedPAR file for MS-DRGs 338, 339, and 340. Our findings are 
shown in the following table.
[GRAPHIC] [TIFF OMITTED] TP29MY20.032

    As shown in the table, we found a total of 685 cases with an 
average length of stay of 8.1 days and average costs of $20,930 in MS-
DRG 338. We found a total of 2,245 cases with an average length of stay 
of 5.0 days and average costs of $12,705 in MS-DRG 339. We found a 
total of 1,840 cases, average length of stay 2.9 days, and average 
costs of $9,101 in MS-DRG 340.
    Our clinical advisors agreed that the presence of an abscess would 
clinically determine whether a diagnosis of acute appendicitis would be 
considered a complicated principal diagnosis. As diagnosis code K35.20 
is described as ``without'' an abscess, our clinical advisors 
recommended that it not be added to the list of principal diagnoses for 
MS-DRGS 338, 339, and 340 (Appendectomy with Complicated Principal 
Diagnosis with MCC, with CC, and without CC/MCC, respectively). We 
believe that while the average costs for cases reporting diagnosis code 
K35.20 are similar to the cases in MS-DRGs 338, 339, and 340, diagnosis 
codes describing acute appendicitis that do not indicate the presence 
of an abscess should remain in MS-DRGs 341, 342, and 343 (Appendectomy 
without Complicated Principal Diagnosis with MCC, with CC, and without 
CC/MCC, respectively) for clinical consistency. Therefore, we are not 
proposing to reassign diagnosis code K35.20 from MS-DRGs 341, 342, and 
343 to MS-DRGs 338, 339, and 340.
    As noted previously, the requestor pointed out that diagnosis 
K35.32 (Acute appendicitis with perforation and localized peritonitis, 
without abscess) currently groups to MS-DRGs 338, 339, and 340 
(Appendectomy with Complicated Principal Diagnosis with MCC, with CC, 
and without CC/MCC, respectively). Therefore, we identified all the 
diagnosis codes describing acute appendicitis within the ICD-10-CM 
classification under subcategory K35.2 (Acute appendicitis with 
generalized peritonitis) and subcategory K35.3 (Acute appendicitis with 
localized

[[Page 32502]]

peritonitis) and reviewed their respective MS-DRG assignments for 
clinical coherence. The diagnosis codes in these subcategories are 
shown in the following table.
[GRAPHIC] [TIFF OMITTED] TP29MY20.033

    We analyzed claims data from the September 2019 update of the FY 
2019 MedPAR file for cases reporting any one of the ICD-10-CM diagnosis 
codes as previously listed as a principal diagnosis in MS-DRGs 338, 
339, 340, 341, 342, and 343. Our findings are shown in the following 
table.
[GRAPHIC] [TIFF OMITTED] TP29MY20.034

    As shown in the table, the diagnosis codes describing ``with 
abscess'' (K35.21 and K35.33) are currently assigned to MS-DRGs 338, 
339, and 340. In addition, the diagnosis codes describing ``without 
abscess'' (K35.20, K35.30, and K35.31) are currently assigned to MS-
DRGs 341, 342, and 343. Our clinical advisors believe that cases 
reporting ICD-10-CM diagnosis codes describing ``with abscess'' are 
associated with higher severity of illness and resource consumption 
because of extended lengths of stay and treatment with intravenous 
antibiotics. Therefore, our clinical advisors determined that diagnosis 
code K35.32 should also be assigned to MS-DRGs 341, 342, and 343 for 
clinical consistency.
    Accordingly, we are proposing to reassign diagnosis code K35.32 to 
MS-DRGs 341, 342, and 343 (Appendectomy without Complicated Principal

[[Page 32503]]

Diagnosis with MCC, with CC, and without CC/MCC, respectively).
    The ICD-10 MS-DRG Version 37 Definitions Manual currently lists the 
following ICD-10-CM diagnosis codes as Complicated Principal Diagnoses 
in MS-DRGs 338, 339, 340, 341, 342, and 343: C18.1 (Malignant neoplasm 
of appendix); C7A.020 (Malignant carcinoid tumor of the appendix); 
K35.21 (Acute appendicitis with generalized peritonitis, with abscess); 
K35.32 (Acute appendicitis with perforation and localized peritonitis, 
without abscess) and K35.33 (Acute appendicitis with perforation and 
localized peritonitis, with abscess). For the same reasons discussed 
previously, we are proposing to remove diagnosis code K35.32 from the 
complicated principal diagnosis list to be clinically consistent.
    Therefore, for the reasons discussed, we are proposing to (1) 
maintain the current assignment of diagnosis code K35.20 (Acute 
appendicitis with generalized peritonitis, without abscess) in MS-DRGs 
341, 342, and 343 (Appendectomy without Complicated Principal Diagnosis 
with MCC, with CC, and without CC/MCC, respectively); (2) reassign 
diagnosis code K35.32 from MS-DRGs 338, 339, and 340 to MS-DRGs 341, 
342, and 343; and (3) remove diagnosis code K35.32 from the complicated 
principal diagnosis list in MS-DRGs 338, 339, and 340 as listed in the 
ICD-10 MS-DRG Version 37 Definitions Manual.
7. MDC 8 (Diseases and Disorders of the Musculoskeletal System and 
Connective Tissue)
a. Cervical Radiculopathy
    We received a request to reassign ICD-10-CM diagnosis codes M54.11 
(Radiculopathy, occipito-atlanto-axial region), M54.12, (Radiculopathy, 
cervical region) and M54.13 (Radiculopathy, cervicothoracic region) 
from MDC 01 (Diseases and Disorders of the Nervous System) to MDC 08 
(Diseases and Disorders of the Musculoskeletal System and Connective 
Tissue). The requestor stated that when one of these diagnosis codes 
describing radiculopathy in the cervical/cervicothoracic area of the 
spine is reported as a principal diagnosis in combination with a 
cervical spinal fusion procedure code, the case currently groups to MDC 
01 in MS-DRG 028 (Spinal Procedures with MCC), MS-DRG 029 (Spinal 
Procedures with CC or Spinal Neurostimulators), and MS-DRG 030 (Spinal 
Procedures without CC/MCC). The requestor acknowledged that 
radiculopathy results from nerve impingement, however, the requestor 
noted it typically also results from a musculoskeletal spinal disorder 
such as spondylosis or stenosis. According to the requestor, the 
underlying musculoskeletal cause should be reported as the principal 
diagnosis if documented. The requestor stated that when the medical 
record documentation to support a musculoskeletal cause is not 
available, cases reporting a cervical spinal fusion procedure with a 
principal diagnosis of cervical radiculopathy would be more consistent 
with other cervical spinal fusion procedures if they grouped to MDC 08 
in MS-DRGs 471, 472, and 473 (Cervical Spinal Fusion with MCC, with CC, 
and without CC/MCC, respectively). The requestor stated that the 
following diagnosis codes describing radiculopathy of the thoracic and 
lumbar areas of the spine are currently assigned to MDC 08 and 
therefore, group appropriately to the spinal fusion MS-DRGs in MDC 08.
[GRAPHIC] [TIFF OMITTED] TP29MY20.035

    The requestor is correct that when diagnosis codes M54.11, M54.12 
or M54.13 are reported as a principal diagnosis in combination with a 
cervical spinal fusion procedure, the case currently groups to MDC 01 
in MS-DRG 028, MS-DRG 029, and MS-DRG 030. This grouping occurs because 
the diagnosis codes describing radiculopathy in the cervical/
cervicothoracic area of the spine are assigned to MDC 01 and the 
procedure codes describing a cervical spinal fusion procedure are 
assigned to MDC 01 in MS-DRGs 028, 029 and 030. The requestor is also 
correct that diagnosis codes describing radiculopathy of the thoracic 
and lumbar areas of the spine (M54.14, M54.15, M54.16 and M54.17) are 
currently assigned to MDC 08 and therefore, group to the spinal fusion 
MS-DRGs in MDC 08 consistent with the GROUPER logic definitions. The 
MS-DRGs that involve spinal fusion procedures of the cervical or lumbar 
regions that are currently assigned in MDC 01 and MDC 08 are listed in 
the following table.

[[Page 32504]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.036

    We refer the reader to the ICD-10 MS-DRG Version 37 Definitions 
Manual (which is available via the internet on the CMS website at: 
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software for complete 
documentation of the GROUPER logic for the listed MS-DRGs.
    We examined claims data from the September 2019 update of the FY 
2019 MedPAR file for all cases in MS-DRGs 028, 029, and 030 and for 
cases reporting any one of the diagnosis codes describing radiculopathy 
of the cervical/cervicothoracic area of the spine (M54.11, M54.12, or 
M54.13) in combination with a cervical spinal fusion procedure. We 
refer the reader to Table 6P.1b associated with this proposed rule 
(which is available via the internet on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index/ for the list of procedure codes describing a 
cervical spinal fusion procedure. Our findings are shown in the 
following table.
[GRAPHIC] [TIFF OMITTED] TP29MY20.037

    As shown in the table, there were a total of 2,105 cases with an 
average length of stay of 11.9 days and average costs of $40,866 in MS-
DRG 028. Of those 2,105 cases, there were 22 cases reporting a 
principal diagnosis of cervical radiculopathy with a cervical spinal 
fusion procedure with an average length of stay of 8.2 days and average 
costs of $44,980. For MS-DRG 029, there were a total of 3,574 cases 
with an average length of stay of 6 days and average costs of $24,026. 
Of those 3,574 cases, there were 176 cases reporting a principal 
diagnosis of cervical

[[Page 32505]]

radiculopathy with a cervical spinal fusion procedure with an average 
length of stay of 2.6 days and average costs of $24,852. For MS-DRG 
030, there were a total of 1,338 cases with an average length of stay 
of 3.1 days and average costs of $17,393. Of those 1,338 cases, there 
were 166 cases reporting a principal diagnosis of cervical 
radiculopathy with a cervical spinal fusion procedure with an average 
length of stay of 1.7 days and average costs of $23,003.
    We also reviewed the claims data for MS-DRGs 471, 472, and 473. Our 
findings are shown in the following table.
[GRAPHIC] [TIFF OMITTED] TP29MY20.038

    As shown in the table, there were a total of 3,327 cases with an 
average length of stay of 9 days and average costs of $36,941 in MS-DRG 
471. There were a total of 15,298 cases with an average length of stay 
of 3.3 days and average costs of $22,539 in MS-DRG 472. There were a 
total of 11,144 cases with an average length of stay of 2 days and 
average costs of $18,748 in MS-DRG 473.
    Based on the claims data, the average costs of the cases reporting 
a principal diagnosis of cervical radiculopathy with a cervical spinal 
fusion procedure are consistent with the average costs of all the cases 
in MS-DRGs 028, 029, and 030 in MDC 01. We also note that the average 
costs of all the cases in MS-DRGs 028, 029, and 030 in MDC 01 are also 
comparable to the average costs of all the cases in MS-DRGs 471, 472, 
and 473, respectively; ($40,886 versus $36,941; $24,026 versus $22,539; 
and $17,393 versus $18,748).
    Our clinical advisors do not support reassigning diagnosis codes 
M54.11, M54.12, and M54.13 that describe radiculopathy in the cervical/
cervicothoracic area of the spine from MDC 01 to MDC 08 until further 
analysis of the appropriate assignment of these and other diagnosis 
codes describing radiculopathy. As the requestor pointed out, the 
diagnosis codes describing radiculopathy of the thoracic and lumbar 
areas of the spine (M54.14, M54.15, M54.16 and M54.17) are currently 
assigned to MDC 08. There are also two other codes to identify 
radiculopathy within the classification, diagnosis code M54.10 
(Radiculopathy, site unspecified) and M54.18 (Radiculopathy, sacral and 
sacrococcygeal region), both of which are currently assigned to MDC 01. 
Our clinical advisors recommend maintaining the current assignment of 
diagnosis codes describing cervical radiculopathy in MDC 01 until 
further analysis of whether all the diagnosis codes describing 
radiculopathy of a specified or unspecified site should be assigned to 
the same MDC and if so, whether those codes should be assigned to MDC 
01 or MDC 08. As part of this analysis, they also recommend soliciting 
further input from the public on the appropriate assignment for all of 
the diagnosis codes describing radiculopathy, including from 
professional societies and national associations for neurology and 
orthopedics. For these reasons, we are not proposing to reassign 
diagnosis codes M54.11, M54.12, and M54.13 from MDC 01 to MDC 08 at 
this time.
b. Hip and Knee Joint Replacements
    We received a request to restructure the MS-DRGs for total joint 
arthroplasty that utilize an oxidized zirconium bearing surface implant 
in total hip replacement and total knee replacement procedures. 
According to the requestor, several international joint replacement 
registries, retrospective claims review, and published clinical studies 
show compelling short-term, mid-term and long-term clinical outcomes 
for patients receiving these implants. The requestor stated that 
without specific MS-DRGs, beneficiary access to these implants is 
restricted and the benefit to patients and cost savings cannot be 
recognized.
    The requestor noted that effective October 1, 2017, new ICD-10-PCS 
procedure codes describing hip and knee replacement procedures with an 
oxidized zirconium bearing surface implant were established, which 
allow greater specificity and provide the ability to track costs and 
clinical outcomes for the patients who receive the implant. The 
requestor provided 3 options for CMS to consider as part of its request 
which are summarized in this section of this rule.
    The first option provided by the requestor was to create a new MS-
DRG by reassigning cases reporting a hip or knee replacement procedure 
with an oxidized zirconium bearing surface implant from MS-DRG 470 
(Major Hip and Knee Joint Replacement or Reattachment of Lower 
Extremity without MCC) to the suggested new MS-DRG. The requestor 
conducted its own analysis and noted that there were approximately 
18,000 cases reporting a hip or knee replacement with an oxidized 
zirconium bearing surface implant and the average length of stay for 
these cases was shorter in comparison to the cases reporting hip and 
knee replacement procedures without an oxidized zirconium bearing 
surface implant. The requestor suggested that patients receiving an 
oxidized zirconium bearing surface implant may be walking earlier after 
surgery and the risk of infection may be reduced as a result of the 
shorter hospitalization.
    The requestor stated that separating out these cases reporting the 
use of an oxidized zirconium bearing surface implant is clinically 
justified because the implants are designed for increased longevity. 
The requestor also stated that oxidized zirconium is an entirely 
distinct material from traditional ceramic or metal implants, as it is 
made through a unique thermal oxidation process which creates a 
ceramicised surface while maintaining the biocompatible zirconium alloy 
substrate. According to the requestor, this process creates an implant 
with the unique properties of both metals and ceramics: Durability, 
strength and friction resistance. Conversely, the requestor stated that 
cobalt chrome used in metal implants contains up to 143x

[[Page 32506]]

more nickel (<0.5% vs <0.0035%) than oxidized zirconium and that nickel 
is the leading cause of negative reactions in patients with metal 
sensitivities.
    The requestor asserted that creating a new MS-DRG for hip and knee 
replacement procedures with an oxidized zirconium bearing surface 
implant would be a logical extension of the unique procedure codes that 
CMS finalized and stated that other countries have established higher 
government reimbursement for these implants to reflect the increased 
value of the technology. The requestor also asserted that multiple 
joint replacement registries have reported excellent hip replacement 
results, including a statistically significant 33 percent reduced risk 
of revision (p<0.001) for oxidized zirconium on highly cross-linked 
polyethylene (XLPE), from three months compared to the most common 
bearing surface of metal/XLPE.
    Lastly, the requestor stated that multiple U.S. data sources, 
including Medicare claims, show strong short-term outcomes, reduced 30-
day readmissions, fewer discharges to skilled nursing facilities 
(SNFs), shorter LOS, and more frequent discharges to home, resulting in 
less costly post-acute care.
    The second option provided by the requestor was to create a new MS-
DRG by reassigning all cases in MS-DRG 470 reporting a hip replacement 
procedure (excluding those with an oxidized zirconium bearing surface 
implant) with a principal diagnosis of hip fracture and all hip 
replacement procedures with an oxidized zirconium bearing surface 
implant, with or without a principal diagnosis of hip fracture to the 
suggested new MS-DRG. The requestor stated that based on its own 
analysis, this proposed new MS-DRG would have approximately 58,000 
cases with an estimated relative weight between the current MS-DRGs for 
total joint arthroplasty (MS-DRGs 469 and 470) to reflect the increased 
resource consumption of total hip replacement procedures performed due 
to a hip fracture, while also reflecting a higher resource grouping for 
oxidized zirconium bearing surface implants used in total hip 
replacement procedures, and lastly, to reflect statistically 
significant reductions in revision of total hip replacement procedure 
rates.
    The requestor also indicated that a new MS-DRG for total hip 
replacement procedures with a hip fracture would correspond to 
differentials recognized in the Comprehensive Care for Joint 
Replacement (CJR) program, which established a separate target 90-day 
episode price for total hip replacement procedures performed due to hip 
fracture cases, as these are typically higher severity patients with 
longer lengths of stay than hip replacement procedures absent a hip 
fracture.
    The requestor conducted its own analysis of Medicare claims data 
(Q4 2017-Q3 2018) for total hip replacement procedures and compared 
cases with an oxidized zirconium bearing surface implant to cases 
without an oxidized zirconium bearing surface implant. The requestor 
reported that it found statistically reduced SNF costs, hospital length 
of stay, 90-day episode costs, and 55% decreased mortality at 180 days 
for the oxidized zirconium bearing surface implant cases. The requestor 
urged CMS to recognize this technology with a differentiated payment in 
the form of a new MS-DRG, based on its findings of excellent clinical 
outcomes for total hip replacement procedures that utilize an oxidized 
zirconium bearing surface implant.
    The third option provided by the requestor was to reassign all 
cases reporting a total hip replacement procedure using an oxidized 
zirconium bearing surface implant with a principal diagnosis of hip 
fracture from MS-DRG 470 (Major Hip and Knee Joint Replacement or 
Reattachment of Lower Extremity without MCC) to MS-DRG 469 (Major Hip 
and Knee Joint Replacement or Reattachment of Lower Extremity with MCC 
or Total Ankle Replacement). The requestor stated this option would 
maintain the two existing MS-DRGs for total joint arthroplasty and 
would only involve moving a small subset of cases (approximately 300) 
from MS-DRG 470 to MS-DRG 469.
    The requestor acknowledged that the third option was more limited 
than the first two options, however, the requestor stated that it was 
the least disruptive since the two MS-DRGs and estimated relative 
weights would remain essentially the same. The requestor also stated 
that reassigning cases reporting a total hip replacement procedure 
using an oxidized zirconium bearing surface implant with a principal 
diagnosis of hip fracture from MS-DRG 470 to MS-DRG 469 would encourage 
hospitals to use these high-quality, proven implants.
    The requestor also asserted that the third option focuses the 
suggested payment changes on the population of patients that benefit 
the most from the technology. According to the requestor, the analysis 
of Medicare claims data suggests that there is potential to improve 
care for the older population of patients who receive a total hip 
replacement by encouraging providers to use an oxidized zirconium 
bearing surface implant for hip fracture cases. In addition, the 
requestor stated that long-term Medicare solvency concerns impel 
consideration of incentives as a means to drive better outcomes at 
lower cost. Specifically, the requestor asserted that if all of the 
approximately 150,000 total hip replacement procedures performed 
annually in the U.S. for hip fracture achieved 90-day episode cost 
savings observed in Medicare claims for oxidized zirconium bearing 
surface implants, based on the requestor's analysis, potential annual 
savings of more than $650 million could be realized, in addition to 
longer-term savings achieved through reduced revisions.
    The requestor also welcomed additional analysis by CMS of the 
claims data and consideration of alternative configurations that might 
better align patient severity, clinical value and payment.
    As indicated by the requestor, October 1, 2017, new ICD-10-PCS 
procedure codes describing hip and knee replacement procedures with an 
oxidized zirconium bearing surface implant were created. The procedure 
codes are as follows:

[[Page 32507]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.039

    We examined claims data from the September 2019 update of the FY 
2019 MedPAR file for MS-DRGs 469 and 470 where hip and knee replacement 
procedures are currently assigned for cases reporting the use of an 
oxidized zirconium bearing surface implant to address the three options 
provided by the requestor.
    To evaluate the first option provided by the requestor, we analyzed 
the cases reporting a total hip or total knee replacement procedure 
with an oxidized zirconium bearing surface implant in MS-DRG 470 to 
determine if a new MS-DRG is warranted. To evaluate the second option 
provided by the requestor, we analyzed the cases reporting a total hip 
replacement procedure without an oxidized zirconium bearing surface 
implant with a principal diagnosis of hip fracture and cases reporting 
a total hip replacement procedure with an oxidized zirconium implant 
with or without a principal diagnosis of hip fracture in MS-DRG 470 to 
determine if a new MS-DRG is warranted. We refer the reader to Table 
6P.1c for a list of the procedure codes that describe a hip replacement 
without an oxidized zirconium bearing surface implant and to Table 
6P.1e for a list of the diagnosis codes describing a hip fracture that 
were provided by the requestor for consideration of options 2 and 3. To 
evaluate the third option provided by the requestor, we analyzed the 
cases reporting a total hip replacement procedure with an oxidized 
zirconium bearing surface implant and a principal diagnosis of fracture 
in MS-DRG 470 to determine if the cases warrant reassignment to MS-DRG 
469. Our findings are shown in the following table.

[[Page 32508]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.040

    As shown in the table, there was a total of 25,701 cases with an 
average length of stay of 5.9 days and average costs of $22,126 in MS-
DRG 469. For MS-DRG 470, there was a total of 386,221 cases with an 
average length of stay of 2.3 days and average costs of $14,326. Of 
those 386,221 cases in MS-DRG 470, there was a total of 18,898 cases 
reporting a total hip replacement or total knee replacement procedure 
with an oxidized zirconium bearing surface implant with an average 
length of stay of 2.1 days and average costs of $14,808; a total of 
47,316 cases reporting a total hip replacement procedure with a 
principal diagnosis of hip fracture with an average length of stay of 
4.5 days and average costs of $16,077; a total of 7,241 cases reporting 
a total hip replacement procedure with an oxidized zirconium bearing 
surface implant with or without a principal diagnosis of hip fracture 
with an average length of stay of 1.9 days and average costs of 
$13,875; and a total of 316 cases reporting a total hip replacement 
procedure with an oxidized zirconium bearing surface implant with a 
principal diagnosis of hip fracture with an average length of stay of 4 
days and average costs of $18,304.
    The data analysis performed to evaluate the first option provided 
by the requestor indicates that the 18,898 cases reporting a total hip 
replacement or total knee replacement procedure with an oxidized 
zirconium bearing surface implant in MS-DRG 470 have a similar average 
length of stay (2.1 days versus 2.3 days) and similar average costs 
($14,808 versus $14,326) compared to all the cases in MS-DRG 470. The 
results are also consistent with the requestor's findings that there 
were approximately 18,000 cases reporting a hip or knee replacement 
with an oxidized zirconium bearing surface implant. Based on the claims 
analysis, our clinical advisors stated that the data does not support 
creating a new MS-DRG for these procedures. Our clinical advisors also 
believe that the characteristics of the patients and resources used for 
a case that involves a total hip replacement or total knee replacement 
procedure with an oxidized zirconium bearing surface implant are not 
clinically distinct from the characteristics of the patients and 
resources used for the cases reporting a total hip replacement or total 
knee replacement procedure without an oxidized zirconium bearing 
surface implant. Therefore, in consideration of the first option 
provided by the requestor, we are not proposing to create a new MS-DRG 
for cases reporting a total hip or knee replacement procedure with an 
oxidized zirconium bearing surface implant.
    The data analysis performed to evaluate the second option provided 
by the requestor indicates that the 47,316 cases reporting a total hip 
replacement procedure without an oxidized zirconium bearing surface 
implant with a principal diagnosis of hip fracture have an average 
length of stay that is longer than the average length of stay for all 
the cases in MS-DRG 470 (4.5 days versus 2.3 days) and the average 
costs are higher when compared to all the cases in MS-DRG 470 ($16,077 
versus

[[Page 32509]]

$14,326). For the 7,241 cases reporting a total hip replacement 
procedure with an oxidized zirconium bearing surface implant with or 
without a principal diagnosis of hip fracture, the average length of 
stay is shorter than the average length of stay for all the cases (1.9 
days versus 2.3 days) and the average costs are slightly lower when 
compared to all the cases in MS-DRG 470 ($13,875 versus $14,326). Our 
analysis of the combined total number of cases identified for the 
second option provided by the requestor indicates that the 54,557 cases 
(47,316 + 7,241) have a longer average length of stay compared to the 
average length of stay for all the cases in MS-DRG 470 (4.2 days versus 
2.3 days) and the average costs are slightly higher ($15,785 versus 
$14,326) when compared to all the cases in MS-DRG 470. The results are 
also consistent with the requestor's findings that there were 
approximately 58,000 cases reporting a total hip replacement procedure 
without an oxidized zirconium bearing surface implant with a principal 
diagnosis of hip fracture or a total hip replacement procedure with an 
oxidized zirconium bearing surface implant with or without a principal 
diagnosis of hip fracture. Our clinical advisors believe that the data 
does not support creating a new MS-DRG for the subset of cases as 
suggested by the requestor. They noted the variation in the volume 
(47,316 cases and 7,241 cases), average length of stay (4.5 days and 
1.9 days), and the average costs ($16,077 and $13,875) for each subset 
of option 2 and that the total average cost for the combined cases 
identified for the second option ($15,785) is very similar to the costs 
of all the cases in MS-DRG 470 ($14,326). Therefore, in consideration 
of the second option provided by the requestor, we are not proposing to 
create a new MS-DRG for cases reporting a total hip replacement 
procedure without an oxidized zirconium bearing surface implant with a 
principal diagnosis of hip fracture and cases reporting a total hip 
replacement procedure with an oxidized zirconium implant with or 
without a principal diagnosis of hip fracture.
    The data analysis performed to evaluate the third option provided 
by the requestor indicates that the 316 cases reporting a total hip 
replacement procedure with an oxidized zirconium bearing surface 
implant with a principal diagnosis of hip fracture have a longer 
average length of stay (4.0 days versus 2.3 days) and higher average 
costs ($18,304 versus $14,326) compared to all the cases in MS-DRG 470. 
The results are also consistent with the requestor's findings that 
there were approximately 300 cases reporting a total hip replacement 
procedure with an oxidized zirconium bearing surface implant with a 
principal diagnosis of hip fracture. Our clinical advisors noted that 
while the data shows a longer length of stay and higher average costs 
for these cases under option 3, the analysis of the cases reporting a 
total hip replacement procedure without an oxidized zirconium bearing 
surface implant with a principal diagnosis of hip fracture under option 
2 also demonstrated a longer length of stay and higher average costs. 
They therefore recommended we conduct further review specifically of 
those cases reporting a total hip replacement procedure with a 
principal diagnosis of hip fracture, with or without an oxidized 
zirconium bearing surface implant.
    Based on the advice of our clinical advisors and in connection with 
the request for CMS to examine the claims data and consider alternative 
configurations, we performed additional analysis of those cases 
reporting a total hip replacement procedure with a principal diagnosis 
of hip fracture for both MS-DRGs 469 and 470. The procedure codes for 
the hip replacement procedures included in this additional analysis are 
displayed in Table 6P.1d and the diagnosis codes for hip fracture 
included in this additional analysis are displayed in Table 6P.1e. Our 
findings are shown in the following table.
[GRAPHIC] [TIFF OMITTED] TP29MY20.041

    As shown in the table, there was a total of 14,163 cases reporting 
a total hip replacement procedure with a principal diagnosis of hip 
fracture with an average length of stay of 7.2 days and average costs 
of $21,951 in MS-DRG 469. There was a total of 47,632 cases reporting a 
total hip replacement procedure with a principal diagnosis of hip 
fracture with an average length of stay of 4.5 days and average costs 
of $16,092 in MS-DRG 470. The average length of stay for the cases 
reporting a total hip replacement procedure with a principal diagnosis 
of hip fracture in MS-DRGs 469 and 470 were longer (7.2 days versus 5.9 
days and 4.5 versus 2.3 days, respectively) compared to all the cases 
in their assigned MS-DRGs. The average costs of the cases reporting a 
total hip replacement procedure with a principal diagnosis of hip 
fracture in MS-DRG 469 were approximately $175 less when compared to 
the average costs of all

[[Page 32510]]

cases in MS-DRG 469 ($21,951 versus $22,126) and slightly more for MS-
DRG 470 ($16,092 versus $14,326). Our clinical advisors support 
differentiating the cases reporting a total hip replacement procedure 
with a principal diagnosis of hip fracture from those cases without a 
hip fracture by assigning them to a new MS-DRG. They noted that 
clinically, individuals who undergo hip replacement following hip 
fracture tend to require greater resources for effective treatment than 
those without hip fracture. They further noted that the increased 
complexity associated with hip fracture patients can be attributed to 
the post traumatic state and the stress of pain, possible peri-
articular bleeding, and the fact that this subset of patients, most of 
whom have fallen as the cause for their fracture, may be on average 
more frail than those who require hip replacement because of 
degenerative joint disease.
    We applied the criteria to create subgroups in a base MS-DRG as 
discussed in section II.D.1.b. of this FY 2021 IPPS/LTCH PPS proposed 
rule. As shown in the table that follows, a three-way split of this 
base MS-DRG failed to meet the criterion that there be at least a 20% 
difference in average costs between the CC and NonCC subgroup and also 
failed to meet the criterion that there be at least a $2,000 difference 
in average costs between the CC and NonCC subgroup. The following table 
illustrates our findings.
[GRAPHIC] [TIFF OMITTED] TP29MY20.042

    We then applied the criteria for a two-way split for the ``with MCC 
and without MCC'' subgroups and found that all five criteria were met. 
For the proposed new MS-DRGs, there is at least (1) 500 cases in the 
MCC subgroup and 500 cases in the without MCC subgroup; (2) 5 percent 
of the cases in the MCC group and 5 percent in the without MCC 
subgroup; (3) a 20 percent difference in average costs between the MCC 
group and the without MCC group; (4) a $2,000 difference in average 
costs between the MCC group and the without MCC group; and (5) a 3-
percent reduction in cost variance, indicating that the proposed 
severity level splits increase the explanatory power of the base MS-DRG 
in capturing differences in expected cost between the proposed MS-DRG 
severity level splits by at least 3 percent and thus improve the 
overall accuracy of the IPPS payment system. The following table 
illustrates our findings.
[GRAPHIC] [TIFF OMITTED] TP29MY20.043

    For FY 2021, we are proposing to create new MS-DRG 521 (Hip 
Replacement with Principal Diagnosis of Hip Fracture with MCC) and new 
MS-DRG 522 (Hip Replacement with Principal Diagnosis of Hip Fracture 
without MCC). We refer the reader to Table 6P.1d for the list of 
procedure codes describing hip replacement procedures and to Table 
6P.1e for the list of diagnosis codes describing hip fracture diagnoses 
that we are proposing to define in the logic for these proposed new MS-
DRGs.
    We also note that the Comprehensive Care for Joint Replacement 
(CJR) model includes episodes triggered by MS-DRG 469 with hip fracture 
and MS-DRG 470 with hip fracture. Given the proposal to create proposed 
new MS-DRG 521 and MS-DRG 522, we seek comment on the effect this 
proposal would have on the CJR model and whether to incorporate MS-DRG 
521 and MS-DRG 522, if finalized, into the CJR model's proposed 
extension to December 31, 2023. As discussed in the CJR proposed rule 
``Comprehensive Care for Joint Replacement Model Three-Year Extension 
and Changes to Episode Definition and Pricing'' (85 FR 10516), we 
proposed to extend the duration of the CJR model. This extension, if 
finalized, would revise certain aspects of the CJR model including, but 
not limited to, the episode of care definition, the target price 
calculation, the reconciliation process, the beneficiary notice 
requirements and the appeals process. Additionally, the CJR proposed 
rule would allow time to test the proposed changes by extending the 
length of the CJR model through December 31, 2023, for certain 
participant hospitals. The comment period for the CJR proposed rule 
closes on June 23, 2020 (85 FR 22978).
8. MDC 11 (Diseases and Disorders of the Kidney and Urinary Tract)
a. Kidney Transplants
    We received two separate but related requests to review the MS-DRG 
assignment for procedures describing the transplantation of kidneys. 
The first request was to designate kidney transplants as a Pre-MDC MS-
DRG in the same manner that other organ transplants are. The requestor 
performed its own analysis and stated that it found that cases with a 
principal diagnosis from MDC 05 (Diseases and Disorders of the 
Circulatory System), for example I13.2 (Hypertensive heart and chronic 
kidney disease with heart failure and with stage 5 chronic kidney 
disease, or end stage renal disease), reported with a kidney transplant 
from

[[Page 32511]]

MDC 11 (Diseases and Disorders of the Kidney and Urinary Tract), 
grouped to MS-DRG 981 (Extensive O.R. Procedure Unrelated to Principal 
Diagnosis with MCC). The requestor stated it did not appear appropriate 
that a kidney transplant would group to MS-DRG 981 when diagnosis code 
I13.2 is a legitimate principal diagnosis for this procedure. This 
requestor also suggested that if there was a proposal for designating 
the MS-DRG for kidney transplants as a Pre-MDC MS-DRG, that a severity 
level split should also be proposed.
    As discussed in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42128 
through 42129), during our review of cases that group to MS-DRGS 981 
through 983, we noted that when procedures describing transplantation 
of kidneys (ICD-10-PCS procedure codes 0TY00Z0 (Transplantation of 
right kidney, allogeneic, open approach) and 0TY10Z0 (Transplantation 
of left kidney, allogeneic, open approach) are reported in conjunction 
with ICD-10-CM diagnosis codes in MDC 05 (Diseases and Disorders of the 
Circulatory System), the cases group to MS-DRGs 981 through 983. For 
the reasons discussed, we proposed to add ICD-10-PCS procedure codes 
0TY00Z0 and 0TY10Z0 to MS-DRG 264 in MDC 05. As summarized in the FY 
2020 IPPS/LTCH PPS final rule, commenters opposed our proposal to add 
ICD-10-PCS procedure codes 0TY00Z0 and 0TY10Z0 to MS-DRG 264 in MDC 05. 
Commenters suggested that CMS instead assign these cases to MS-DRG 652, 
noting that the length of stay for the vast majority of kidney 
transplant cases involving serious cardiac conditions approximates the 
length of stay for kidney transplants in general. After consideration 
of public comments, we did not finalize our proposal to add ICD-10-PCS 
procedure codes 0TY00Z0 and 0TY10Z0 to MS-DRG 264 in MDC 05. We stated 
that we believed it would be appropriate to take additional time to 
review the concerns raised by commenters consistent with the 
President's Executive Order on Advancing American Kidney Health (see 
https://www.whitehouse.gov/presidential-actions/executive-order-advancing-american-kidney-health/). Accordingly, cases reporting a 
principal diagnosis in MDC 05 with a procedure describing kidney 
transplantation (that is, procedure code 0TY00Z0 or 0TY10Z0) continue 
to group to MS-DRGs 981 through 983 under the ICD-10 MS-DRGs Version 
37, effective October 1, 2019.
    In response to these public comments and the request we received on 
this topic for FY 2021 consideration, we examined claims data from the 
September 2019 update of the FY 2019 MedPAR file for MS-DRG 652. In MS-
DRG 652, there were 11,324 cases reporting one of the procedure codes 
listed describing a kidney transplant procedure, with an average length 
of stay of 6 days and average costs of $25,424.
[GRAPHIC] [TIFF OMITTED] TP29MY20.044

    We then analyzed claims data for cases reporting one of the 
procedure codes listed describing the transplantation of kidney 
reported in MS-DRGs 981, 982, and 983. We did not find any such cases 
in MS-DRG 983.
[GRAPHIC] [TIFF OMITTED] TP29MY20.045

    Of the 366 cases reporting procedures describing kidney transplants 
in MS-DRGs 981 and 982, all of the cases reported a principal diagnosis 
from MDC 05. The diagnoses reported are reflected in the table.

[[Page 32512]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.046

    Our clinical advisors reviewed these data. As indicated previously, 
in MS-DRG 652, there were 11,324 cases reporting one of the procedure 
codes listed describing a kidney transplant procedure, with an average 
length of stay of 6 days and average costs of $25,424. Our clinical 
advisors noted that the average costs for cases reporting 
transplantation of kidney with a diagnosis from MDC 05 listed 
previously are generally similar to the average costs of cases in MS-
DRG 652. The diagnoses assigned to MDC 05 reflect conditions associated 
with the circulatory system. Our clinical advisors agreed that although 
these diagnoses might also be a reasonable indication for kidney 
transplant procedures, it would not be appropriate to move these 
diagnoses into MDC 11 because it could inadvertently cause cases 
reporting these same MDC 05 diagnoses with a circulatory system 
procedure to be assigned to an unrelated MS-DRG.
    To further examine the impact of moving MDC 05 diagnoses into MDC 
11, we analyzed claims data for cases reporting a circulatory system 
O.R. procedure and MDC 05 ICD-10-CM diagnosis code I13.2 (Hypertensive 
heart and chronic kidney disease with heart failure and with stage 5 
chronic kidney disease, or end stage renal disease). Diagnosis code 
I13.2 was selected since this diagnosis was the MDC 05 diagnosis most 
frequently reported with kidney transplant procedures. Our findings are 
reflected in the following table:
BILLING CODE 4120-01-P

[[Page 32513]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.047


[[Page 32514]]


[GRAPHIC] [TIFF OMITTED] TP29MY20.048

BILLING CODE 4120-01-C
    As shown in the table, if we were to move diagnosis code I13.2 to 
MDC 11, 4,366 cases would be assigned to the surgical class referred to 
as ``unrelated operating room procedures'' as an unintended 
consequence. Therefore, as an alternate option, we are proposing to 
modify the GROUPER logic for MS-DRG 652 by allowing the presence of a 
procedure code describing transplantation of the kidney to determine 
the MS-DRG assignment independent of the MDC of the principal diagnosis 
in most instances. The logic for MDC 24 (Multiple Significant Trauma) 
and MDC 25 (Human Immunodeficiency Virus Infections) will remain 
unchanged, meaning there would be two exceptions to the proposed 
modification of the GROUPER logic for MS-DRG 652. If a principal 
diagnosis of trauma and at least two significant traumas of different 
body sites are present, the appropriate MS-DRG in MDC 24 would be 
assigned based on the principal diagnosis and procedures reported, 
instead of MS-DRG 652. Also, if either a principal diagnosis of HIV 
infection or a secondary diagnosis of HIV infection with a principal 
diagnosis of a significant HIV related condition are present, the 
appropriate MS-DRG in MDC 25 would be assigned based on the principal 
diagnosis and procedures reported instead of MS-DRG 652. The diagram 
found towards the end of this discussion illustrates how the proposed 
MS-DRG logic for MS-DRG 652 (Kidney Transplant) would function.
    We recognize MS-DRG 652 is one of the only transplant MS-DRGs not 
currently defined as a Pre-MDC. Pre-MDCs were an addition to Version 8 
of the Diagnosis Related Groups. This was the first departure from the 
use of principal diagnosis as the initial variable in DRG and 
subsequently MS-DRG assignment. For Pre-MDC DRGs, the initial step in 
DRG assignment is not the principal diagnosis, but instead certain 
surgical procedures with extremely high costs such as heart transplant, 
liver transplant, bone marrow transplant, and tracheostomies performed 
on patients on long-term ventilation. When added in Version 8, these 
types of services were viewed as being very resource intensive. Our 
clinical advisors have noted, however, that treatment practices have 
shifted since the inception of Pre-MDCs. The current proposed 
refinements to MS-DRG 652 represent the first step in investigating how 
we may consider introducing this concept of allowing certain procedures 
to affect the MS-DRG assignment regardless of the MDC from which the 
diagnosis is reported in the future, with the possibility of removing 
the Pre-MDC category entirely. In other words, we would consider having 
the resource intensive procedures currently assigned to the Pre-MDC MS-
DRGs determine assignment to MS-DRGs within the clinically appropriate 
MDC. We are making concerted efforts to continue refining the ICD-10 
MS-DRGs and we believe that it is important to include the Pre-MDC 
category as part of our comprehensive review.
    In response to the request for a severity level split, since the 
request to designate kidney transplants as a Pre-MDC MS-DRG did not 
involve a revision of the existing GROUPER logic for MS-DRG 652, we 
applied the five criteria as described in section II.D1.b. of the 
preamble of this proposed rule to determine if it would be appropriate 
to subdivide cases currently assigned to MS-DRG 652 into severity 
levels. This analysis includes 2 years of MedPAR claims data to compare 
the data results from 1 year to the next to avoid making determinations 
about whether additional severity levels are warranted based on an 
isolated year's data fluctuation and also, to validate that the 
established severity levels within a base MS-DRG are supported. 
Therefore, we reviewed the claims data for base MS-DRG 652 using the 
September 2018 update of the FY 2018 MedPAR file and the September 2019 
update of the FY 2019 MedPAR file, which were used in our analysis of 
claims data for MS-DRG reclassification requests for FY 2020 and FY 
2021. Our findings are shown in the table:
[GRAPHIC] [TIFF OMITTED] TP29MY20.049


[[Page 32515]]


    We applied the criteria to create subgroups for the three-way 
severity level split. As discussed in section II.D.1.b., beginning with 
this FY 2021 IPPS/LTCH PPS proposed rule, we are proposing to expand 
the previously listed criteria to also include the Non-CC group. We 
found that the criterion that there be at least a 20% difference in 
average costs between subgroups failed for the average costs between 
the MCC and CC subgroups based on the data in both the FY 2018 and FY 
2019 MedPAR files. The criterion that there be at least 500 cases for 
each subgroup also was not met, as shown in the table for both years. 
Specifically, for the ``with MCC'', ``with CC'', and ``without CC/MCC'' 
split, there were only 356 cases in the ``without CC/MCC'' subgroup 
based on the data in the FY 2019 MedPAR file and only 464 cases in the 
``without CC/MCC'' subgroup based on the data in the FY 2018 MedPAR 
file. We then applied the criteria to create subgroups for the two-way 
severity level splits and found that the criterion that there be at 
least a 20 percent difference in average costs between the ``with MCC'' 
subgroup and the ``without MCC'' group failed for both years. The 
criterion that there be at least a 3-percent reduction in cost variance 
between the ``with CC/MCC'' and ``without CC/MCC'' subgroups also 
failed for both years, indicating that the current base MS-DRG 652 
maintains the overall accuracy of the IPPS payment system. The claims 
data do not support a three-way or a two-way severity level split for 
MS-DRG 652, therefore for FY 2021, we are not proposing to subdivide 
MS-DRG 652 into severity levels.
    As discussed earlier in this section we received two separate but 
related requests. The second request was that a new MS-DRG be created 
for kidney transplant cases where the patient received dialysis during 
the inpatient stay and after the date of the transplant. According to 
the requestor, transplant hospitals incur higher costs related to post-
transplant care of patients who receive kidneys from ``medically 
complex donors'' (defined by the requestor as coming from organ donors 
over aged 60 and donors after circulatory death). The requestor also 
stated that their research indicated that studies consistently 
identified organ donors over the age of 60 and donors after circulatory 
death as the most significant areas for growth in increasing the number 
of organ transplantations, but this growth is hampered by the 
underutilization of these types of organs. The requestor performed its 
own data analysis and stated that total standardized costs were 32 
percent higher for cases where the beneficiary received dialysis during 
the inpatient stay and after the date of transplant compared to all 
other kidney transplant cases currently in MS-DRG 652 (Kidney 
Transplant), with the additional costs serving as a disincentive to the 
use of viable kidneys for donation. The requestor asserted that this 
financially disadvantages transplant centers from using such organs, 
contributing to the kidney discard rate.
    The following ICD-10-PCS procedure codes identify the performance 
of hemodialysis.
[GRAPHIC] [TIFF OMITTED] TP29MY20.050

    We acknowledge that the request was to review the costs of dialysis 
performed after kidney transplantation during the same inpatient 
admission, however our clinical advisors pointed out, that while not 
routine, it is not uncommon for a patient to require dialysis while 
admitted for kidney transplantation before the procedure is performed 
due to factors related to the availability of the organ, nor is it 
uncommon for a kidney that has been removed from the donor, 
transported, and then implanted to require dialysis before it returns 
to optimal function. Therefore, we examined claims data from the 
September 2019 update of the FY 2019 MedPAR file for all cases in MS-
DRG 652 and compared the results to cases representing kidney 
transplantation with dialysis performed during the same inpatient 
admission either before or after the date of kidney transplantation. 
The following table shows our findings:
[GRAPHIC] [TIFF OMITTED] TP29MY20.051

    As shown by the table, for MS-DRG 652, we identified a total of 
11,324 cases, with an average length of stay of 6.0 days and average 
costs of $25,424. Of the 11,324 cases in MS-DRG 652, there were 3,254 
cases describing the performance of hemodialysis in an admission where 
the patient received a kidney transplant with an average length of stay 
of 7.6 days and average costs of $30,606. Our clinical advisors noted 
that the average length of stay and average costs of cases in MS-DRG 
652 describing the performance of hemodialysis in an admission where 
the patient received a kidney transplant were higher than the average 
length of stay and average costs for all cases in the same MS-DRG.
    In further analyzing this issue, noting that patients can require a 
simultaneous

[[Page 32516]]

pancreas/kidney transplant procedure, we also examined claims data from 
the September 2019 update of the FY 2019 MedPAR file for all cases in 
Pre-MDC MS-DRG 008 (Simultaneous Pancreas/Kidney Transplant) and 
compared the results to cases representing simultaneous pancreas/kidney 
transplantation with dialysis performed during the same inpatient 
admission either before or after the date of kidney transplantation. 
The following table shows our findings:
[GRAPHIC] [TIFF OMITTED] TP29MY20.052

    As shown by the table, for Pre-MDC MS-DRG 008, we identified a 
total of 374 cases, with an average length of stay of 10.9 days and 
average costs of $41,926. Of the 374 cases in Pre-MDC MS-DRG 008, there 
were 84 cases describing the performance of hemodialysis during an 
admission where the patient received a simultaneous pancreas/kidney 
transplant with an average length of stay of 13.4 days and average 
costs of $49,001. Our clinical advisors again noted that the average 
length of stay and average costs of cases in Pre-MDC MS-DRG 008 
describing the performance of hemodialysis during an admission where 
the patient received a simultaneous pancreas/kidney transplant were 
higher than the average length of stay and average costs for all cases 
in the same Pre-MDC MS-DRG.
    Our clinical advisors believe that these hemodialysis procedures 
either performed before or after kidney transplant or before or after 
simultaneous pancreas/kidney transplant contribute to increased 
resource consumption for these transplant patients. While there is not 
a large number of cases describing a simultaneous pancreas/kidney 
transplant with hemodialysis procedures either performed before or 
after transplant represented in the Medicare data, and we generally 
prefer not to create a new MS-DRG unless it would include a substantial 
number of cases, we believe creating separate MS-DRGs for these cases 
would appropriately address the differential in resource consumption 
consistent with the President's Executive Order on Advancing American 
Kidney Health (see https://www.whitehouse.gov/presidential-actions/executive-order-advancing-american-kidney-health/). For these reasons, 
we are proposing to create new MS-DRGs for the performance of 
hemodialysis during an admission where the patient received a kidney 
transplant or simultaneous pancreas/kidney transplant.
    To compare and analyze the impact of our suggested modifications, 
we ran a simulation using the Version 37 ICD-10 MS-DRG GROUPER and the 
claims data from the September 2019 update of the FY 2019 MedPAR file. 
The following table reflects our findings for all 3,254 cases 
representing kidney transplantation with dialysis performed during the 
same inpatient admission either before or after the date of kidney 
transplantation with a two-way severity level split.
[GRAPHIC] [TIFF OMITTED] TP29MY20.053

    As shown in the table, there was a total of 2,195 cases for the 
kidney transplant with hemodialysis with MCC subgroup, with an average 
length of stay of 8.0 days and average costs of $32,360. There was a 
total of 1,059 cases for the kidney transplant with hemodialysis 
without MCC subgroup, with an average length of stay of 6.8 days and 
average costs of $26,972. We applied the criteria to create subgroups 
for the two-way severity level split for the proposed MS-DRGs, 
including our proposed expansion of the criteria to also include the 
nonCC group, and found that all five criteria were met. For the 
proposed MS-DRGs, there is (1) at least 500 cases in the MCC subgroup 
and in the without MCC subgroup; (2) at least 5 percent of the cases 
are in the MCC subgroup and in the without MCC subgroup; (3) at least a 
20 percent difference in average costs between the MCC subgroup and the 
without MCC subgroup; (4) at least a $2,000 difference in average costs 
between the MCC subgroup and the without MCC subgroup; and (5) at least 
a 3-percent reduction in cost variance, indicating that the proposed 
severity level splits increase the explanatory power of the base MS-DRG 
in capturing differences in expected cost between the proposed MS-DRG 
severity level splits by at least 3 percent and thus improve the 
overall accuracy of the IPPS payment system.

[[Page 32517]]

    For the cases describing the performance of hemodialysis during an 
admission where the patient received a simultaneous pancreas/kidney 
transplant, we identified a total of 84 cases, so the criterion that 
there are at least 500 or more cases in any subgroup could not be met. 
Therefore, for FY 2021, we are not proposing to subdivide the proposed 
new Pre-MDC MS-DRG for the performance of hemodialysis in an admission 
where the patient received a simultaneous pancreas/kidney transplant 
into severity levels.
    In summary, for FY 2021, taking into consideration that it 
clinically requires greater resources to perform hemodialysis during an 
admission where the patient received a kidney or simultaneous pancreas/
kidney transplant, we are proposing to create a new Pre-MDC MS-DRG for 
cases describing the performance of hemodialysis during an admission 
where the patient received a simultaneous pancreas/kidney transplant. 
We are also proposing to create two new MS-DRGs with a two-way severity 
level split for cases describing the performance of hemodialysis in an 
admission where the patient received a kidney transplant in MDC 11. 
These proposed new MS-DRGs are proposed new Pre-MDC MS-DRG 019 
(Simultaneous Pancreas/Kidney Transplant with Hemodialysis), proposed 
new MS-DRG 650 (Kidney Transplant with Hemodialysis with MCC) and 
proposed new MS-DRG 651 (Kidney Transplant with Hemodialysis without 
MCC). We are proposing to add the procedure codes from current Pre-MDC 
MS-DRG 008 to the proposed new Pre-MDC MS-DRG 019 with the procedure 
codes describing a hemodialysis procedure. Similarly, we are also 
proposing to add the procedure codes from current MS-DRG 652 to the 
proposed new MS-DRGs 650 and 651 with the procedure codes describing a 
hemodialysis procedure. We note that the procedure codes describing 
hemodialysis procedures are designated as non-O.R. procedures, 
therefore, as part of the logic for these proposed new MS-DRGs, we are 
also proposing to designate these codes as non-O.R. procedures 
affecting the MS-DRG.
    The diagram illustrates how the proposed MS-DRG logic for Kidney 
Transplants would function. The diagram (Diagram 1.) begins by asking 
if the criteria for a Pre-MDC MS-DRG is met. If yes, the logic asks if 
the criteria for Pre-MDC MS-DRGs 018, 001-006, 014 or 007 is met. If 
yes, the logic directs the case to either Pre-MDC MS-DRG 018, 001-006, 
014 or 007 based on the principal diagnosis and/or procedures reported. 
If no, the logic asks if there is a simultaneous pancreas/kidney 
transplant with a qualifying diagnosis reported on the claim. If no, 
the logic directs the case to either Pre-MDC MS-DRGs 016, 017, or 010-
013 based on the principal diagnosis and/or procedures reported. If 
yes, the logic asks if there was a hemodialysis procedure reported on 
the claim. If yes, the logic assigns the case to proposed new Pre-MDC 
MS-DRG 019 (Simultaneous Pancreas/Kidney Transplant with Hemodialysis). 
If no, the logic assigns the case to existing Pre-MDC MS-DRG 008 
(Simultaneous Pancreas/Kidney Transplant).
    If the criteria for a Pre-MDC MS-DRG were not met at the first 
step, the GROUPER logic asks if there was a principal diagnosis of 
trauma and at least two significant traumas of different body sites. If 
yes, the logic directs the case to the appropriate MS-DRG in MDC 24 
based on the principal diagnosis and procedures reported. If no, the 
logic asks if there was either a principal diagnosis of HIV infection 
or a secondary diagnosis of HIV infection with a principal diagnosis of 
a significant HIV related condition. If yes, the logic directs the case 
to the appropriate MS-DRG in MDC 25 based on the principal diagnosis 
and procedures reported. If no, the logic asks if there is kidney 
transplant procedure reported on the claim. If no, the logic directs 
the case to the appropriate MDC and MS-DRG based on the principal 
diagnosis and procedures reported. If yes, the logic asks if there was 
a hemodialysis procedure reported on the claim. If yes, the logic 
assigns the case to proposed new MS-DRGs 650 or 651 (Kidney Transplant 
with Hemodialysis with MCC or without MCC, respectively). If no, the 
logic assigns the case to existing MS-DRG 652 (Kidney Transplant).
BILLING CODE 4120-01-C

[[Page 32518]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.054


[[Page 32519]]


BILLING CODE 4120-01-P
b. Proposed Addition of Diagnoses to Other Kidney and Urinary Tract 
Procedures Logic
    We received a request to add 29 ICD-10-CM diagnosis codes to the 
list of principal diagnoses assigned to MS-DRGs 673, 674, and 675 
(Other Kidney and Urinary Tract Procedures with MCC, with CC, and 
without CC/MCC, respectively) in MDC 11 (Diseases and Disorders of the 
Kidney and Urinary Tract) when reported with procedure codes describing 
the insertion of totally implantable vascular access devices (TIVADs) 
and tunneled vascular access devices. The list of 29 ICD-10-CM 
diagnosis codes submitted by the requestor, as well as their current 
MDC assignments, are found in the table:
[GRAPHIC] [TIFF OMITTED] TP29MY20.055

    The requestor stated that by adding the codes listed, cases 
reporting principal diagnosis codes describing complications of 
dialysis access sites and principal diagnosis codes describing kidney 
disease in the setting of diabetes or hypertension, would group to MS-
DRGs 673, 674, and 675 when a TIVAD or tunneled vascular access device 
is inserted. The requestor stated that patients who have kidney 
transplant complications or dialysis catheter complications typically 
also have chronic kidney disease, end stage renal disease (ESRD) or 
resolving acute tubular necrosis (ATN) but ICD-10-CM coding guidelines 
require a complication code to be sequenced first. The requester stated 
that when reporting a diagnosis code describing ESRD and diabetes, a 
diabetes code from ICD-10-CM Chapter 4 (Endocrine, Nutritional and 
Metabolic Diseases) must be sequenced first and when coding ESRD, 
hypertension, and heart failure, the combination code I13.2 
(Hypertensive heart and chronic kidney disease with heart failure and 
with stage 5 chronic kidney disease or end stage renal disease) must be 
sequenced first per coding guidelines. The requestor pointed out that 
code I13.11 (Hypertensive heart and chronic kidney disease without 
heart failure with stage 5 CKD or ESRD) is currently one of the 
qualifying principal diagnoses in MS-DRGs 673, 674, and 675 when 
reported with procedure codes describing the insertion of TIVADs or 
tunneled vascular access devices; therefore, according to the 
requestor, diagnosis code I13.2 should reasonably be added.
    To begin our analysis, we reviewed the GROUPER logic for MS-DRGs 
673, 674, and 675 including the special logic in MS-DRGs 673, 674, and 
675 for certain MDC 11 diagnoses reported with procedure codes for the 
insertion of tunneled or totally implantable vascular access devices. 
As discussed in the FY 2003 IPPS/LTCH PPS final rule (67 FR

[[Page 32520]]

49993 through 49994), the procedure code for the insertion of totally 
implantable vascular access devices was added to the GROUPER logic of 
DRG 315 (Other Kidney and Urinary Tract O.R. Procedures), the 
predecessor DRG of MS-DRGs 673, 674, and 675, when combined with 
principal diagnoses specifically describing renal failure, recognizing 
that inserting these devices as an inpatient procedure for the purposes 
of hemodialysis can lead to higher average charges and longer lengths 
of stay for those cases.
    We next reviewed the 29 ICD-10-CM codes submitted by the requestor. 
Our clinical advisors noted that ICD-10-CM diagnosis codes E10.21, 
E11.21, and E13.21 describing diabetes mellitus with diabetic 
nephropathy; codes E10.29, E11.29, and E13.29 describing diabetes 
mellitus with other diabetic kidney complication; T80.211A, T80.212A, 
and T80.218A describing infection due to central venous catheters; and 
codes T82.7XXA, T82.818A, T82.828A, T82.838A, T82.848A, T82.858A, 
T82.868A, and T82.898A describing complications of cardiac and vascular 
prosthetic devices, implants and grafts, are not necessarily indicative 
of a patient having renal (kidney) failure requiring the insertion of a 
TIVAD or a tunneled vascular access device to allow access to the 
patient's blood for hemodialysis purposes. TIVADs and tunneled vascular 
access devices are widely used to provide central venous access for the 
administration of intravenous antibiotics, chemotherapeutic agents, 
parenteral nutrition and other treatments. They are used in a variety 
of disease groups, and in both children and adults. As such, our 
clinical advisors do not support adding these diagnoses to the list of 
principal diagnosis codes in MS-DRG 673, 674, and 675 when reported 
with procedure codes describing the insertion of TIVADs and tunneled 
vascular access devices. They noted that TIVADs and tunneled vascular 
access devices may be inserted for a variety of principal diagnoses, 
and that adding these 17 diagnoses that are not specific to renal 
failure would not maintain the clinical coherence with other cases in 
this subset of cases in MS-DRGs 673, 674, and 675.
    Our clinical advisors also do not support adding ICD-10-CM 
diagnosis code I13.2 (Hypertensive heart and chronic kidney disease 
with heart failure and with stage 5 chronic kidney disease, or end 
stage renal disease) to the special logic in MS-DRGs 673, 674, and 675. 
As discussed previously, code I13.2 is assigned to MDC 05 (Diseases and 
Disorders of the Circulatory System). Our clinical advisors agreed it 
would not be appropriate to move this diagnosis into MDC 11 because it 
would inadvertently cause cases reporting this same MDC 05 diagnosis 
with circulatory system procedures to be assigned to an unrelated MS-
DRG.
    Therefore, for the reasons described previously, we are not 
proposing to add the following 18 ICD-10-CM codes to the list of 
principal diagnosis codes for MS-DRGs 673, 674, and 675 when reported 
with a procedures code describing the insertion of a TIVAD or a 
tunneled vascular access device: E10.21, E10.29, E11.21, E11.29, 
E13.21, E13.29, I13.2, T80.211A, T80.212A, T80.218A, T82.7XXA, 
T82.818A, T82.828A, T82.838A, T82.848A, T82.858A, T82.868A, and 
T82.898A.
    We then reviewed the remaining 11 diagnosis codes submitted by the 
requestor. Codes T82.41XA, T82.42XA, T82.43XA and T82.49XA describe 
mechanical complications of vascular dialysis catheters. Our clinical 
advisors believe the insertion of TIVADs or tunneled vascular access 
devices for the purposes of hemodialysis is clearly clinically related 
to diagnosis codes describing a mechanical complication of a vascular 
dialysis catheter and that for clinical coherence, these cases should 
be grouped with the subset of cases that report the insertion of 
totally implantable vascular access devices or tunneled vascular access 
devices as an inpatient procedure for the purposes of hemodialysis for 
renal failure.
    Codes T82.41XA, T82.42XA, T82.43XA and T82.49XA that describe 
mechanical complications of vascular dialysis catheters are currently 
assigned to MDC 05 and would require reassignment to MDC 11 in MS-DRGs 
673, 674, and 675 to group with the subset of cases that report the 
insertion of totally implantable vascular access devices or tunneled 
vascular access devices as an inpatient procedure for the purposes of 
hemodialysis for renal failure. We examined claims data from the 
September 2019 update of the FY 2019 MedPAR file for all cases 
reporting procedures describing the insertion of TIVADs or tunneled 
vascular access devices with a principal diagnosis from the T82.4- 
series in MDC 05 and compared this data to cases in MS-DRGs 673, 674 
and 675. The following table shows our findings:

[[Page 32521]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.056

    As shown in the table, there were 13,068 cases in MS-DRG 673 with 
an average length of stay of 11 days and average costs of $26,528. 
There were 1,025 cases reporting a principal diagnosis describing a 
mechanical complication of vascular dialysis catheter, with a secondary 
diagnosis of MCC, and a procedure code for the insertion of a TIVAD or 
tunneled vascular access device with an average length of stay of 4.6 
days and average costs of $14,882. There were 6,592 cases in MS-DRG 674 
with an average length of stay of 7.6 days and average costs of 
$17,491. There were 2 cases reporting a principal diagnosis describing 
a mechanical complication of vascular dialysis catheter, with a 
secondary diagnosis of CC, and a procedure code for the insertion of a 
TIVAD or tunneled vascular access device with an average length of stay 
of 6 days and average costs of $15,016. There were 437 cases in MS-DRG 
675 with an average length of stay of 3.4 days and average costs of 
$12,506. There was one case reporting a principal diagnosis describing 
a mechanical complication of vascular dialysis catheter, without a 
secondary diagnosis of CC or MCC, and a procedure code for the 
insertion of a TIVAD or tunneled vascular access device with a length 
of stay of 3 days and costs of $9,317. Our clinical advisors noted that 
the average length of stay and average costs of cases reporting a 
diagnosis describing a mechanical complication of a vascular dialysis 
catheter and the insertion of a TIVAD or a tunneled vascular access 
device are lower than for all cases in MS-DRGs 673, 674, and 675, 
respectively.
    For the reasons discussed, our clinical advisors believe that it is 
clinically appropriate for the four ICD-10-CM diagnosis codes 
describing a mechanical complication of a vascular dialysis catheter to 
group to the subset of GROUPER logic that recognizes the insertion of 
totally implantable vascular access devices or tunneled vascular access 
devices as an inpatient procedure for the purposes of hemodialysis. 
Therefore, we are proposing to reassign ICD-10-CM diagnosis codes 
T82.41XA, T82.42XA, T82.43XA, and T82.49XA from MDC 05 in MS-DRGs 314, 
315, and 316 (Other Circulatory System Diagnoses with MCC, with CC, and 
without CC/MCC, respectively) to MDC 11 (Diseases and Disorders of the 
Kidney and Urinary Tract) assigned to MS-DRGs 673, 674, and 675 (Other 
Kidney and Urinary Tract Procedures with MCC, with CC, and without CC/
MCC, respectively) and 698, 699, and 700 (Other Kidney and Urinary 
Tract Diagnoses with MCC, with CC, and without CC/MCC, respectively).
    In reviewing ICD-10-CM codes E10.22, E11.22, and E13.22 describing 
diabetes mellitus with diabetic chronic kidney disease, we noted that 
related ICD-10-CM diagnosis code E09.22 (Drug or chemical induced 
diabetes mellitus with diabetic chronic kidney disease) is also not 
included in the current list of diagnosis codes included in the special 
logic in MS-DRGs 673, 674, and 675 for certain MDC 11 diagnoses 
reported with procedure codes for the insertion of tunneled or totally 
implantable vascular access devices, and therefore we included E09.22 
in our review. ICD-10-CM assumes a causal relationship between diabetes 
mellitus and chronic kidney disease. According to the ICD-10-CM 
Official Guidelines for Coding and Reporting, the word ``with'' or 
``in'' should be interpreted to mean ``associated with'' or ``due to'' 
when it appears in a code title, the Alphabetic Index (either under a 
main term or subterm), or an instructional note in the Tabular List, 
meaning these conditions should be coded as related even in the absence 
of provider documentation explicitly linking them, unless the 
documentation clearly states the conditions are unrelated. To code 
diabetic chronic kidney disease in ICD-10-CM, instructional notes 
direct to ``code first any associated diabetic chronic kidney disease'' 
(that is, E09.22, E10.22, E11.22, and E13.22) with a second code from 
subcategory of N18

[[Page 32522]]

listed after the diabetes code to specify the stage of chronic kidney 
disease. Recognizing that coding guidelines instruct to code E09.22, 
E10.22, E11.22, and E13.22 before codes that specify the stage of 
chronic kidney disease, our clinical advisors recommend adding diabetic 
codes E09.22, E10.22, E11.22, and E13.22 when reported with a secondary 
diagnosis of either N18.5 Chronic kidney disease, stage 5) or N18.6 
(End stage renal disease) to the special logic in MS-DRGs 673, 674, and 
675 since these diagnosis code combinations describe an indication that 
could require the insertion of a totally implantable vascular access 
device or a tunneled vascular access device to allow access to the 
patient's blood for hemodialysis purposes.
    ICD-10-CM codes T86.11, T86.12, T86.13, and T86.19 describe 
complications of kidney transplant and are currently assigned to MDC 
11. Our clinical advisors believe these diagnoses are also indications 
for hemodialysis and these cases represent a distinct, recognizable 
clinical group similar to those cases in the subset of cases assigned 
to the special logic in MS-DRGs 673, 674, and 675 when reported with 
procedure codes describing the insertion of totally implantable 
vascular access devices or tunneled vascular access devices for 
hemodialysis.
    In summary, we are proposing to add ICD-10-CM codes E09.22, E10.22, 
E11.22, and E13.22, when reported with a secondary diagnosis of N18.5 
or N18.6, to the list of principal diagnosis codes in the subset of 
GROUPER logic in MS-DRGs 673, 674, and 675 that recognizes the 
insertion of totally implantable vascular access devices or tunneled 
vascular access devices as an inpatient procedure for the purposes of 
hemodialysis. We are also proposing to add ICD-10-CM codes T86.11, 
T86.12, T86.13, and T86.19 to the list of principal diagnosis codes in 
this subset of GROUPER logic in MS-DRGs 673, 674, and 675.
    Lastly, we reviewed the current list of 20 MDC 11 diagnoses 
assigned to the special logic in MS-DRGs 673, 674, and 675 when 
reported with procedure codes for the insertion of tunneled or totally 
implantable vascular access devices. The list of MDC 11 diagnosis codes 
currently included in the special logic of MS-DRGs 673, 674, and 675 
are found in the following table:
[GRAPHIC] [TIFF OMITTED] TP29MY20.057

    Our clinical advisors pointed out that ICD-10-CM codes I12.9, 
I13.10, N18.1, N18.2, N18.3, N18.4, and N18.9 do not describe renal 
failure and they do not describe indications that would generally 
require the insertion of totally implantable vascular access devices or 
tunneled vascular access devices for the purposes of hemodialysis. Our 
advisors

[[Page 32523]]

note hemodialysis replicates the function of the kidneys. In cases of 
acute kidney failure and anuria, hemodialysis is indicated to prevent 
urea and other waste material from building up in the blood until the 
kidneys return to normal function. A diagnosis of chronic kidney 
disease stages 1 through 4, however, means the kidneys still have the 
ability to filter waste and extra fluid out of the blood. Dialysis is 
not often not initiated in chronic kidney disease until the chronic 
kidney disease progresses to stage 5 or ESRD, which is defined as when 
kidney function drops to 15 percent or less. Our clinical advisors 
stated that these seven codes do not describe indications requiring the 
insertion of totally implantable vascular access devices or tunneled 
vascular access devices for hemodialysis and recommended these codes be 
removed from the special logic in MS-DRGs 673, 674, and 675.
    We examined claims data from the September 2019 update of the FY 
2019 MedPAR file for MS--DRGs 673, 674, and 675 for this subset of 
cases to determine if there were any cases that reported one of the 
seven ICD-10-CM codes in the special logic of MS-DRGs 673, 674, and 675 
that do not necessarily describe indications requiring the insertion of 
totally implantable vascular access devices or tunneled vascular access 
devices for hemodialysis, the frequency with which they were reported 
and the relative resource use as compared with all cases assigned to 
the special logic in MS-DRGs 673, 674, and 675. The following table 
shows our findings:
[GRAPHIC] [TIFF OMITTED] TP29MY20.058

    As shown by the table, for MS-DRG 673, we identified a total of 
7,391 cases assigned to the special logic within this MS-DRG with an 
average length of stay of 12.1 days and average costs of $28,273. Of 
these 7,391 cases in the subset of MS-DRG 673, there were 34 cases 
describing insertion of a TIVAD or tunneled vascular access device with 
a principal diagnosis of I12.9, I13.10, N18.1, N18.2, N18.3, N18.4, or 
N18.9 with an average length of stay of 14.2 days and average costs of 
$27,844. For MS-DRG 674, we identified a total of 3,055 cases assigned 
to the special logic within this MS-DRG with an average length of stay 
of 7.8 days and average costs of $17,107. Of these 3,055 cases in the 
subset of MS-DRG 674, there were 30 cases describing insertion of a 
TIVAD or tunneled vascular access device with a principal diagnosis of 
I12.9, I13.10, N18.1, N18.2, N18.3, N18.4, or N18.9 with an average 
length of stay of 7.2 days and average costs of $11,227. For MS-DRG 
675, we identified a total of 58 cases assigned to the special logic 
within this MS-DRG with an average length of stay of 6.1 days and 
average costs of $12,582. Of these 58 cases in the subset of MS-DRG 
675, there was one case describing insertion of a TIVAD or tunneled 
vascular access device with a principal diagnosis of I12.9, I13.10, 
N18.1, N18.2, N18.3, N18.4, or N18.9 with a length of stay of 4 days 
and costs of $6,549. Overall, for MS-DRGs 673, 674 and 675, there were 
a relatively small number of cases reporting a principal diagnosis of 
I12.9, I13.10, N18.1, N18.2, N18.3, N18.4, or N18.9 and a procedure 
code describing the insertion of a TIVAD or tunneled vascular access 
device demonstrating

[[Page 32524]]

that these conditions are not typically addressed by insertion of these 
devices.
    As stated previously, TIVADs and tunneled vascular access devices 
may be inserted for a variety of principal diagnoses. Our clinical 
advisors believe that continuing to include these seven diagnoses that 
are not specific to renal failure or that do not otherwise describe 
indications requiring the insertion of totally implantable vascular 
access devices or tunneled vascular access devices for hemodialysis 
would not maintain clinical coherence with other cases in this subset 
of cases in MS-DRGs 673, 674, and 675. Therefore, for the reasons 
stated, we are proposing to remove ICD-10-CM codes I12.9, I13.10, 
N18.1, N18.2, N18.3, N18.4, and N18.9 from the subset of GROUPER logic 
in MS-DRGs 673, 674, and 675 that recognizes the insertion of totally 
implantable vascular access devices or tunneled vascular access devices 
as an inpatient procedure for the purposes of hemodialysis.
9. MDC 17 (Myeloproliferative Diseases and Disorders, Poorly 
Differentiated Neoplasms): Inferior Vena Cava Filter Procedures
    We received a request to review the GROUPER logic in MDC 17. The 
requester stated that cases reporting the introduction of a high dose 
chemotherapy agent, or reporting a chemotherapy principal diagnosis 
with a secondary diagnosis describing acute leukemia, are assigned to 
medical MS-DRGs 837 (Chemotherapy with Acute Leukemia as Secondary 
Diagnosis or with High Dose Chemotherapy Agent with MCC), MS-DRG 838 
(Chemotherapy with Acute Leukemia as Secondary Diagnosis with CC or 
High Dose Chemotherapy Agent), and MS-DRG 839 (Chemotherapy with Acute 
Leukemia as Secondary Diagnosis without CC/MCC). However, when 
procedure codes describing the placement of an inferior vena cava (IVC) 
filter, namely 06H03DZ (Insertion of intraluminal device into inferior 
vena cava, percutaneous approach), are also reported with the same 
codes describing the introduction of a high dose chemotherapy agent or 
report a chemotherapy principal diagnosis with a secondary diagnosis 
describing acute leukemia, the cases are assigned to surgical MS-DRGs 
829 and 830 (Myeloproliferative Disorders or Poorly Differentiated 
Neoplasms with Other Procedure with and without CC/MCC, respectively). 
According to the requestor, the additional resources used by the 
hospital to place an IVC filter should not result in assignment to 
lower-weighted MS-DRGs.
    The ICD-10-PCS codes that describe the insertion of an infusion 
device or the insertion of an intraluminal device into the inferior 
vena cava are listed in the following table.
[GRAPHIC] [TIFF OMITTED] TP29MY20.059

    Our analysis of this grouping issue confirmed that, when procedure 
code 06H03DZ (Insertion of intraluminal device into inferior vena cava, 
percutaneous approach) is reported with a procedure code describing the 
introduction of a high dose chemotherapy agent, or when it is reported 
with a chemotherapy principal diagnosis code with a secondary diagnosis 
code describing acute leukemia, these cases group to surgical MS-DRGs 
829 and 830. ICD-10-PCS procedure code 06H03DZ identifies the placement 
of an IVC filter and is designated as an extensive O.R. procedure for 
purposes of MS-DRG assignment. We then examined the GROUPER logic for 
medical MS-DRGs 837, 838 and 839. The GROUPER logic for MS-DRGs 837, 
838, and 839 is defined by a principal diagnosis of chemotherapy 
identified with ICD-10-CM diagnosis codes Z08 (Encounter for follow-up 
examination after completed treatment for malignant neoplasm), Z51.11 
(Encounter for antineoplastic chemotherapy) or Z51.112 (Encounter for 
antineoplastic immunotherapy) along with a secondary diagnosis of acute 
leukemia or a procedure code for the introduction of a high dose 
chemotherapy agent as reflected in the logic table:

[[Page 32525]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.060

    We refer the reader to the ICD-10 MS-DRG Version 37 Definitions 
Manual (which is available via the internet on the CMS website at: 
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software for complete 
documentation of the GROUPER logic for the listed MS-DRGs.
    We examined claims data from the September 2019 update of the FY 
2019 MedPAR file for all cases in MS-DRGs 829 and 830 and for cases 
reporting the insertion of an IVC filter (procedure codes 06H00DZ, 
06H03DZ, and 06H04DZ) with a procedure code describing the introduction 
of a high dose chemotherapy agent, or with a chemotherapy principal 
diagnosis code with a secondary diagnosis code describing acute 
leukemia. Our findings are shown in the following table.
[GRAPHIC] [TIFF OMITTED] TP29MY20.061

    As shown in the table, there were a total of 1,697 cases with an 
average length of stay of 9.2 days and average costs of $24,188 in MS-
DRG 829. Of those 1,697 cases, there were 18 cases reporting procedure 
code 06H03DZ with a procedure code describing the introduction of a 
high dose chemotherapy agent, or with a chemotherapy principal 
diagnosis code with a secondary diagnosis code describing acute 
leukemia with an average length of stay of 25.6 days and average costs 
of $83,861. We note that there were no cases reporting procedure codes 
06H00DZ or 06H04DZ. For MS-DRG 830, there were a total of 311 cases 
with an average length of stay of 2.9 days and average costs of 
$10,885. We found zero cases in MS-DRG 830 reporting a procedure code 
for the insertion of an IVC filter with a procedure code describing the 
introduction of a high dose chemotherapy agent, or with a chemotherapy 
principal diagnosis code with a secondary diagnosis code describing 
acute leukemia. Based on the claims data, the cases reporting procedure 
code 06H03DZ with a procedure code describing the introduction of a 
high dose chemotherapy agent, or with a chemotherapy principal 
diagnosis code with a secondary diagnosis code describing acute 
leukemia have higher average costs ($83,861 versus $24,188) and a 
longer average length of stay (25.6

[[Page 32526]]

days versus 9.2 days) than all the cases in MS-DRG 829.
    We also reviewed the claims data for MS-DRGs 837, 838, and 839. Our 
findings are shown in the following table.
[GRAPHIC] [TIFF OMITTED] TP29MY20.062

    As shown in the table, there were a total of 1,776 cases with an 
average length of stay of 17 days and average costs of $40,667 in MS-
DRG 837. There were a total of 1,172 cases with an average length of 
stay of 7.3 days and average costs of $16,594 in MS-DRG 838. There were 
a total of 810 cases with an average length of stay of 5 days and 
average costs of $10,994 in MS-DRG 839. Based on the claims data, the 
cases reporting procedure code 06H03DZ with a procedure code describing 
the introduction of a high dose chemotherapy agent, or with a 
chemotherapy principal diagnosis code with a secondary diagnosis code 
describing acute leukemia again have higher average costs ($83,861 
versus $40,667, $16,594, and $10,994 respectively) and a longer average 
length of stay (25.6 days versus 17 days, 7.3 days and 5 days, 
respectively) than all the cases in MS-DRG 837, 838, and 839. Our 
clinical advisors reviewed the claims data and noted there were only a 
small number of cases reporting procedure code 06H03DZ with a procedure 
code describing the introduction of a high dose chemotherapy agent, or 
with a chemotherapy principal diagnosis code with a secondary diagnosis 
code describing acute leukemia, and believe there may have been other 
factors contributing to the higher costs for these cases. Our clinical 
advisors stated the procedure to insert an IVC filter is not surgical 
in nature and recommended further analysis.
    We performed further analysis on the other ICD-10-PCS codes 
describing the insertion of a device into the inferior vena cava to 
identify if they have a similar extensive O.R. designations and noted 
inconsistencies among the O.R. and non-O.R. designations. In Version 37 
of the ICD-10 MS-DRGs, ICD-10-PCS procedure codes 06H003T, 06H003Z, 
06H033T, 06H033Z, and 06H043Z identify the insertion of an infusion 
device into the inferior vena cava with various approaches and are 
classified as Non-O.R. procedures. ICD-10-PCS procedure codes 06H00DZ, 
06H03DZ, and 06H04DZ identify the insertion of an intraluminal device 
into the inferior vena cava (IVC filter procedure) with various 
approaches and are classified as extensive O.R. procedures. Our 
clinical advisors indicated that codes 06H00DZ, 06H03DZ, and 06H04DZ 
describing the insertion of an intraluminal device into the inferior 
vena cava do not require the resources of an operating room, that the 
procedure to insert an IVC filter is not surgical in nature and that 
these procedures are comparable to the related ICD-10-PCS procedure 
codes that describe the insertion of infusion devices into the inferior 
vena cava that are currently designated as Non-O.R. procedures. Our 
clinical advisors believe that, given the similarity in factors such as 
complexity, resource utilization, and lack of a requirement for 
anesthesia administration between all procedures describing insertion 
of a device into the inferior vena cava, it would be more appropriate 
to designate these three ICD-10-PCS codes describing the insertion of 
an intraluminal device into the inferior vena cava as Non-O.R. 
procedures. Therefore, we are proposing to remove ICD-10-PCS procedure 
codes 06H00DZ, 06H03DZ, and 06H04DZ from the FY 2021 ICD-10 MS-DRG 
Version 38 Definitions Manual in Appendix E--Operating Room Procedures 
and Procedure Code/MS-DRG Index as O.R. procedures. Under this 
proposal, these procedures would no longer impact MS-DRG assignment.
10. Review of Procedure Codes in MS-DRGs 981 Through 983 and 987 
Through 989
    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 (Non-Extensive 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 cases reporting these 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 use this information to 
determine which procedure codes and diagnosis codes to examine.
    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. 
We also consider whether it would be more appropriate to move the 
principal diagnosis codes into the MDC to which the procedure is 
currently assigned.
    In addition to this internal review, we also consider requests that 
we receive to examine cases found to group to MS-DRGs 981 through 983 
or MS-DRGs 987 through 989 to determine if it would be appropriate to 
add procedure codes to one of the surgical MS DRGs for the MDC into 
which the principal diagnosis falls or to move the principal diagnosis 
to the surgical MS DRGs to which the procedure codes are assigned.
    Based on the results of our review of the claims data from the 
September 2019 update of the FY 2019 MedPAR file, as well as our review 
of the requests that we received to examine cases found to group to MS-
DRGs 981 through 983 or MS-DRGs 987 through 989, we are proposing to 
move the cases reporting the procedures and/or principal diagnosis 
codes described in this section of this rule 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 or procedure is assigned.

[[Page 32527]]

a. Horseshoe Abscess With Drainage
    We received a request to reassign cases reporting a principal 
diagnosis of a horseshoe abscess with a procedure involving open 
drainage of perineum subcutaneous tissue and fascia from MS-DRGs 987, 
988, and 989 (Non-Extensive O.R. Procedure Unrelated to Principal 
Diagnosis with MCC, with CC, and without CC/MCC, respectively) to MS-
DRGs 356, 357, and 358 (Other Digestive System O.R. Procedures with 
MCC, with CC, and without CC/MCC, respectively) in MDC 06. ICD-10-CM 
diagnosis code K61.31 (Horseshoe abscess) is used to report a horseshoe 
abscess and is currently assigned to MDC 06 (Diseases and Disorders of 
the Digestive System). A horseshoe abscess is a specific type of 
ischiorectal abscess caused by an abscessed anal gland located in the 
posterior midline of the anal canal with suppuration found in the 
ischiorectal fossae. ICD-10-PCS procedure code 0J9B0ZZ (Drainage of 
perineum subcutaneous tissue and fascia, open approach) may be reported 
to describe drainage of an abscess in the ischiorectal space and is 
currently assigned to MDC 08 (Diseases and Disorders of the 
Musculoskeletal System and Connective Tissue), MDC 09 (Diseases and 
Disorders of the Skin, Subcutaneous Tissue and Breast), MDC 21 
(Injuries, Poisonings and Toxic Effects of Drugs) and MDC 24 (Multiple 
Significant Trauma).
    Our analysis of this grouping issue confirmed that, when a 
horseshoe abscess is reported as a principal diagnosis with ICD-10-PCS 
procedure code 0J9B0ZZ, these cases group to MS-DRGs 987, 988, and 989. 
As previously noted, whenever there is a surgical procedure reported on 
the claim that 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''.
    We examined the claims data to identify cases reporting procedure 
code 0J9B0ZZ with a principal diagnosis of K61.31 that are currently 
grouping to MS-DRGs 987, 988, and 989. Our findings are shown in this 
table:
[GRAPHIC] [TIFF OMITTED] TP29MY20.063

    As previously noted, the requestor asked that we reassign these 
cases to MS-DRGs 356, 357, and 358. We therefore examined the data for 
all cases in MS-DRGs 356, 357, and 358. Our findings are shown in this 
table:
[GRAPHIC] [TIFF OMITTED] TP29MY20.064

    While our clinical advisors noted that the average length of stay 
and average costs of cases in MS-DRGs 356, 357, and 358 are higher than 
the average length of stay and average costs for the small subset of 
cases reporting procedure code 0J9B0ZZ and a principal diagnosis code 
of K61.31 in MS-DRGs 987, 988, and 989, they believe that the procedure 
is clearly clinically related to the principal diagnosis and is a 
logical accompaniment of the diagnosis. Therefore, they believe it is 
clinically appropriate for the procedure to group to the same MS-DRGs 
as the principal diagnosis.
    Therefore, we are proposing to add ICD-10-PCS procedure code 
0J9B0ZZ to MDC 06 in MS-DRGs 356, 357, and 358. Under this proposal, 
cases reporting procedure code 0J9B0ZZ in conjunction with a principal 
diagnosis from MDC 06, such as diagnosis code K61.31, would group to 
MS-DRGs 356, 357, and 358.
b. Chest Wall Deformity With Supplementation
    We received a request to reassign cases reporting a principal 
diagnosis of acquired deformity of chest and rib with a procedure 
involving the placement of a biological or synthetic material that 
supports or strengthens the body part 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) in MDC 08.
    ICD-10-CM diagnosis code M95.4 (Acquired deformity of chest and 
rib) is used to report this condition and is currently assigned to MDC 
08 (Diseases and Disorders of the Musculoskeletal System and Connective 
Tissue). ICD-10-PCS procedure codes 0WU807Z (Supplement chest wall with 
autologous tissue substitute, open approach), 0WU80JZ (Supplement chest 
wall with synthetic substitute, open approach)

[[Page 32528]]

and 0WU80KZ (Supplement chest wall with nonautologous tissue 
substitute, open approach) may be reported to describe procedures to 
supplement or reinforce the chest wall with biologic or synthetic 
material. ICD-10-PCS procedure codes 0WU807Z and 0WU80KZ are currently 
assigned to MDC 04 (Diseases and Disorders of the Respiratory System). 
We note that ICD-10-PCS procedure code 0WU80JZ is already assigned to 
MDC 08 (Diseases and Disorders of the Musculoskeletal System and 
Connective Tissue) as well as MDC 04 (Diseases and Disorders of the 
Respiratory System), so these cases already group to MS-DRGs 515, 516, 
and 517 when reported with a principal diagnosis of ICD-10-CM diagnosis 
code M95.4.
    Our analysis of this grouping issue confirmed that when diagnosis 
code M95.4 is reported as a principal diagnosis with ICD-10-PCS 
procedure codes 0WU807Z or 0WU80KZ, these cases group to MS-DRGs 981, 
982, and 983. As noted in the previous discussion, whenever there is a 
surgical procedure reported on the claim that 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''.
    We examined the claims data to identify cases reporting procedure 
codes 0WU807Z or 0WU80KZ with principal diagnosis code M95.4 that are 
currently grouping to MS-DRGs 981, 982, and 983. Our analysis showed 
one case reporting a principal diagnosis of code M95.4 with procedure 
code 0WU807Z, with a length of stay of 2.0 days and average costs of 
$11,594 in MS-DRG 983. We found zero cases in MS-DRGs 981 and 982 
reporting procedure codes 0WU807Z or 0WU80KZ and a principal diagnosis 
of M95.4.
    We also examined the data for cases in MS-DRGs 515, 516, and 517, 
and our findings are shown in this table.
[GRAPHIC] [TIFF OMITTED] TP29MY20.065

    While there is only one case reporting procedure codes 0WU807Z or 
0WU80KZ with principal diagnosis M95.4 in MS-DRGs 981, 982, and 983, 
our clinical advisors reviewed this request and believe that the cases 
involving procedures of chest wall supplementation with a principal 
diagnosis of acquired deformity of chest and rib represent a distinct, 
recognizable clinical group similar to those cases in MS-DRGs 515, 516, 
and 517, and that procedures reporting 0WU80JZ and 0WU80KZ are clearly 
related to the principal diagnosis code. They believe that it is 
clinically appropriate for the three ICD-10-PCS codes describing 
procedures to supplement or reinforce the chest wall with biologic or 
synthetic material to group to the same MS-DRGs as the principal 
diagnoses.
    Therefore, we are proposing to add ICD-10-PCS procedure codes 
0WU807Z and 0WU80KZ to MDC 08 in MS-DRGs 515, 516, and 517. Under this 
proposal, cases reporting procedure codes 0WU807Z or 0WU80KZ in 
conjunction with a principal diagnosis code from MDC 08 would group to 
MS-DRGs 515, 516, and 517.
c. Hepatic Malignancy With Hepatic Artery Embolization
    We received a request to reassign cases for hepatic malignancy when 
reported with procedures involving the embolization of a hepatic artery 
from MS-DRGs 987, 988, and 989 (Non-Extensive O.R. Procedure Unrelated 
to Principal Diagnosis with MCC, with CC, and without CC/MCC, 
respectively) to MS-DRGs 423, 424, and 425 (Other Hepatobiliary or 
Pancreas Procedures with MCC, with CC, and without CC/MCC, 
respectively) in MDC 08.
    ICD-10-PCS procedure code 04V33DZ (Restriction of hepatic artery 
with intraluminal device, percutaneous approach) may be reported to 
describe embolization procedures to narrow or partially occlude a 
hepatic artery with an intraluminal device and is currently assigned to 
MDC 05 (Diseases and Disorders of the Circulatory System). ICD-10-PCS 
procedure code 04L33DZ (Occlusion of hepatic artery with intraluminal 
device, percutaneous approach) may be reported to describe embolization 
procedures to completely close off a hepatic artery with an 
intraluminal device and is currently assigned to MDC 05 (Diseases and 
Disorders of the Circulatory System) and MDC 06 (Diseases and Disorders 
of the Digestive System).
    The requestor did not provide an ICD-10-CM diagnosis code in its 
request so we reviewed ICD-10-CM diagnosis codes in the C00 through D49 
code range to identify conditions that describe hepatic malignancies. 
We identified the following fourteen ICD-10-CM diagnosis codes, all 
currently assigned to MDC 07 (Diseases and Disorders of the 
Hepatobiliary System & Pancreas):

[[Page 32529]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.066

    Our analysis of this grouping issue confirmed that, when one of the 
fourteen hepatic malignancy ICD-10-CM diagnosis codes previously listed 
is reported as a principal diagnosis with ICD-10-PCS procedure code 
04L33DZ, these cases group to MS-DRGs 987, 988, and 989. However, we 
noted that when one of these fourteen hepatic malignancy ICD-10-CM 
diagnosis codes is reported as a principal diagnosis with ICD-10-PCS 
procedure code 04V33DZ, these cases currently 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). As noted in the 
previous discussion, whenever there is a surgical procedure reported on 
the claim that 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''.
    To understand the resource use for the subset of cases reporting 
procedure code 04V33DZ with a principal diagnosis of hepatic malignancy 
that are currently grouping to MS-DRGs 981, 982, and 983, we examined 
claims data for the average length of stay and average costs for these 
cases. Our findings are shown in the following table:
[GRAPHIC] [TIFF OMITTED] TP29MY20.067

    We then examined the claims data to identify cases reporting 
procedure code 04L33DZ reported with a principal diagnosis of hepatic 
malignancy that are currently grouping to MS-DRGs 987, 987, and 989. 
Our findings are shown in the following table:

[[Page 32530]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.068

    We also examined the data for cases in MS-DRGs 423, 424, and 425, 
and our findings are shown in the following table:
[GRAPHIC] [TIFF OMITTED] TP29MY20.069

    While the average lengths of stay of cases in MS-DRGs 423, 424, and 
425 are longer than the average lengths of stay for the subset of cases 
reporting procedure codes 04V33DZ or 04L33DZ and a principal diagnosis 
of hepatic malignancy, the average costs of these same cases are 
generally similar. Our clinical advisors also believe that these 
procedures are clearly related to the principal diagnoses, as they are 
an appropriate treatment for a number of hepatobiliary diagnoses, 
including cancer and it is clinically appropriate for the procedures to 
group to the same MDC as the principal diagnoses.
    Therefore, we are proposing to add ICD-10-PCS procedure codes 
04V33DZ and 04L33DZ to MDC 07 in MS-DRGs 423, 424 and 425. Under this 
proposal, cases reporting procedure codes 04V33DZ or 04L33DZ in 
conjunction with a principal diagnosis code for a hepatic malignancy 
from MDC 07 would group to MS-DRGs 423, 424 and 425.
d. Hemoptysis With Percutaneous Artery Embolization
    We received a request to reassign cases for hemoptysis when 
reported with a procedure describing percutaneous embolization of an 
upper artery with an intraluminal device 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 163, 164, and 165 
(Major Chest Procedures with MCC, with CC, and without CC/MCC, 
respectively) in MDC 04. Hemoptysis is the expectoration of blood from 
some part of the respiratory tract. ICD-10-CM diagnosis code R04.2 
(Hemoptysis) is used to report this condition and is currently assigned 
to MDC 04 (Diseases and Disorders of the Respiratory System). ICD-10-
PCS procedure code 03LY3DZ (Occlusion of upper artery with intraluminal 
device, percutaneous approach) may be reported to describe percutaneous 
embolization of an upper artery with an intraluminal device and is 
currently assigned to MDC 05 (Diseases and Disorders of the Circulatory 
System), MDC 21 (Injuries, Poisonings and Toxic Effects of Drugs) and 
MDC 24 (Multiple Significant Trauma).
    Our analysis of this grouping issue confirmed that when a procedure 
describing percutaneous embolization of an upper artery with an 
intraluminal device (such as ICD-10-PCS procedure code 03LY3DZ) is 
reported with a principal diagnosis from MDC 04, such as R04.2, these 
cases group to MS-DRGs 981, 982, and 983. During our review of this 
issue, we also examined claims data for similar procedures 03LY0DZ 
(Occlusion of upper artery with intraluminal device, open approach) and 
03LY4DZ (Occlusion of upper artery with intraluminal device, 
percutaneous endoscopic approach) and noted the same pattern. As noted 
in the previous discussion, whenever there is a surgical procedure 
reported on the claim that 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''.
    We examined the claims data to identify cases reporting procedure 
codes 03LY0DZ, 03LY3DZ or 03LY4DZ with a principal diagnosis from MDC 
04 that are currently grouping to MS-DRGs 981, 982, and 983. Our 
findings are shown in this table:

[[Page 32531]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.070

    As indicated earlier, the requestor suggested that we move ICD-10-
PCS procedure code 03LY3DZ to MS-DRGs 163, 164, and 165. However, our 
clinical advisors believe that, within MDC 04, procedure codes 
describing percutaneous embolization of an upper artery with an 
intraluminal device are more clinically aligned with the procedure 
codes assigned to MS-DRGs 166, 167, and 168 (Other Respiratory System 
O.R. Procedures with MCC, with CC and without CC/MCC, respectively), as 
these procedures would not be considered major chest procedures. 
Therefore, we examined claims data to identify the average length of 
stay and average costs for cases assigned to MS-DRGs 166, 167 and 168. 
Our findings are shown in the following table.
[GRAPHIC] [TIFF OMITTED] TP29MY20.071

    While our clinical advisors noted that the average costs of cases 
in MS-DRGs 166, 167, and 168 are lower than the average costs for the 
subset of cases reporting procedure codes 03LY0DZ, 03LY3DZ or 03LY4DZ 
and a principal diagnosis code from MDC 04, they believe that these 
procedures are clearly related to the principal diagnoses as these 
procedures are appropriate for certain respiratory tract diagnoses. 
Therefore, it is clinically appropriate for the procedures to group to 
the same MDC as the principal diagnoses.
    Therefore, we are proposing to add ICD-10-PCS procedure codes 
03LY0DZ, 03LY3DZ and 03LY4DZ to MDC 04 in MS-DRGs 166, 167, and 168. 
Under this proposal, cases reporting procedure codes 03LY0DZ, 03LY3DZ 
or 03LY4DZ in conjunction with a principal diagnosis code from MDC 04 
such as hemoptysis (R04.2) would group to MS-DRGs 166, 167, and 168.
e. Acquired Coagulation Factor Deficiency With Percutaneous Artery 
Embolization
    We received a request to reassign cases for acquired coagulation 
factor deficiency when reported with a procedure describing the 
complete occlusion of an artery with an intraluminal device 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 252, 253 and 254 (Other Vascular Procedures with MCC, with CC, and 
without CC/MCC, respectively) or 270, 271, and 272 (Other Major 
Cardiovascular Procedures with MCC, with CC, and without CC/MCC, 
respectively) in MDC 05 (Diseases and Disorders of the Circulatory 
System). The requestor asked that we reassign ICD-10-CM diagnosis code 
D68.4 (Acquired coagulation factor deficiency) from MDC 16 (Diseases 
and Disorders of Blood, Blood Forming Organs, Immunologic Disorders) in 
MS-DRG 813 (Coagulation Disorders), to MDC 05. The requestor provided 
the following list of 59 ICD-10-PCS procedure codes describing the 
complete occlusion of an artery with an intraluminal device in its 
request for consideration to reassign the ICD-10-CM diagnosis code for 
acquired coagulation factor deficiency to MDC 05. The requester noted 
that the diagnosis of Hemorrhage, not elsewhere classified (ICD-10-CM 
diagnosis code R58) groups to MS-DRGs 252, 253 and 254 or 270, 271, and 
272 in MDC 05 when reported with one of the 59 ICD-10-PCS procedure 
codes listed and requested that cases reporting a diagnosis describing 
acquired coagulation factor deficiency also group to those MS-DRGs when 
reported with one of the 59 ICD-10-PCS procedure codes listed.
BILLING CODE 4120-01-P

[[Page 32532]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.072


[[Page 32533]]


[GRAPHIC] [TIFF OMITTED] TP29MY20.073

BILLING CODE 4120-01-C
    Our analysis of this grouping issue confirmed that, when diagnosis 
code D68.4 is reported as a principal diagnosis with one of the 59 ICD-
10-PCS procedure codes provided by the requestor, these cases group to 
MS-DRGs 981, 982, and 983. As noted in the previous discussion, 
whenever there is a surgical procedure reported on the claim that 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''.
    We examined the claims data to identify cases involving the 59 
procedure codes in MDC 05 reported with a principal diagnosis of code 
D68.4 that are currently grouping to MS-DRGs 981, 982, and 983. Our 
analysis showed one case reported a principal diagnosis of D68.4 with a 
procedure code in MDC 05, with a length of stay of 2.0 days and costs 
of $21,890 in MS-DRG 981. We found zero cases in MS-DRGs 982 and 983 
reporting a procedure code from MDC 05 and a principal diagnosis of 
code M95.4.
    Overall, for MS-DRGs 981, 982, and 983, there was a total of one 
case reporting a principal diagnosis of acquired coagulation factor 
deficiency with any of the procedures from MDC 05 provided by the 
requestor, demonstrating that acquired coagulation factor deficiency is 
not typically corrected surgically by occlusion of an artery with an 
intraluminal device.
    We also examined the data for cases in MS-DRG 813, and our findings 
are shown in this table:
[GRAPHIC] [TIFF OMITTED] TP29MY20.074

    As shown in this table, there were a total of 16,680 cases in MS-
DRG 813, with an average length of stay of 4.7 days and average costs 
of $11,286. In MS-DRG 813, we found 142 cases reporting a principal 
diagnosis of an acquired coagulation factor deficiency with an average 
length of stay of 6.41 days and average costs of $17,822. We note that 
the average costs for the subset of cases in MS-DRG 813 reporting a 
principal diagnosis of an acquired coagulation factor deficiency are 
higher than the average costs of all cases that currently group to MS-
DRG 813. However, our clinical advisors believe that diagnosis code 
D68.4 describes acquired bleeding disorders in which the affected 
person lacks the necessary coagulation factors for proper clot 
formation and wound healing, and therefore, is most clinically aligned 
with the diagnosis codes assigned to MDC 16 (where it is currently 
assigned). Our clinical advisors further note that a diagnosis of an 
acquired bleeding disorder is not comparable to conditions described by 
the ICD-10-CM code R58 (Hemorrhage, not elsewhere classified) as 
suggested by the requestor. Diagnoses described by codes from Chapter 
18 (Symptoms, Signs and Abnormal Clinical and Laboratory Findings) of 
ICD-10-CM, such as R58, can be the result of a variety of underlying 
conditions, or describe conditions of an unexplained etiology. As an 
ill-defined condition, our clinical advisors do not believe it is 
appropriate to equate this diagnosis code with a bleeding disorder. 
Therefore, we are not proposing to reassign ICD-10-CM diagnosis code 
D68.4 from MDC 16 to MDC 05.
f. Epistaxis With Percutaneous Artery Embolization
    We received a request to consider adding cases for a hemorrhage of 
the nose when reported with a procedure describing percutaneous 
arterial embolization to MDC 03 (Disease and Disorders of the Ear, 
Nose, Mouth and Throat) in MS-DRGs 133 and 134 (Other Ear, Nose, Mouth 
and Throat O.R. Procedures with CC/MCC and without CC/MCC, 
respectively). ICD-10-CM diagnosis code R04.0 (Epistaxis) is used to 
describe a hemorrhage of the nose or ``nosebleed'' and is currently 
assigned to MDC 03. ICD-10-PCS procedure codes

[[Page 32534]]

describing percutaneous arterial embolization may be reported with 
procedure codes 03LM3DZ (Occlusion of right external carotid artery 
with intraluminal device, percutaneous approach), 03LN3DZ (Occlusion of 
left external carotid artery with intraluminal device, percutaneous 
approach), or 03LR3DZ (Occlusion of face artery with intraluminal 
device, percutaneous approach) and are currently assigned to several 
MS-DRGs in five MDCs as illustrated in the table.
[GRAPHIC] [TIFF OMITTED] TP29MY20.075

    According to the requestor, when diagnosis code R04.0 is reported 
as a principal diagnosis with any one of the procedure codes describing 
a percutaneous arterial embolization (03LM3DZ, 03LN3DZ, or 03LR3DZ), 
these cases are grouping to MS-DRGs 981, 982, and 983 (Extensive O.R. 
Procedure Unrelated to Principal Diagnosis with MCC, with CC, and 
without CC/MCC, respectively).
    Our analysis of this grouping issue confirmed that, when epistaxis 
(ICD-10-CM diagnosis code R04.0) is reported as a principal diagnosis 
with ICD-10-PCS procedure codes 03LM3DZ, 03LN3DZ, or 03LR3DZ, 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 
that 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.''
    For our review of this grouping issue and the request to have cases 
reporting procedure codes 03LM3DZ, 03LN3DZ, or 03LR3DZ added to MDC 03 
in MS-DRGs 133 through 134, we examined claims data from September 2019 
update of the FY 2019 MedPAR file for cases reporting ICD-10-PCS 
procedure codes 03LM3DZ, 03LN3DZ, or 03LR3DZ with a principal diagnosis 
of R0.40 from MDC 03 that currently group to MS-DRGs 981 through 983. 
Our findings are shown in the following table.
[GRAPHIC] [TIFF OMITTED] TP29MY20.076

    We then examined the claims data to identify the average length of 
stay and average costs for all cases in MS-DRGs 133 and 134. Our 
findings are shown in the table.
[GRAPHIC] [TIFF OMITTED] TP29MY20.077

    As shown in the table, for MS-DRG 133, there were a total of 1,757 
cases with an average length of stay of 5.6 days and average costs of 
$15,337. For MS-DRG 134, there were a total of 849 cases with an 
average length of stay of 2.5 days and average costs of $9,512. Our 
clinical advisors believe that procedure codes 03LM3DZ, 03LN3DZ,

[[Page 32535]]

and 03LR3DZ are appropriate procedures to treat commonly occurring ear, 
nose, and throat bleeding diagnoses and expressed support for these 
procedure codes to group to MDC 03.
    We note that, as discussed in section II.D.4 of the preamble of 
this proposed rule, we are proposing to delete MS-DRGs 133 and 134 and 
create proposed new MS-DRGs 143, 144, and 145 (Other Ear, Nose, Mouth 
and Throat O.R. Procedures with MCC, with CC, and without CC/MCC, 
respectively). Therefore, we are proposing to add ICD-10-PCS procedure 
codes 03LM3DZ, 03LN3DZ, and 03LR3DZ to MDC 03 in proposed new MS-DRGs 
143, 144, and 145, if finalized. Under this proposal, cases reporting 
ICD-10-PCS procedure codes 03LM3DZ, 03LN3DZ, or 03LR3DZ with a 
principal diagnosis from MDC 03 would group to proposed new MS-DRGs 
143, 144, and 145.
    The following table reflects our simulation for ICD-10-PCS 
procedure codes 03LM3DZ, 03LN3DZ, and 03LR3DZ in proposed new MS-DRGs 
143, 144, and 145.
[GRAPHIC] [TIFF OMITTED] TP29MY20.078

g. Revision or Removal of Synthetic Substitute in Peritoneal Cavity
    During the review of the cases that group to MS-DRGs 981 through 
983, we noted that when several ICD-10-PCS procedure codes describing 
revision or removal of synthetic substitute in the peritoneal cavity 
are reported in conjunction with ICD-10-CM diagnosis codes in MDC 01 
(Diseases and Disorders of the Nervous System), such as complications 
of intracranial shunts, the cases group to MS-DRGs 981 through 983. 
ICD-10-PCS procedure codes 0WWG0JZ (Revision of synthetic substitute in 
peritoneal cavity, open approach), 0WWG4JZ (Revision of synthetic 
substitute in peritoneal cavity, percutaneous endoscopic approach), and 
0WPG0JZ (Removal of synthetic substitute from peritoneal cavity, open 
approach) are currently assigned to MDC 06 (Diseases and Disorders of 
the Digestive System) in MS-DRGs 356, 357, and 358 (Other Digestive 
System O.R. Procedures with MCC, with CC, and without CC/MCC, 
respectively).
    We examined cases that reported a principal diagnosis in MDC 01 and 
procedure code 0WWG0JZ, 0WWG4JZ, or 0WPG0JZ that currently group to MS-
DRGs 981 through 983. Our findings are shown in the following table.
[GRAPHIC] [TIFF OMITTED] TP29MY20.079

    Within MDC 01, our clinical advisors believe that these procedures, 
which describe revision or removal of synthetic substitute in 
peritoneal cavity, are most clinically similar to those in MS-DRGs 031, 
032, and 033 (Ventricular Shunt Procedures with MCC, with CC, and 
without CC/MCC, respectively). We therefore examined the data for all 
cases in MS-DRGS 031, 032, and 033.

[[Page 32536]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.080

    The average costs for the subset of cases in MS-DRGs 981, 982, and 
983 that report procedures describing revision or removal of synthetic 
substitute in the peritoneal cavity with a principal diagnosis from MDC 
01 are lower than the average costs of cases in MS-DRGs 031, 032, and 
033 as a whole, and the average length of stay for this subset of cases 
is also lower in two of the MS-DRGs and higher in one. Our clinical 
advisors believe the procedure codes describing revision or removal of 
synthetic substitute in the peritoneal cavity are clearly related to 
the principal diagnosis codes describing complications of intracranial 
shunts and, therefore, it is clinically appropriate for the procedures 
to group to the same MS-DRGs (031, 032, and 033) as the principal 
diagnoses describing complications of intracranial shunts. We are 
proposing to add ICD-10-PCS procedure codes 0WWG0JZ, 0WWG4JZ, and 
0WPG0JZ to MDC 01 (Diseases and Disorders of the Nervous System) in MS-
DRGs 031, 032, and 033.
h. Revision of Totally Implantable Vascular Access Devices
    During the review of the cases that group to MS-DRGs 981 through 
983, we noted that when procedure codes describing Totally Implantable 
Vascular Access Devices (TIVADs) are reported with ICD-10-CM diagnosis 
codes assigned to MDC 04 (Diseases and Disorders of the Respiratory 
System), MDC 06 (Diseases and Disorders of the Digestive System), MDC 
07 (Diseases and Disorders of the Hepatobiliary System and Pancreas), 
MDC 08 (Diseases and Disorders of the Musculoskeletal System and 
Connective Tissue), MDC 13 (Diseases and Disorders of the Female 
Reproductive System), or MDC 16 (Diseases and Disorders of Blood, Blood 
Forming Organs, Immunologic Disorders), the cases group to MS-DRGs 981 
through 983.
    TIVADs are port catheter devices inserted for chemotherapy 
treatment. The nine ICD-10-PCS procedure codes describing TIVADs are 
listed in this table.
[GRAPHIC] [TIFF OMITTED] TP29MY20.081

    We examined claims data to identify the average length of stay and 
average costs for cases in MS-DRGs 981 through 983 reporting ICD-10-PCS 
procedure codes describing TIVADs in conjunction with a principal 
diagnosis from MDCs 04, 06, 07, 08, 13, or 16. Our findings are shown 
in the following table.

[[Page 32537]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.082

    Our clinical advisors believe that cases reporting TIVADs with a 
principal diagnosis in MDCs 04, 06, 07, 08, 13, or 16 would most 
suitably group to the MS-DRGs describing ``Other'' procedures for each 
of these MDCs. These TIVAD procedures cannot be assigned to the 
specific surgical MS-DRGs within these MDCs since they are not 
performed on the particular anatomical areas described by each of the 
specific surgical MS-DRGs. For example, in MDC 04, TIVADs could not be 
assigned to MS-DRGs 163, 164, and 165 (Major Chest Procedures with MCC, 
with CC, and without CC/MCC, respectively) because they are not major 
chest procedures.
    We therefore examined the claims data for each of these MS-DRGs. 
Our findings are shown in the following table.

[[Page 32538]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.083

    We note that while the average costs and length of stay are similar 
in some cases and in some cases vary between the subset of cases 
currently grouping to MS-DRGs 981 through 983 and the cases currently 
grouping to the MS-DRGs describing ``Other'' procedures as set forth in 
the table, our clinical advisors noted that TIVADs are frequently 
inserted in order to administer chemotherapy for a variety of 
malignancies. MDCs 04, 06, 07, 08, 13, or 16 each contain ICD-10-CM 
diagnosis codes that describe a variety of malignancies. Therefore, our 
clinical advisors believe that the TIVAD procedures are clearly related 
to the principal diagnoses within MDCs 04, 06, 07, 08, 13, and 16. For 
the reasons previously indicated, our clinical advisors believe that 
cases reporting TIVADs with a principal diagnosis in MDCs 04, 06, 07, 
08, 13, or 16 would mostly suitably group to the MS-DRGs describing 
``Other'' procedures for each of these MDCs.
    Therefore, we are proposing to add the nine ICD-10-PCS procedure 
codes describing TIVADs as set forth in the table to the MS-DRGs 
describing ``Other'' procedures within each of MDCs 04, 06, 07, 08, 13, 
and 16, specifically: MDC 04 in MS-DRGs 166, 167, and 168, MDC 06 in 
MS-DRGs 356, 357, and 358, MDC 07 in MS-DRGs 423, 424, and 425, MDC 08 
in MS-DRGs 515, 516, and 517, MDC 13 in MS-DRGs 749 and 750, and MDC 16 
in MS-DRGs 802, 803, and 804. Under this proposal, cases reporting a 
principal diagnosis in MDCs 04, 06, 07, 08, 13, or 16 with a TIVAD 
procedure would group to the respective MS-DRGs within the MDC.
i. Multiple Trauma With Internal Fixation of Joints
    For FY 2020, we received a request to reassign cases involving 
diagnoses that identify multiple significant trauma combined with 
internal fixation of joint procedures 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 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). The requestor provided an example of several ICD-10-CM 
diagnosis codes that together described multiple significant trauma in 
conjunction with ICD-10-PCS procedure codes beginning with the prefix 
``0RH'' and ``0SH'' that describe internal fixation of upper and lower 
joints. The requestor provided several suggestions to address this 
reassignment, including: Adding all ICD-10-PCS procedure codes from MDC 
08 (Diseases and Disorders of the Musculoskeletal System and Connective 
Tissue) with the exception of codes that group to MS-DRG 956 (Limb 
Reattachment, Hip and Femur Procedures for Multiple Significant Trauma) 
to MS DRGs 957, 958, and 959; adding codes with the prefix ``0RH'' and 
``0SH'' to MDC 24; and adding ICD-10-PCS procedure codes from all MDCs 
except those that currently group to MS-DRG 955 (Craniotomy for 
Multiple Significant Trauma) or MS-DRG 956 (Limb Reattachment, Hip and 
Femur Procedures for Multiple Significant Trauma) to MS-DRGs 957, 958, 
and 959 in MDC 24. In the FY 2020 IPPS/LTCH PPS proposed rule, we 
stated that we believe any potential reassignment of these cases 
requires significant analysis. We therefore did not propose any changes 
to the cases identified by the requestor.
    For FY 2021, as the first step of the comprehensive analysis needed 
to assess the reassignment of cases involving diagnoses that identify 
multiple significant trauma combined with internal fixation of joint 
procedures, our clinical advisors reviewed the list of procedure codes 
in the ``0RH'' and ``0SH'' code ranges, as

[[Page 32539]]

suggested by the requestor. Our clinical advisors identified 161 ICD-
10-PCS codes, which are listed in table 6P.1f., that they believe are 
clinically related to diagnoses assigned to MDC 24. We examined the 
claims data for cases that would be assigned to MDC 24 based on their 
diagnoses, but currently group to MS-DRGs 981 through 983 based on the 
presence of procedure codes in the ``0RH'' and ``0SH'' code ranges. Our 
findings are shown in this table.
[GRAPHIC] [TIFF OMITTED] TP29MY20.084

    We note that we found only 8 claims, with varying lengths of stay 
and average costs. We also examined the claims data for all cases in 
MS-DRGs 957, 958, and 959. Our findings are shown in this table.

[[Page 32540]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.085

    The very small number of claims we identified for cases that would 
be assigned to MDC 24 based on their diagnoses, but grouped to MS-DRGs 
981 through 983 based on the presence of procedure codes in the ``0RH'' 
and ``0SH'' code ranges, have varying resource use relative to MS-DRGs 
957, 958, and 959 as a whole. The average costs of the cases found in 
MS-DRGs 981-983 range from $7,015 to $72,331 with average lengths of 
stay ranging from 3 days to 14 days. The average costs of the cases 
found in MS-DRGs 957-959 range from $20,563 to $54,771 with average 
lengths of stay ranging from 5 days to 13.2 days. Given the nature of 
trauma cases, the resource use would be expected to vary based on the 
nature of the patient's injuries. In addition, as noted, our clinical 
advisors believe that these procedure codes are clinically related to 
the diagnoses in MDC 24. Therefore, we are proposing to add the 161 
ICD-10-PCS codes shown in Table 6P.1f to MDC 24 in MS-DRGs 957, 958, 
and 959. Under this proposal, cases that would be assigned to MDC 24 
based on their diagnoses, that also report one of the 161 ICD-10-PCS 
codes included in table 6P.1f, will group to MDC 24 in MS-DRGs 957, 
958, and 959, rather than to MS-DRGs 981 through 983.
    We note that while we are making this proposal to address the 
grouping issue for internal fixation of upper and lower joint 
procedures identified by the requestor, our clinical advisors believe 
that a more comprehensive analysis is required within MDC 24 to address 
the differences in severity level of diagnoses as well as the 
assignment of procedure codes to the MS-DRGs within MDC 24. We plan to 
continue this comprehensive analysis in future rulemaking.
j. 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 claims data in the September 
2019 update of the FY 2019 MedPAR file, we are proposing to reassign 
three procedure codes from MS-DRGs 981, 982, and 983 (Extensive O.R. 
Procedure Unrelated to Principal Diagnosis with MCC, with CC, without 
CC/MCC, respectively) to MS-DRGs 987, 988, and 989 (Non-Extensive 
Procedure Unrelated to Principal Diagnosis with MCC, with CC, without 
CC/MCC, respectively). We are also proposing to reassign three 
procedure codes from MS-DRGs 987, 988, and 989 (Non-Extensive Procedure 
Unrelated to Principal Diagnosis with MCC, with CC, without CC/MCC, 
respectively) to MS-DRGs 981, 982, and 983 (Extensive O.R. Procedure 
Unrelated to Principal Diagnosis with MCC, with CC, without CC/MCC, 
respectively).
    In conducting our review of the request to designate ICD-10-PCS 
procedure code 0W3G0ZZ (Control bleeding in peritoneal cavity, open 
approach) as an O.R. procedure (as described in section II.D.11.c.5. of 
this proposed rule), our clinical advisors noted that ICD-10-PCS codes 
0W3G3ZZ (Control bleeding in peritoneal cavity, percutaneous approach) 
and 0W3G4ZZ (Control bleeding in peritoneal cavity, endoscopic 
approach) are currently assigned to MS-DRGs 981 through 983 when 
reported with a principal diagnosis that is not assigned to one of the 
MDCs to which these procedure codes are assigned. Our clinical advisors 
believe that these procedures would be more appropriately assigned to 
MS-DRGs 987 through 989 because they are on average less complex and 
difficult than the same procedure performed by an open approach, and 
therefore should be assigned to the ``less extensive'' DRG. Therefore, 
we are proposing to reassign ICD-10-PCS codes 0W3G3ZZ and 0W3G4ZZ from 
MS-DRGs 981 through 983 to 987 through 989.
    In conducting our review of the request to designate ICD-10-PCS 
procedure codes 0WBC4ZX (Excision of mediastinum, percutaneous 
endoscopic

[[Page 32541]]

approach, diagnostic) and 0WBC3ZX (Excision of mediastinum, 
percutaneous approach, diagnostic) as O.R. procedures (as described in 
section II.D.11.c.1. of this proposed rule), our clinical advisors 
noted that ICD-10-PCS code 0WBC0ZX (Excision of mediastinum, open 
approach, diagnostic) is currently assigned to MS-DRGs 981 through 983 
when reported with a principal diagnosis that is not assigned to one of 
the MDCs to which the procedure code is assigned. Our clinical advisors 
believe that this procedure would be more appropriately assigned to MS-
DRGs 987 through 989 because this assignment is consistent with the 
assignment of other procedures that describe excision of the 
mediastinum performed by an open, percutaneous, or percutaneous 
endoscopic approach, and is consistent with the proposal for procedure 
codes 0WBC4ZX and 0WBC3ZX (with diagnostic qualifier) as discussed in 
section II.D.11.c.1. of this proposed rule. Therefore, we are proposing 
to reassign ICD-10-PCS code 0WBC0ZX from MS-DRGs 981 through 983 to 987 
through 989.
    We received a request to examine cases reporting a procedure 
describing the open excision of gastrointestinal body parts in the 
gastrointestinal body system. The requester stated that when procedures 
describing the open excision of a specific gastrointestinal body part 
in the gastrointestinal body system are reported with a principal 
diagnosis such as C49.A3 (Gastrointestinal stromal tumor of small 
intestine (GIST)), the cases are assigned to MS-DRGs 987, 988, and 989 
(Non-Extensive O.R. Procedure Unrelated to Principal Diagnosis with 
MCC, with CC, and without CC/MCC, respectively). However, when 
procedures describing the excision of a general gastrointestinal body 
part in the gastrointestinal body system are reported with the same 
principal diagnosis of GIST, the cases are 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). The requestor 
stated that procedures describing a specific body part value should be 
assigned to the same MS-DRG as procedures describing a general body 
part value.
    The requestor provided four ICD-10-PCS procedure codes in its 
request. These four ICD-10-PCS procedure codes, as well as their MDC 
assignments, are listed in the table:
[GRAPHIC] [TIFF OMITTED] TP29MY20.086

    We note that in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42120 
through 42122), we finalized our proposal to move seven ICD-10-CM 
diagnosis codes describing gastrointestinal stromal tumors (GIST), 
including C49.A3, from MDC 08 to MDC 06, under the ICD-10 MS-DRGs 
Version 37, effective October 1, 2019. As a result, cases reporting a 
principal diagnosis of GIST and a procedure code that is assigned to 
MDC 06 (such as ICD-10-PCS codes 0DBA0ZZ, 0DBB0ZZ, 0DB80ZZ, and 
0DB90ZZ) now group to MS-DRGs in MDC 06.
    Our analysis of this grouping issue found that these four ICD-10-
PCS codes describing related procedures have dissimilar designations 
that determine whether and in what way the presence of the procedure 
impacts the MS-DRG assignment. ICD-10-PCS code 0DB80ZZ is classified as 
an extensive O.R. procedure and ICD-10-PCS codes 0DB90ZZ, 0DBA0ZZ, and 
0DBB0ZZ are classified as non-extensive O.R. procedures. As a result, 
whenever ICD-10-PCS code 0DB80ZZ is reported with a principal diagnosis 
that is assigned to a different MDC than the procedure code, the case 
would be assigned to MS-DRGs 981 through 983. When ICD-10-PCS codes 
0DB90ZZ, 0DBA0ZZ, or 0DBB0ZZ are reported with a principal diagnosis 
that is assigned to a different MDC than the procedure code, the case 
would be assigned to MS-DRGs 987 through 989.
    We examined the claims data to identify cases reporting procedure 
code 0DB80ZZ that are currently grouping to MS-DRGs 981, 982 and 983. 
Our findings are shown in this table:

[[Page 32542]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.087

    We also examined the claims data to identify cases reporting 
procedure codes 0DB90ZZ, 0DBA0ZZ, and 0DBB0ZZ that are currently 
grouping to MS-DRGs 987, 988 and 989. Our findings are shown in this 
table:
[GRAPHIC] [TIFF OMITTED] TP29MY20.088

    The results of our data analysis indicate that cases reporting 
procedure codes 0DB90ZZ, 0DBA0ZZ, and 0DBB0ZZ describing the open 
excision of a specific gastrointestinal body part in MS-DRGs 987, 988, 
and 989 generally have a longer length of stay and higher average costs 
when compared to all the cases in their assigned MS-DRG. The subset of 
cases reporting 0DB90ZZ, 0DBA0ZZ, and 0DBB0ZZ and the subset of cases 
in MS-DRGs 981, 982 and 983 reporting 0DB80ZZ are more closely aligned 
in terms of the lengths of stay and average costs. Our clinical 
advisors believe that, given the similarity in resource use required 
for procedures describing an open excision of a gastrointestinal body 
part in terms of the use of an operating room, anesthesia and skills 
required, for clinical coherence and consistency in assignment with 
ICD-10-PCS code 0DB80ZZ, it would be appropriate to also designate ICD-
10-PCS codes 0DB90ZZ, 0DBA0ZZ, and 0DBB0ZZ as extensive O.R. 
procedures.
    Therefore, we are proposing to change the designation of ICD-10-PCS 
codes 0DB90ZZ, 0DBA0ZZ and 0DBB0ZZ from non-extensive O.R. procedures 
to extensive O.R. procedures for FY 2021. Under this proposal, cases 
reporting procedure codes 0DB90ZZ, 0DBA0ZZ and 0DBB0ZZ, which are 
unrelated to the MDC to which the case would otherwise be assigned 
based on the principal diagnosis, will group to MS-DRGs 981, 982 and 
983.
11. Operating Room (O.R.) and Non-O.R. Issues
a. Background
    Under the IPPS MS-DRGs (and former CMS MS-DRGs), we have a list of 
procedure codes that are considered operating room (O.R.) procedures. 
Historically, we developed this list using physician panels that 
classified each procedure code based on the procedure and its effect on 
consumption

[[Page 32543]]

of hospital resources. For example, generally the presence of a 
surgical procedure which required the use of the operating room would 
be expected to have a significant effect on the type of hospital 
resources (for example, operating room, recovery room, and anesthesia) 
used by a patient, and therefore, these patients were considered 
surgical. Because the claims data generally available do not precisely 
indicate whether a patient was taken to the operating room, surgical 
patients were identified based on the procedures that were performed. 
Generally, if the procedure was not expected to require the use of the 
operating room, the patient would be considered medical (non-O.R.).
    Currently, each ICD-10-PCS procedure code has designations that 
determine whether and in what way the presence of that procedure on a 
claim impacts the MS-DRG assignment. First, each ICD-10-PCS procedure 
code is either designated as an O.R. procedure for purposes of MS-DRG 
assignment (``O.R. procedures'') or is not designated as an O.R. 
procedure for purposes of MS-DRG assignment (``non-O.R. procedures''). 
Second, for each procedure that is designated as an O.R. procedure, 
that O.R. procedure is further classified as either extensive or non-
extensive. Third, for each procedure that is designated as a non-O.R. 
procedure, that non-O.R. procedure is further classified as either 
affecting the MS-DRG assignment or not affecting the MS-DRG assignment. 
We refer to these designations that do affect MS-DRG assignment as 
``non-O.R. affecting the MS-DRG.'' For new procedure codes that have 
been finalized through the ICD-10 Coordination and Maintenance 
Committee meeting process and are proposed to be classified as O.R. 
procedures or non-O.R. procedures affecting the MS-DRG, our clinical 
advisors recommend the MS-DRG assignment which is then made available 
in association with the proposed rule (Table 6B.--New Procedure Codes) 
and subject to public comment. These proposed assignments are generally 
based on the assignment of predecessor codes or the assignment of 
similar codes. For example, 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 proposed to be newly designated as O.R. procedures. As 
discussed in section II.D.13 of the preamble of this proposed rule, we 
are making Table 6B.--New Procedure Codes--FY 2021 available on the CMS 
website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html. We also refer readers to the ICD-
10 MS-DRG Version 37 Definitions Manual at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software.html for detailed information regarding 
the designation of procedures as O.R. or non-O.R. (affecting the MS-
DRG) in Appendix E--Operating Room Procedures and Procedure Code/MS-DRG 
Index.
    In the FY 2020 IPPS/LTCH PPS proposed rule, we stated that, given 
the long period of time that has elapsed since the original O.R. 
(extensive and non-extensive) and non-O.R. designations were 
established, the incremental changes that have occurred to these O.R. 
and non-O.R. procedure code lists, and changes in the way inpatient 
care is delivered, we plan to conduct a comprehensive, systematic 
review of the ICD-10-PCS procedure codes. This will be a multi-year 
project during which we will also review the process for determining 
when a procedure is considered an operating room procedure. For 
example, we may restructure the current O.R. and non-O.R. designations 
for procedures by leveraging the detail that is now available in the 
ICD-10 claims data. We refer readers to the discussion regarding the 
designation of procedure codes in the FY 2018 IPPS/LTCH PPS final rule 
(82 FR 38066) where we stated that the determination of when a 
procedure code should be designated as an O.R. procedure has become a 
much more complex task. This is, in part, due to the number of various 
approaches available in the ICD-10-PCS classification, as well as 
changes in medical practice. While we have typically evaluated 
procedures on the basis of whether or not they would be performed in an 
operating room, we believe that there may be other factors to consider 
with regard to resource utilization, particularly with the 
implementation of ICD-10. Therefore, we are again soliciting feedback 
on what factors or criteria to consider in determining whether a 
procedure is designated as an O.R. procedure in the ICD-10-PCS 
classification system for future consideration. Commenters should 
submit their recommendations to the following email address: 
[email protected] by October 20, 2020.
    We discussed in the FY 2020 IPPS/LTCH PPS proposed rule that as a 
result of this planned review and potential restructuring, procedures 
that are currently designated as O.R. procedures may no longer warrant 
that designation, and conversely, procedures that are currently 
designated as non-O.R. procedures may warrant an O.R. type of 
designation. We intend to consider the resources used and how a 
procedure should affect the MS-DRG assignment. We may also consider the 
effect of specific surgical approaches to evaluate whether to subdivide 
specific MS-DRGs based on a specific surgical approach. We plan to 
utilize our available MedPAR claims data as a basis for this review and 
the input of our clinical advisors. As part of this comprehensive 
review of the procedure codes, we also intend to evaluate the MS-DRG 
assignment of the procedures and the current surgical hierarchy because 
both of these factor into the process of refining the ICD-10 MS-DRGs to 
better recognize complexity of service and resource utilization.
    We will provide more detail on this analysis and the methodology 
for conducting this review in future rulemaking. As we noted in the FY 
2020 IPPS/LTCH PPS rulemaking, as we continue to develop our process 
and methodology, as previously noted, we are soliciting recommendations 
on other factors to consider in our refinement efforts to recognize and 
differentiate consumption of resources for the ICD-10 MS-DRGs.
    In this proposed rule, we are addressing requests that we received 
regarding changing the designation of specific ICD-10-PCS procedure 
codes from non-O.R. to O.R. procedures, or changing the designation 
from O.R. procedure to non-O.R. procedure. In this section of the rule 
we discuss the process that was utilized for evaluating the requests 
that were received for FY 2021 consideration. For each procedure, our 
clinical advisors considered--
     Whether the procedure would typically require the 
resources of an operating room;
     Whether it is an extensive or a nonextensive procedure; 
and
     To which MS-DRGs the procedure should be assigned.
    We note that many MS-DRGs require the presence of any O.R. 
procedure. As a result, cases with a principal diagnosis associated 
with a particular MS-DRG would, by default, be grouped to that MS-DRG. 
Therefore, we do not list these MS-DRGs in our discussion in this 
section of this rule. Instead, we only discuss MS-DRGs that require 
explicitly adding the relevant procedure codes to the GROUPER logic in 
order for those procedure codes to affect the MS-DRG assignment as 
intended. In cases where

[[Page 32544]]

we are proposing to change the designation of procedure codes from non-
O.R. procedures to O.R. procedures, we also are proposing one or more 
MS-DRGs with which these procedures are clinically aligned and to which 
the procedure code would be assigned.
    In addition, cases that contain O.R. procedures will map to MS-DRG 
981, 982, or 983 (Extensive O.R. Procedure Unrelated to Principal 
Diagnosis with MCC, with CC, and without CC/MCC, respectively) or MS-
DRG 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 this section of this rule.
    For procedures that would not typically require the resources of an 
operating room, our clinical advisors determined if the procedure 
should affect the MS-DRG assignment.
    We received several requests to change the designation of specific 
ICD-10-PCS procedure codes from non-O.R. procedures to O.R. procedures, 
or to change the designation from O.R. procedures to non-O.R. 
procedures. In this section of this rule, we detail and respond to some 
of those requests. With regard to the remaining requests, our clinical 
advisors believe it is appropriate to consider these requests as part 
of our comprehensive review of the procedure codes as previously 
discussed.
b. O.R. Procedures to Non-O.R. Procedures
(1) Endoscopic Revision of Feeding Devices
    One requestor identified three ICD-10-PCS procedure codes that 
describe endoscopic revision of feeding devices, shown in the following 
table.
[GRAPHIC] [TIFF OMITTED] TP29MY20.089

    In the ICD-10 MS-DRG Version 37 Definitions Manual, these three 
ICD-10-PCS procedure codes are currently recognized as O.R. procedures 
for purposes of MS-DRG assignment. The requestor noted that these 
procedures would not require the resources of an operating room and 
that they consume resources comparable to related ICD-10-PCS procedure 
codes describing the endoscopic insertion of feeding tubes that 
currently are designated as Non-O.R. procedures.
    We agree with the requestors that these procedures do not typically 
require the resources of an operating room, and are not surgical in 
nature. Therefore, we are proposing to remove 0DW08UZ, 0DW68UZ, 0DWD8UZ 
from the FY 2021 ICD-10 MS-DRGs Version 38 Definitions Manual in 
Appendix E--Operating Room Procedures and Procedure Code/MS-DRG Index 
as O.R. procedures. Under this proposal, these procedures would no 
longer impact MS-DRG assignment.
c. Non-O.R. Procedures to O.R. Procedures
(1) Percutaneous/Endoscopic Biopsy of Mediastinum
    One requestor identified ICD-10-PCS procedure code 0WBC4ZX 
(Excision of mediastinum, percutaneous endoscopic approach, diagnostic) 
that describes a percutaneous endoscopic biopsy of the mediastinum that 
the requestor stated is performed in the operating room under general 
anesthesia, requires an incision through the chest wall, insertion of a 
mediastinoscope in the space between the lungs and involves removal of 
a tissue sample. The requestor recommended that all procedures 
performed within the mediastinum by an open or percutaneous endoscopic 
approach, regardless of whether it is a diagnostic or therapeutic 
procedure, should be designated as O.R. procedures because the 
procedures require great skill and pose risks to patients due to the 
structures contained within the mediastinum. The requestor noted that 
the mediastinum contains loose connective tissue, the heart and great 
vessels, esophagus, trachea, nerves, and lymph nodes. The requestor 
further noted that redesignating these procedures from non-O.R. to O.R. 
would provide compensation for operating room resources and general 
anesthesia.
    We note that under the ICD-10-PCS procedure classification, biopsy 
procedures are identified by the 7th digit qualifier value 
``diagnostic'' in the code description. In response to the requestor's 
suggestion that all procedures performed within the mediastinum by an 
open or percutaneous endoscopic approach, regardless of whether it is a 
diagnostic or therapeutic procedure should be designated as an O.R. 
procedure, we examined the following procedure codes:

[[Page 32545]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.090

    In the ICD-10 MS-DRGs Definitions Manual Version 37, procedure 
codes 0WBC0ZX, 0WBC0ZZ, 0WBC3ZZ, and 0WBC4ZZ are currently designated 
as O.R. procedures, however, procedure codes 0WBC3ZX and 0WBC4ZX are 
not recognized as O.R. procedures for purposes of MS-DRG assignment. We 
agree with the requestor that procedure code 0WBC4ZX would typically 
require the resources of an operating room. Our clinical advisors also 
agree that procedure code 0WBC3ZX would typically require the resources 
of an operating room. Therefore, we are proposing to add these 2 
procedure codes to the FY 2021 ICD-10 MS-DRGs Version 38 Definitions 
Manual in Appendix E--Operating Room Procedures and Procedure Code/MS-
DRG Index as O.R. procedures, assigned to MS-DRGs 166, 167, and 168 
(Other Respiratory System O.R. Procedures with MCC, with CC, and 
without CC/MCC, respectively) in MDC 04 (Diseases and Disorders of the 
Respiratory System); MS-DRGs 628, 629, and 630 (Other Endocrine, 
Nutritional and Metabolic O.R. Procedures with MCC, with CC, and 
without CC/MCC, respectively) in MDC 10 (Endocrine, Nutritional and 
Metabolic Diseases and Disorders); MS-DRGs 820, 821, and 822 (Lymphoma 
and Leukemia with Major O.R. Procedure with MCC, with CC, and without 
CC/MCC, respectively) and 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 
(Myeloproliferative Diseases and Disorders, Poorly Differentiated 
Neoplasms); and to MS-DRGs 987, 988, and 989 (Non-Extensive O.R. 
Procedure Unrelated to Principal Diagnosis with MCC, with CC and 
without MCC/CC, respectively).
    As previously noted, procedure codes 0WBC0ZX, 0WBC0ZZ, 0WBC3ZZ, and 
0WBC4ZZ are currently designated as O.R. procedures. As displayed in 
the FY 2020 ICD-10 MS-DRGs Version 37 Definitions Manual in Appendix 
E--Operating Room Procedures and Procedure Code/MS-DRG Index, these 
procedure codes are assigned to several MS-DRGs across many MDCs. 
During our process of reviewing potential MDC and MS-DRG assignments 
for procedure codes 0WBC3ZX and 0WBC4ZX, our clinical advisors 
recommended that we reassign procedure codes 0WBC0ZZ, 0WBC3ZZ, and 
0WBC4ZZ from their current MS-DRG assignments in MDC 04 (Diseases and 
Disorders of the Respiratory System). Procedure codes 0WBC0ZZ, 0WBC3ZZ, 
and 0WBC4ZZ are currently assigned to MS-DRGs 163, 164, and 165 (Major 
Chest Procedures with MCC, with CC, and without CC/MCC, respectively) 
and procedure code 0WBC0ZX is assigned to MS-DRGs 166, 167, and 168 
(Other Respiratory System O.R. Procedures with MCC, with CC, and 
without CC/MCC, respectively). According to our clinical advisors, 
procedure codes 0WBC0ZZ, 0WBC3ZZ, and 0WBC4ZZ would be more 
appropriately and clinically aligned with the same MS-DRG assignment as 
procedure code 0WBC0ZX, which is also consistent with the assignment 
for other procedures performed on the mediastinum. Therefore, we are 
proposing to reassign procedure codes 0WBC0ZZ, 0WBC3ZZ, and 0WBC4ZZ to 
MS-DRGs 166, 167, and 168 (Other Respiratory System O.R. Procedures 
with MCC, with CC, and without CC/MCC, respectively).
(2) Percutaneous Endoscopic Chemical Pleurodesis
    One requestor identified ICD-10-PCS procedure code 3E0L4GC 
(Introduction of other therapeutic substance into pleural cavity, 
percutaneous endoscopic approach) that the requestor stated is 
currently not recognized as an O.R. procedure for purposes of MS-DRG 
assignment. The requestor noted that talc pleurodesis via video-
assisted thoracoscopic surgery (VATS), involves placing a thoracoscope 
through the chest wall for visualization, then placing a port and 
injecting talc, doxycycline, or other chemical into the pleural cavity 
under general anesthesia and should therefore be recognized as an O.R. 
procedure for purposes of MS-DRG assignment.
    We agree with the requestor that ICD-10-PCS procedure code 3E0L4GC 
typically requires the resources of an operating room. We also note 
that the AHA published Coding Clinic advice in 2015 that instructed to 
code both ICD-10-PCS procedure codes 0BJQ4ZZ (Inspection of pleura, 
percutaneous endoscopic approach) and 3E0L3GC (Introduction of other 
therapeutic substance into pleural cavity, percutaneous approach) for 
thoracoscopic chemical pleurodesis. In the publication, code 0BJQ4ZZ, 
recognized as an O.R. procedure for purposes of MS-DRG assignment, was 
instructed to be reported for the video-assisted thoracoscopic portion 
of the procedure since the endoscopic component of the procedure could 
not be captured by the approach values available at the time. In FY 
2018, the approach value ``4'' Percutaneous Endoscopic was added to the 
root operation Introduction table 3E0, to capture percutaneous 
endoscopic administration of a therapeutic substance, meaning that code 
0BJQ4ZZ was no longer needed along with code 3E0L3GC to report 
thoracoscopic chemical pleurodesis. Only code 3E0L4GC is needed to 
report all components of the procedure. Designating code 3E0L4GC as an 
O.R. procedure for purposes of MS-DRG assignment classifies the 
procedure as intended when two codes were needed to fully code the 
procedure. Therefore, we are proposing to add procedure code 3E0L4GC to 
the FY 2021 ICD-10 MS-DRG Version 38 Definitions Manual in Appendix E--
Operating Room Procedures and Procedure Code/MS-DRG Index as an O.R. 
procedure assigned to MS-DRGs 166, 167, and 168 (Other Respiratory 
System O.R. procedures with MCC, CC, without CC/MCC, respectively) in 
MDC 04 (Diseases and Disorders of the Respiratory System); and MS-DRG 
264 (Other Circulatory System O.R. Procedures) in MDC 05 (Diseases and 
Disorders of the Circulatory System).

[[Page 32546]]

(3) Percutaneous Endoscopic Excision of Stomach
    One requestor identified ICD-10-PCS procedure code 0DB64ZZ 
(Excision of stomach, percutaneous endoscopic approach) that the 
requestor stated is currently not recognized as an O.R. procedure for 
purposes of MS-DRG assignment. The requestor noted that percutaneous 
endoscopic excisions of gastric lesions and percutaneous endoscopic 
partial gastrectomies are performed in the operating room under general 
anesthesia, use comparable resources, and are designated as O.R. 
procedures. Therefore, the requestor stated that this procedure should 
also be recognized as O.R. procedure for purposes of MS-DRG assignment.
    We agree with the requestor that ICD-10-PCS procedure code 0DB64ZZ 
typically requires the resources of an operating room. During our 
review, we also noted that ICD-10-PCS code 0DB64ZX (Excision of 
stomach, percutaneous endoscopic approach, diagnostic) was not 
currently recognized as an O.R. procedure. We are proposing to add 
these codes to the FY 2021 ICD-10 MS-DRG Version 38 Definitions Manual 
in Appendix E--Operating Room Procedures and Procedure Code/MS-DRG 
Index as an O.R. procedure assigned to MS-DRGs 326, 327, and 328 
(Stomach, Esophageal and Duodenal Procedures with MCC, with CC, and 
without CC/MCC, respectively) in MDC 06 (Diseases and Disorders of the 
Digestive System); MS-DRGs 619, 620, and 621 (Procedures for Obesity 
with MCC, with CC, and without CC/MCC, respectively) in MDC 10 
(Endocrine, Nutritional and Metabolic Diseases and Disorders); and MS-
DRGs 820, 821, and 822 (Lymphoma and Leukemia with Major Procedure with 
MCC, with CC, and without CC/MCC, respectively), MS-DRGs 826, 827, and 
828 (Myeloproliferative Disorders or Poorly Differentiated Neoplasms 
with Major Procedure with MCC, with CC, and without CC/MCC, 
respectively), and MS-DRGs 829 and 830 (Myeloproliferative Disorders or 
Poorly Differentiated Neoplasms with Other Procedure with CC/MCC and 
without CC/MCC, respectively) in MDC 17 (Myeloproliferative Diseases 
and Disorders, Poorly Differentiated Neoplasms).
    During our review, we also noted that ICD-10-PCS procedure code 
0DB64Z3 (Excision of stomach, percutaneous endoscopic approach, 
vertical (sleeve)), which is clinically similar to ICD-10-PCS codes 
0DB64ZZ and 0DB64ZX, is designated as an O.R. procedure assigned to the 
same MS-DRGs as we are proposing for ICD-10-PCS codes 0DB64ZZ and 
0DB64ZX, as well as to MS-DRG 264 (Other Circulatory System O.R. 
Procedures) in MDC 05 (Diseases and Disorders of the Circulatory 
System); 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). Our clinical advisors believe that 
principal diagnoses in MDCs 05 and 21 are typically not indications for 
procedures describing percutaneous endoscopic excision of stomach and 
that ICD-10-PCS procedure code 0DB64Z3 should be assigned to the same 
MS-DRGs as ICD-10-PCS codes 0DB64ZZ and 0DB64ZX. We examined claims 
data from the September 2019 update of the FY 2019 MedPAR file to 
determine if there were any cases that reported 0DB64Z3 and were 
assigned to MDC 05, MDC 21, or MDC 24. The following table shows our 
findings:
[GRAPHIC] [TIFF OMITTED] TP29MY20.091

    We found zero cases in MS-DRGs 957, 958, and 959 reporting 0DB64Z3 
and a principal diagnosis in MDC 24 (Multiple Significant Trauma). Our 
analysis demonstrates that diagnoses assigned to MDC 05, MDC 21, and 
MDC 24 are not typically corrected surgically by percutaneous 
endoscopic vertical (sleeve) gastrectomy given the small number of 
cases reporting this procedure in these MDCs. Our clinical advisors 
believe procedure codes describing the percutaneous endoscopic excision 
of stomach should have the same MDC assignments in the ICD-10 MS-DRGs 
Version 38 for coherence. Therefore, we are proposing to remove the 
assignments of code 0DB64Z3 from MS-DRG 264 (Other Circulatory System 
O.R. Procedures) in MDC 05 (Diseases and Disorders of the Circulatory 
System); 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).
    Lastly, while we were reviewing this request, we noted 
inconsistencies in how procedures involving the excision of stomach are 
designated. Excision of stomach codes differ by approach and qualifier. 
ICD-10-PCS procedure codes describing excision of stomach with similar 
approaches have been assigned

[[Page 32547]]

different attributes in terms of designation as an O.R. or Non-O.R. 
procedure. We identified the following five related codes:
[GRAPHIC] [TIFF OMITTED] TP29MY20.092

    In the ICD-10 MS-DRGs Version 37, these ICD-10-PCS codes are 
currently recognized as O.R. procedures for purposes of MS-DRG 
assignment, while similar excision of stomach procedure codes with the 
same approach but different qualifiers are recognized as Non-O.R. 
procedures. Our clinical advisors indicated that these procedures are 
not surgical in nature and do not require an incision. Therefore, we 
are proposing to remove ICD-10-PCS procedure codes 0DB63Z3, 0DB63ZZ, 
0DB67Z3, 0DB67ZZ, and 0DB68Z3 from the FY 2021 ICD-10 MS-DRG Version 38 
Definitions Manual in Appendix E--Operating Room Procedures and 
Procedure Code/MS-DRG Index as O.R. procedures. Under this proposal, 
these procedures would no longer impact MS-DRG assignment.
(4) Percutaneous Endoscopic Drainage
    One requestor identified six ICD-10-PCS procedure codes that 
describe procedures involving laparoscopic drainage of peritoneum, 
peritoneal cavity, and gallbladder that the requestor stated are 
currently not recognized as O.R. procedures for purposes of MS-DRG 
assignment. The six procedure codes are listed in the following table:
[GRAPHIC] [TIFF OMITTED] TP29MY20.093

    The requestor stated these procedures would commonly be performed 
under general anesthesia and require the resources of an operating 
room. The requestor also noted that similar procedures such as 
percutaneous endoscopic inspection of gallbladder, percutaneous 
endoscopic excision of peritoneum and percutaneous endoscopic 
extirpation of matter from peritoneal cavity are currently classified 
as O.R. procedures in Version 37 of the ICD-10 MS-DRGs and that the six 
listed procedure codes should be designated as O.R. procedures due to 
comparable costs and resource use.
    We agree with the requestor that the six ICD-10-PCS procedure codes 
listed in the table typically require the resources of an operating 
room. Therefore, to the FY 2021 ICD-10 MS-DRG Version 38 Definitions 
Manual in Appendix E--Operating Room Procedures and Procedure Code/MS-
DRG Index, we are proposing to add codes 0D9W4ZZ and 0D9W40Z as O.R. 
procedures assigned to MS-DRGs 356, 357, and 358 (Other Digestive 
System O.R. Procedures, with MCC, with CC, and without CC/MCC, 
respectively) in MDC 06 (Diseases and Disorders of the Digestive 
System); and 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). We are also 
proposing to add codes 0W9G4ZZ and 0W9G40Z as O.R. procedures assigned 
to MS-DRGs 356, 357, and 358 (Other Digestive System O.R. Procedures 
with MCC, with CC, and without CC/MCC, respectively) in MDC 06 
(Diseases and Disorders of the Digestive System); MS-DRGs 420, 421, and 
422 (Hepatobiliary Diagnostic Procedures, with MCC, with CC, and 
without CC/MCC, respectively) in MDC 07 (Diseases and Disorders of the 
Hepatobiliary System and Pancreas); MS-DRGs 673, 674, and 675 (Other 
Kidney and Urinary Tract Procedures, with MCC, with CC, and without CC/
MCC, respectively) in MDC 11 (Diseases and Disorders of the Kidney and 
Urinary Tract); MS-DRGs 749 and 750 (Other Female Reproductive System 
Procedures with and without CC/MCC, respectively) in MDC 13 (Diseases 
and Disorders of the Female Reproductive System); MS-DRGs 802, 803, and 
804 (Other O.R. Procedures of the Blood and Blood Forming Organs, with 
MCC, with CC, and without CC/MCC, respectively) in MDC 16 (Diseases and 
Disorders of Blood, Blood Forming Organs, Immunologic Disorders); MS-
DRGs 820, 821, and 822 (Lymphoma and Leukemia with Major Procedure with 
MCC, with CC, and without CC/MCC, respectively) and MS-DRGs 826, 827, 
and 828 (Myeloproliferative Disorders or Poorly Differentiated 
Neoplasms with Major Procedure with MCC, with CC, and without CC/MCC, 
respectively) in MDC 17 (Myeloproliferative Diseases and Disorders, 
Poorly Differentiated Neoplasms); and 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

[[Page 32548]]

Effects of Drugs). Lastly, we are proposing to add codes 0F944ZZ and 
0F9440Z as O.R. procedures assigned to MS-DRGs 408, 409, and 410 
(Biliary Tract Procedures Except Only Cholecystectomy with or without 
C.D.E., with MCC, with CC, and without CC/MCC, respectively) in MDC 07 
(Diseases and Disorders of the Hepatobiliary System and Pancreas).
    We identified related ICD-10-PCS procedure code 0F944ZX (Drainage 
of gallbladder, percutaneous endoscopic approach, diagnostic) that is 
also currently not recognized as an O.R. procedure for purposes of MS-
DRG assignment. Our clinical advisors believe that similar to the six 
procedure codes submitted by the requester, this procedure typically 
requires the resources of an operating room and should have the same 
attributes in Version 38 for coherence. Therefore, we are proposing to 
add code 0F944ZX as an O.R. procedure assigned to MS-DRGs 420, 421 and 
422 (Hepatobiliary Diagnostic Procedures, with MCC, with CC, and 
without CC/MCC, respectively) in MDC 07 (Diseases and Disorders of the 
Hepatobiliary System and Pancreas) to the FY 2021 ICD-10 MS-DRG Version 
38 Definitions Manual in Appendix E--Operating Room Procedures and 
Procedure Code/MS-DRG Index.
    During our review, we also identified the related ICD-10-PCS 
procedure codes 0F940ZZ (Drainage of gallbladder, open approach), 
0F940ZX (Drainage of gallbladder, open approach, diagnostic) and 
0F9400Z (Drainage of gallbladder with drainage device, open approach). 
Our analysis found that the ICD-10-PCS codes describing drainage of 
gallbladder have dissimilar MDC assignments. Procedure codes 0F940ZZ 
and 0F940ZX are currently assigned to MS-DRGs 356, 357, and 358 (Other 
Digestive System O.R. Procedures, with MCC, with CC, and without CC/
MCC, respectively) in MDC 06 (Diseases and Disorders of the Digestive 
System) and MS-DRGs 408, 409, and 410 (Biliary Tract Procedures Except 
Only Cholecystectomy with or without C.D.E. with MCC, with CC, and 
without CC/MCC, respectively) in MDC 07 (Diseases and Disorders of the 
Hepatobiliary System and Pancreas). However, ICD-10-PCS procedure code 
0F9400Z is currently assigned to MS-DRGs 408, 409, and 410 (Biliary 
Tract Procedures Except Only Cholecystectomy with or without C.D.E. 
with MCC, with CC, and without CC/MCC, respectively) in MDC 07 
(Diseases and Disorders of the Hepatobiliary System and Pancreas) 
alone. Our clinical advisors believe that principal diagnoses in MDC 06 
are typically not indications for procedures describing the drainage of 
gallbladder. We examined claims data from the September 2019 update of 
the FY 2019 MedPAR file to determine if there were any cases that 
reported procedure codes 0F940ZZ or 0F940ZX and were assigned to MDC 
06. We found zero cases in MS-DRGs 356, 357, and 358 reporting code 
0F944ZZ or 0F940ZX and a principal diagnosis in MDC 06 (Diseases and 
Disorders of the Digestive System), demonstrating that diagnoses in MDC 
06 are not typically corrected surgically by drainage of the 
gallbladder. Our clinical advisors believe procedure codes describing 
the drainage of gallbladder should have the same MDC assignments in 
Version 38 for coherence. Therefore, we are proposing to remove 
procedure codes 0F940ZZ and 0F940ZX from MS-DRGs 356, 357, and 358 in 
MDC 06 (Diseases and Disorders of the Digestive System).
    Our further analysis of this request identified the nine ICD-10-PCS 
codes in the following table describing drainage of the peritoneum, 
peritoneal cavity, or gallbladder:
[GRAPHIC] [TIFF OMITTED] TP29MY20.094

    We note that these procedures are currently classified as extensive 
O.R. procedures. Our clinical advisors have noted that treatment 
practices have shifted since the initial O.R procedure designations. 
Our clinical advisors believe that, given the similarity in factors 
such as complexity, resource utilization, and requirement for 
anesthesia administration between procedures describing the drainage of 
the peritoneum, peritoneal cavity, and gallbladder, it would be more 
appropriate to designate these nine ICD-10-PCS codes as non-extensive 
O.R. procedures. Therefore, we are also proposing to change the 
designation of ICD-10-PCS codes 0D9W00Z, 0D9W0ZX, 0D9W0ZZ, 0D9W4ZX, 
0W9G00Z, 0W9G0ZZ, 0F9400Z, 0F940ZZ, and 0F940ZX from extensive O.R. 
procedures to non-extensive O.R. procedures for FY 2021.
(5) Control of Bleeding
    One requestor identified ICD-10-PCS procedure code 0W3G0ZZ (Control 
bleeding in peritoneal cavity, open approach) that describes a 
procedure in which the bleeding source within the peritoneal cavity is 
controlled by cautery, clips, and/or suture through an open abdominal 
incision with direct visualization of the surgical site, that the 
requestor stated requires the resources of an operating room and 
general anesthesia but is currently not recognized as an O.R. procedure 
for purposes of MS-DRG assignment. The requestor also noted that ICD-
10-PCS procedure codes 0W3F0ZZ (Control bleeding in abdominal wall, 
open approach), 0W3H0ZZ (Control bleeding in retroperitoneum, open 
approach), and 0W3J0ZZ (Control bleeding in pelvic cavity, open 
approach) describe procedures to control bleeding in

[[Page 32549]]

various anatomic sites and are currently classified as O.R. procedures.
    We agree with the requestor that it would be clinically appropriate 
to redesignate procedure code 0W3G0ZZ as an O.R. procedure consistent 
with procedure codes 0W3F0ZZ, 0W3H0ZZ and 0W3J0ZZ, that also describe 
procedures performed to control bleeding and are designated as O.R. 
procedures. Therefore, we are proposing to add procedure code 0W3G0ZZ 
to the FY 2021 ICD-10 MS-DRG Version 38 Definitions Manual in Appendix 
E--Operating Room Procedures and Procedure Code/MS-DRG Index as an O.R. 
procedure assigned to MS-DRG 264 (Other Circulatory O.R. Procedures) in 
MDC 05 (Diseases and Disorders of the Circulatory System); MS-DRGs 356, 
357, and 358 (Other Digestive System O.R. Procedures with MCC, with CC, 
and without CC/MCC, respectively) in MDC 06 (Diseases and Disorders of 
the Digestive System); MS-DRGs 423, 424, and 425 (Other Hepatobiliary 
or Pancreas O.R. Procedures with MCC, with CC, and without CC/MCC, 
respectively) in MDC 07 (Diseases and Disorders of the Hepatobiliary 
System and Pancreas); MS-DRGs 673, 674, and 675 (Other Kidney and 
Urinary Tract Procedures with MCC, with CC, and without CC/MCC, 
respectively) in MDC 11 (Diseases and Disorders of the Kidney and 
Urinary Tract); MS-DRGs 820, 821, and 822 (Lymphoma and Leukemia with 
Major O.R. Procedure with MCC, with CC, and without CC/MCC, 
respectively), 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), and MS-DRGs 829 and 830 
(Myeloproliferative Disorders or Poorly Differentiated Neoplasms with 
Other Procedure with and without CC/MCC, respectively) in MDC 17 
(Myeloproliferative Diseases and Disorders, Poorly Differentiated 
Neoplasms); MS-DRGs 907, 908, and 909 (Other O.R. Procedures for 
Injuries with and without CC/MCC, respectively) in MDC 21 ((Injuries, 
Poisonings and Toxic Effects of Drugs); 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) and to MS-DRGs 981, 982 and 983 (Extensive O.R. Procedure 
Unrelated to Principal Diagnosis with MCC, with CC, and without CC/MCC, 
respectively).
(6) Inspection of Penis
    One requestor stated that ICD-10-PCS procedure code 0VJS0ZZ 
(Inspection of penis, open approach) is currently not recognized as an 
O.R. procedure for purposes of MS-DRG assignment. The requestor noted 
that there are circumstances that warrant inpatient admission for open 
exploration of the penis, such as to rule out penile fracture and 
extravasation due to trauma. The requestor stated their belief that 
because this procedure involves an open incision for exploration of 
penile structures and utilizes general anesthesia in the operating 
room, it would be appropriately classified as an O.R. procedure. We 
agree with the requestor that ICD-10-PCS code 0VJS0ZZ typically 
requires the resources of an operating room. Therefore, we are 
proposing to add ICD-10-PCS procedure code 0VJS0ZZ to the FY 2021 ICD-
10 MS-DRG Version 38 Definitions Manual in Appendix E--Operating Room 
procedures and procedure code/MS-DRG Index as an O.R. procedure 
assigned to MS-DRGs 709 (Penis Procedures with CC/MCC) and 710 (Penis 
Procedures without CC/MCC) in MDC 12 (Diseases and Disorders of the 
Male Reproductive System).
12. Proposed Changes to the MS-DRG Diagnosis Codes for FY 2021
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. 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 a 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 the 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.
    We noted in the FY 2020 IPPS/LTCH PPS proposed rule (84 FR 19235) 
that with the transition to ICD-10-CM and the significant changes that 
have occurred to diagnosis codes since the FY 2008 review, we believed 
it was necessary to conduct a comprehensive analysis once again. Based 
on this analysis, we proposed changes to the severity level 
designations for 1,492 ICD-10-CM diagnosis codes and invited public 
comments on those proposals. As summarized in the FY 2020 IPPS/LTCH PPS 
final rule, many commenters expressed concern with the proposed 
severity level designation changes overall and recommended that CMS 
conduct further analysis prior to finalizing any proposals. After 
careful consideration of the public comments we received, as discussed 
further in the FY 2020 final rule, we generally did not finalize our 
proposed changes to the severity designations for the ICD-10-CM 
diagnosis codes, other than the changes to the severity level 
designations for the diagnosis codes in category Z16--(Resistance to 
antimicrobial drugs) from a non-CC to a CC. We stated that postponing 
adoption of the proposed comprehensive changes in the severity level 
designations would allow further opportunity to provide additional 
background to the public on the methodology utilized and clinical 
rationale applied across diagnostic categories to assist the public in 
its review. We refer readers to the FY 2020 IPPS/LTCH PPS final rule 
(84 FR 42150 through 42152) for a complete discussion of our response 
to public comments regarding the proposed severity level designation 
changes for FY 2020.

[[Page 32550]]

c. Guiding Principles for Making Changes to Severity Levels
    To provide the public with more information on the CC/MCC 
comprehensive analysis discussed in the FY 2020 IPPS/LTCH PPS proposed 
and final rules, CMS hosted a listening session on October 8, 2019. The 
listening session included a review of the methodology to measure the 
impact on resource use. It also provided an opportunity for CMS to 
receive public input on this analysis and to address any questions in 
order to assist the public in formulating written comments on the 
current severity level designations for consideration in the FY 2021 
rulemaking. We refer readers to https://www.cms.gov/Outreach-and-Education/Outreach/OpenDoorForums/PodcastAndTranscripts.html for the 
transcript and audio file of the listening session. We also refer 
readers to https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software.html for 
the supplementary file containing the data describing the impact on 
resource use of specific ICD-10-CM diagnosis codes when reported as a 
secondary diagnosis that was made available for the listening session.
    Following the listening session, we further considered the public 
comments received and reconvened an internal workgroup comprised of 
clinicians, consultants, coding specialists and other policy analysts 
to identify guiding principles to apply in evaluating whether changes 
to the severity level designations of diagnoses are needed and to 
ensure the severity designations proposed appropriately reflect 
resource use based on review of the claims data, as well as 
consideration of relevant clinical factors (for example, the clinical 
nature of each of the secondary diagnoses and the severity level of 
clinically similar diagnoses) and improve the overall accuracy of the 
IPPS payments. Our goal was to develop a set of guiding principles 
that, when applied, could assist in determining whether the presence of 
the specified secondary diagnosis would lead to increased hospital 
resource use in most instances. The workgroup identified the following 
nine guiding principles as meaningful indicators of expected resource 
use by a secondary diagnosis:
     Represents end of life/near death or has reached an 
advanced stage associated with systemic physiologic decompensation and 
debility.
     Denotes organ system instability or failure.
     Involves a chronic illness with susceptibility to 
exacerbations or abrupt decline.
     Serves as a marker for advanced disease states across 
multiple different comorbid conditions.
     Reflects systemic impact.
     Post-operative condition/complication impacting recovery.
     Typically requires higher level of care (that is, 
intensive monitoring, greater number of caregivers, additional testing, 
intensive care unit care, extended length of stay).
     Impedes patient cooperation and/or management of care.
     Recent (last 10 years) change in best practice, or in 
practice guidelines and review of the extent to which these changes 
have led to concomitant changes in expected resource use.
    Using a combination of mathematical analysis of claims data as 
discussed in the FY 2020 IPPS/LTCH PPS proposed rule (84 FR 19235) and 
the application of these guiding principles, we plan to continue a 
comprehensive CC/MCC analysis and present the findings and proposals in 
future rulemaking. We are inviting public comments regarding these 
guiding principles, as well as other possible ways we can incorporate 
meaningful indicators of clinical severity. When providing additional 
feedback or comments, we encourage the public to provide a detailed 
explanation of how applying a suggested concept or principle would 
ensure that the severity designation appropriately reflects resource 
use for any diagnosis code.
d. Proposed Additions and Deletions to the Diagnosis Code Severity 
Levels for FY 2021
    The following tables identify the proposed additions and deletions 
to the diagnosis code MCC severity levels list and the proposed 
additions and deletions to the diagnosis code CC severity levels list 
for FY 2021 and are available via the internet on the CMS website at: 
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html.
    Table 6I.1--Proposed Additions to the MCC List--FY 2021;
    Table 6I.2-- Proposed Deletions to the MCC List--FY 2021;
    Table 6J.1-- Proposed Additions to the CC List--FY 2021; and
    Table 6J.2-- Proposed Deletions to the CC List--FY 2021.
e. Proposed CC Exclusions List for FY 2021
    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 37 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/MS-DRG-Classifications-and-Software.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. For all 
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

[[Page 32551]]

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 patients discharged alive; 
otherwise, they are assigned as a non-CC.
    We received a request to consider removing diagnosis codes 
describing any type of stroke that is designated as a MCC in the code 
range I60.00 through I63.9 from the CC Exclusion list when a principal 
diagnosis of diabetes in the code range E08.00 through E13 is reported. 
According to the requestor, acute strokes and chronic diabetes are two 
distinct conditions, therefore a stroke that occurs during an admission 
for an underlying diabetic condition should not be excluded from acting 
as a MCC. The requestor provided an example of a patient with type 2 
diabetes who was admitted for treatment of infected foot ulcers and 
then experienced a stroke prior to discharge, resulting in assignment 
to MS-DRG 639 (Diabetes without CC/MCC). The requestor asserted the 
more appropriate assignment is MS-DRG 637 (Diabetes with MCC), which 
they stated more appropriately reflects severity of illness and 
resources involved in the treatment of an acute stroke. In another 
example provided by the requestor, a patient with type 2 diabetes and 
osteomyelitis underwent a left below the knee amputation and 
experienced a stroke before discharge, resulting in assignment to MS-
DRG 617 (Amputation of Lower Limb for Endocrine, Nutritional, and 
Metabolic Diseases with CC). The requestor asserted the more 
appropriate assignment is MS-DRG 616 (Amputation of Lower Limb for 
Endocrine, Nutritional, and Metabolic Diseases with MCC), which they 
stated more appropriately reflects severity of illness and resources 
involved in the treatment an acute stroke.
    Our clinical advisors agree that acute strokes and chronic diabetes 
are two distinct conditions and a case reporting a secondary diagnosis 
of a stroke in the code range I60.00 through I63.9 should not be 
excluded from acting as a MCC when reported with a principal diagnosis 
of diabetes in the code range E08.00 through E13.9.
    We analyzed claims data from the September 2019 update of the FY 
2019 MedPAR file for cases reporting a principal diagnosis of diabetes 
in the code range E08.00 through E13.9 with a secondary diagnosis of a 
stroke in the code range I60.00 through I63.9. We refer the reader to 
table 6P.3a for a detailed list of the diagnosis codes describing 
diabetes that were analyzed and table 6P.3b for a detailed list of the 
diagnosis codes describing a stroke that were analyzed and that are 
also designated as a MCC in this code range. We found a total of 1,109 
cases across 40 MS-DRGs with an average length of stay of 10.1 days and 
average costs of $24,672 reporting a principal diagnosis of diabetes 
with a secondary diagnosis of a stroke that was excluded from acting as 
a MCC. Of those 1,109 cases, we identified 161 cases that would result 
in assignment to the higher severity level ``with MCC'' MS-DRG if the 
diagnosis of stroke was no longer excluded from acting as a MCC. The 
remaining 948 cases would maintain their existing MS-DRG assignment 
since they were either already grouped to the highest MCC severity 
level based on another diagnosis code that is designated as a MCC or 
they were assigned to one of the Pre-MDC MS-DRGs. We refer the reader 
to table 6P.4a for the detailed analysis.
    Based on the advice of our clinical advisors, for FY 2021, we are 
proposing to remove the diagnosis codes describing stroke in the code 
range I60.00 through I63.9 that are designated as a MCC from the list 
of CC Exclusions when reported with a principal diagnosis of diabetes 
in the code range E08.00 through E13.9 from the ICD-10 MS-DRGs Version 
38 CC Exclusion List as reflected in Table 6H.1.--Proposed Secondary 
Diagnosis Order Deletions to the CC Exclusions List--FY 2021 and Table 
6H.2.--Proposed Principal Diagnosis Order Deletions to the CC 
Exclusions List--FY 2021.
    We are proposing additional changes to the ICD-10 MS-DRGs Version 
38 CC Exclusion List based on the diagnosis and procedure code updates 
as discussed in section II.D.13. of this FY 2021 IPPS/LTCH PPS proposed 
rule. Therefore, we have developed Table 6G.1.--Proposed Secondary 
Diagnosis Order Additions to the CC Exclusions List--FY 2021; Table 
6G.2.--Proposed Principal Diagnosis Order Additions to the CC 
Exclusions List--FY 2021; Table 6H.1.--Proposed Secondary Diagnosis 
Order Deletions to the CC Exclusions List--FY 2021; and Table 6H.2.--
Proposed Principal Diagnosis Order Deletions to the CC Exclusions 
List--FY 2021. For Table 6G.1, each secondary diagnosis code proposed 
for addition to the CC Exclusion List is shown with an asterisk and the 
principal diagnoses proposed to exclude the secondary diagnosis code 
are provided in the indented column immediately following it. For Table 
6G.2, each of the principal diagnosis codes for which there is a CC 
exclusion is shown with an asterisk and the conditions proposed for 
addition to the CC Exclusion List that will not count as a CC are 
provided in an indented column immediately following the affected 
principal diagnosis. For Table 6H.1, each secondary diagnosis code 
proposed for deletion from the CC Exclusion List is shown with an 
asterisk followed by the principal diagnosis codes that currently 
exclude it. For Table 6H.2, each of the principal diagnosis codes is 
shown with an asterisk and the proposed deletions to the CC Exclusions 
List are provided in an indented column immediately following the 
affected principal diagnosis. Tables 6G.1., 6G.2., 6H.1., and 6H.2. 
associated with this proposed rule are available via the internet on 
the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html.
13. Proposed Changes to the ICD-10-CM and ICD-10-PCS Coding Systems
    To identify new, revised and deleted diagnosis and procedure codes, 
for FY 2021, we have developed Table 6A.--New Diagnosis Codes, Table 
6B.--New Procedure Codes, Table 6C.--Invalid Diagnosis Codes, and Table 
6E.--Revised Diagnosis Code Titles for this proposed rule.
    These tables are not published in the Addendum to this proposed 
rule, but are available via the internet on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html as described in section VI. of the 
Addendum to this proposed rule. As discussed in section II.D.16. of the 
preamble of this proposed rule, the code titles are adopted as part of 
the ICD-10 (previously ICD-9-CM) Coordination and Maintenance Committee 
meeting process. Therefore, although we publish the code titles in the 
IPPS proposed and final rules, they are not subject to comment in the 
proposed or final rules.
    We are proposing the MDC and MS-DRG assignments for the new 
diagnosis codes and procedure codes as set forth in Table 6A.--New 
Diagnosis Codes and Table 6B.--New Procedure Codes. In addition, the 
proposed severity level designations for the new diagnosis codes are 
set forth in Table 6A. and the proposed O.R. status for the new 
procedure codes are set forth in Table 6B.
    We are making available on the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html 
the following tables associated with this proposed rule:
     Table 6A.--New Diagnosis Codes-FY 2021;

[[Page 32552]]

     Table 6B.--New Procedure Codes-FY 2021;
     Table 6C.--Invalid Diagnosis Codes-FY 2021;
     Table 6E.--Revised Diagnosis Code Titles-FY 2021;
     Table 6G.1.--Proposed Secondary Diagnosis Order Additions 
to the CC Exclusions List-FY 2021;
     Table 6G.2.-- Proposed Principal Diagnosis Order Additions 
to the CC Exclusions List-FY 2021;
     Table 6H.1.-- Proposed Secondary Diagnosis Order Deletions 
to the CC Exclusions List-FY 2021;
     Table 6H.2.-- Proposed Principal Diagnosis Order Deletions 
to the CC Exclusions List--FY 2021;
     Table 6I.1.-- Proposed Additions to the MCC List-FY 2021;
     Table 6I.2.- Proposed Deletions to the MCC List-FY 2021;
     Table 6J.1.-- Proposed Additions to the CC List-FY 2021; 
and
     Table 6J.2.-- Proposed Deletions to the CC List -FY 2021.
14. Proposed Changes to the Medicare Code Editor (MCE)
    The Medicare Code Editor (MCE) is a software program that detects 
and reports errors in the coding of Medicare claims data. Patient 
diagnoses, procedure(s), and demographic information are entered into 
the Medicare claims processing systems and are subjected to a series of 
automated screens. The MCE screens are designed to identify cases that 
require further review before classification into an MS-DRG.
    As discussed in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42156), 
we made available the FY 2020 ICD-10 MCE Version 37 manual file. The 
manual contains the definitions of the Medicare code edits, including a 
description of each coding edit with the corresponding diagnosis and 
procedure code edit lists. The link to this MCE manual file, along with 
the link to the mainframe and computer software for the MCE Version 37 
(and ICD-10 MS-DRGs) are posted on the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software.
    For this FY 2021 IPPS/LTCH PPS proposed rule, we address the MCE 
requests we received by the November 1, 2019 deadline. We also discuss 
the proposals we are making based on our internal review and analysis.
a. Age Conflict Edit
    In the MCE, the Age conflict edit exists to detect inconsistencies 
between a patient's age and any diagnosis on the patient's record; for 
example, a 5-year-old patient with benign prostatic hypertrophy or a 
78-year-old patient coded with a delivery. In these cases, the 
diagnosis is clinically and virtually impossible for a patient of the 
stated age. Therefore, either the diagnosis or the age is presumed to 
be incorrect. Currently, in the MCE, the following four age diagnosis 
categories appear under the Age conflict edit and are listed in the 
manual and written in the software program:
     Perinatal/Newborn--Age 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 9-64 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) Maternity Diagnoses
    Under the ICD-10 MCE, the Maternity diagnoses category for the Age 
conflict edit considers the age range of 9 to 64 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.D.13. of the preamble of this proposed 
rule, Table 6A.--New Diagnosis Codes, lists the diagnosis codes that 
have been approved to date which will be effective with discharges on 
and after October 1, 2020. We are proposing to add the following new 
ICD-10-CM diagnosis codes listed in this section of this rule to the 
Maternity diagnoses category code list under the Age conflict edit.
[GRAPHIC] [TIFF OMITTED] TP29MY20.095

    In addition, as discussed in section II.D.13. of the preamble of 
this proposed rule, Table 6C.--Invalid Diagnosis Codes, lists the 
diagnosis codes that are no longer effective October 1, 2020. Included 
in this table is ICD-10-CM diagnosis code O99.89 (Other specified 
diseases and conditions complicating pregnancy, childbirth and the 
puerperium) which is currently listed on the Maternity diagnoses 
category code list under the Age Conflict edit. We are proposing to 
remove this code from the Maternity diagnoses category code list.
(2) Adult Diagnoses
    Under the ICD-10 MCE, the Adult diagnoses category for the Age 
conflict edit considers the age range of 15 to 124 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.D.13. of the preamble of this proposed 
rule, Table 6A.--New Diagnosis Codes, lists the diagnosis codes that 
have been approved to date which will be effective with discharges on 
and after October 1, 2020. We are proposing to add the following new 
ICD-10-CM diagnosis codes to the Adult diagnoses category code list 
under the Age conflict edit.

[[Page 32553]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.096

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
    As discussed in section II.D.13. of the preamble of this proposed 
rule, Table 6A.--New Diagnosis Codes, lists the new diagnosis codes 
that have been approved to date which will be effective with discharges 
on and after October 1, 2020. We are proposing to add the following new 
ICD-10-CM diagnosis codes listed in this section of this rule to the 
edit code list for the Diagnoses for Females Only edit.
[GRAPHIC] [TIFF OMITTED] TP29MY20.097

    In addition, as discussed in section II.D.13. of the preamble of 
this proposed rule, Table 6C.--Invalid Diagnosis Codes, lists the 
diagnosis codes that are no longer effective October 1, 2020. Included 
in this table are ICD-10-CM diagnosis code O99.89 (Other specified 
diseases and conditions complicating pregnancy, childbirth and the 
puerperium) and ICD-10-CM diagnosis code Q51.20 (Other doubling of 
uterus, unspecified) which are currently listed on the Diagnoses for 
Females Only edit code list. We are proposing to delete these codes 
from the Diagnoses for Females Only edit code list.
(2) Procedures for Females Only Edit
    As discussed in section II.D.13. of the preamble of this proposed 
rule, Table 6B.--New Procedure Codes, lists the new procedure codes 
that have been approved to date which will be effective with discharges 
on and after October 1, 2020. We are proposing to add the following new 
ICD-10-PCS procedure codes listed in this section of this rule to the 
edit code list for the Procedures for Females Only edit.
[GRAPHIC] [TIFF OMITTED] TP29MY20.098

(3) Procedures for Males Only
    As discussed in section II.D.13. of the preamble of this proposed 
rule, Table 6B.--New Procedure Codes, lists the new procedure codes 
that have been approved to date which will be effective with discharges 
on and after October 1, 2020. We are proposing to add the following new 
ICD-10-PCS procedure

[[Page 32554]]

codes listed in this section of this rule to the edit code list for the 
Procedures for Males Only edit.
[GRAPHIC] [TIFF OMITTED] TP29MY20.099

c. Manifestation Code as Principal Diagnosis Edit
    In the ICD-10-CM classification system, manifestation codes 
describe the manifestation of an underlying disease, not the disease 
itself, and therefore should not be used as a principal diagnosis.
    As discussed in section II.D.13. of the preamble of this proposed 
rule, Table 6A--New Diagnosis Codes, lists the new diagnosis codes that 
have been approved to date which will be effective with discharges on 
and after October 1, 2020. We are proposing to add the following new 
ICD-10-CM diagnosis codes listed in this section of this rule to the 
edit code list for the Manifestation Codes Not Allowed as Principal 
Diagnosis edit code list because these codes are describing the 
manifestation of an underlying disease and not the disease itself.
[GRAPHIC] [TIFF OMITTED] TP29MY20.100

    In addition, as discussed in section II.D.13. of the preamble of 
this proposed rule, Table 6C.--Invalid Diagnosis Codes, lists the 
diagnosis codes that are no longer effective October 1, 2020. Included 
in this table is ICD-10-CM diagnosis code J84.17 (Other interstitial 
pulmonary diseases with fibrosis in diseases classified elsewhere) 
which is currently listed on the Manifestation Codes Not Allowed as 
Principal Diagnosis edit code list. We are proposing to delete this 
code from the Manifestation Codes Not Allowed as Principal Diagnosis 
edit code list.
d. Unacceptable Principal Diagnosis Edit
    In the MCE, there are select codes that describe a circumstance 
which influences an individual's health status but does not actually 
describe a current illness or injury. There also are codes that are not 
specific manifestations but may be due to an underlying cause. These 
codes are considered unacceptable as a principal diagnosis. In limited 
situations, there are a few codes on the MCE Unacceptable Principal 
Diagnosis edit code list that are considered ``acceptable'' when a 
specified secondary diagnosis is also coded and reported on the claim.
    As discussed in Section II.D.13. of the preamble of this proposed 
rule, Table 6A.--New Diagnosis Codes, lists the new diagnosis codes 
that have been approved to date which will be effective with discharges 
on and after October 1, 2020. We are proposing to add the following new 
ICD-10-CM diagnosis codes listed in this section of this rule to the 
Unacceptable Principal Diagnosis edit code list.

[[Page 32555]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.101

    In addition, as discussed in section II.D.13. of the preamble of 
this proposed rule, Table 6C.--Invalid Diagnosis Codes, lists the 
diagnosis codes that are no longer effective October 1, 2020. Included 
in this table are the following ICD-10-CM diagnosis codes that are 
currently listed on the Unacceptable Principal Diagnosis edit code 
list. We are proposing to delete these codes from the Unacceptable 
Principal Diagnosis edit code list.
[GRAPHIC] [TIFF OMITTED] TP29MY20.102

e. 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. Subsequently, in the FY 2019 IPPS/LTCH PPS proposed rule (83 
FR 20235) we stated that we engaged a contractor to assist in the 
review of the limited coverage and non-covered procedure edits in the 
MCE that may also be present in other claims processing

[[Page 32556]]

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 is 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. The contractor is continuing to conduct this review.
    We have also noted that the purpose of the MCE is to ensure that 
errors and inconsistencies in the coded data are recognized during 
Medicare claims processing. As we indicated in the FY 2019 IPPS/LTCH 
PPS final rule (83 FR 41228), 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 have discussed in prior rulemaking, 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 October 20, 2020.
15. Proposed Changes to Surgical Hierarchies
    Some inpatient stays entail multiple surgical procedures, each one 
of which, occurring by itself, could result in assignment of the case 
to a different MS-DRG within the MDC to which the principal diagnosis 
is assigned. Therefore, it is necessary to have a decision rule within 
the GROUPER by which these cases are assigned to a single MS-DRG. The 
surgical hierarchy, an ordering of surgical classes from most resource-
intensive to least resource-intensive, performs that function. 
Application of this hierarchy ensures that cases involving multiple 
surgical procedures are assigned to the MS-DRG associated with the most 
resource-intensive surgical class.
    A surgical class can be composed of one or more MS-DRGs. For 
example, in MDC 11, the surgical class ``kidney transplant'' consists 
of a single MS-DRG (MS-DRG 652) and the class ``major bladder 
procedures'' consists of three MS-DRGs (MS-DRGs 653, 654, and 655). 
Consequently, in many cases, the surgical hierarchy has an impact on 
more than one MS-DRG. The methodology for determining the most 
resource-intensive surgical class involves weighting the average 
resources for each MS-DRG by frequency to determine the weighted 
average resources for each surgical class. For example, assume surgical 
class A includes MS-DRGs 001 and 002 and surgical class B includes MS-
DRGs 003, 004, and 005. Assume also that the average costs of MS-DRG 
001 are higher than that of MS-DRG 003, but the average costs of MS-
DRGs 004 and 005 are higher than the average costs of MS-DRG 002. To 
determine whether surgical class A should be higher or lower than 
surgical class B in the surgical hierarchy, we would weigh the average 
costs of each MS-DRG in the class by frequency (that is, by the number 
of cases in the MS-DRG) to determine average resource consumption for 
the surgical class. The surgical classes would then be ordered from the 
class with the highest average resource utilization to that with the 
lowest, with the exception of ``other O.R. procedures'' as discussed in 
this proposed rule.
    This methodology may occasionally result in assignment of a case 
involving multiple procedures to the lower-weighted MS-DRG (in the 
highest, most resource-intensive surgical class) of the available 
alternatives. However, given that the logic underlying the surgical 
hierarchy provides that the GROUPER search for the procedure in the 
most resource-intensive surgical class, in cases involving multiple 
procedures, this result is sometimes unavoidable.
    We note that, notwithstanding the foregoing discussion, there are a 
few instances when a surgical class with a lower average cost is 
ordered above a surgical class with a higher average cost. For example, 
the ``other O.R. procedures'' surgical class is uniformly ordered last 
in the surgical hierarchy of each MDC in which it occurs, regardless of 
the fact that the average costs for the MS-DRG or MS-DRGs in that 
surgical class may be higher than those for other surgical classes in 
the MDC. The ``other O.R. procedures'' class is a group of procedures 
that are only infrequently related to the diagnoses in the MDC, but are 
still occasionally performed on patients with cases assigned to the MDC 
with these diagnoses. Therefore, assignment to these surgical classes 
should only occur if no other surgical class more closely related to 
the diagnoses in the MDC is appropriate.
    A second example occurs when the difference between the average 
costs for two surgical classes is very small. We have found that small 
differences generally do not warrant reordering of the hierarchy 
because, as a result of reassigning cases on the basis of the hierarchy 
change, the average costs are likely to shift such that the higher-
ordered surgical class has lower average costs than the class ordered 
below it.
    Based on the changes that we are proposing to make in this FY 2021 
IPPS/LTCH PPS proposed rule, as discussed in section II.D.2.b. of the 
preamble of this proposed rule, we are proposing to revise the surgical 
hierarchy for the Pre-MDC MS-DRGs as follows: In the Pre-MDC MS-DRGs we 
are proposing to sequence proposed new Pre-MDC MS-DRG 018 (Chimeric 
Antigen Receptor (CAR) T-cell Immunotherapy) above Pre-MDC MS-DRGs 001 
and 002 (Heart Transplant or Implant of Heart Assist System with and 
without MCC, respectively). We also note that, as discussed in section 
II.D.2.b. of the preamble of this proposed rule, we are proposing to 
revise the title for Pre-MDC MS-DRG 016 to ``Autologous Bone Marrow 
Transplant with CC/MCC''. In addition, based on the changes that we are 
proposing to make as discussed in section II.D.8.a. of the preamble of 
this proposed rule, we are also proposing to sequence proposed new Pre-
MDC MS-DRG 019 (Simultaneous Pancreas/Kidney Transplant with 
Hemodialysis) above Pre-MDC MS-DRG 008 (Simultaneous Pancreas/Kidney 
Transplant) and below Pre-MDC MS-DRG 007 (Lung Transplant).
    As discussed in section II.D.4. of the preamble of this proposed 
rule, we are proposing to delete MS-DRGs 129 and 130 (Major Head and 
Neck Procedures with CC/MCC or Major Device and without CC/MCC, 
respectively), MS-DRGs 131 and 132 (Cranial and Facial Procedures with 
CC/MCC and without CC/MCC, respectively), and MS-DRGs 133 and 134 
(Other Ear, Nose, Mouth and Throat O.R. Procedures with CC/MC and 
without CC/MCC, respectively). Based on the changes we are proposing to 
make for those MS-DRGs in MDC 03, we are proposing to revise the 
surgical hierarchy for MDC 03 (Diseases and Disorders of the Ear, Nose, 
Mouth and Throat) as follows: In MDC 03, we are proposing to sequence 
proposed new MS-DRGs 140, 141, and 142 (Major Head and Neck Procedures 
with MCC, with CC, and without CC/MCC, respectively) above proposed new 
MS-DRGs 143, 144, and 145 (Other Ear,

[[Page 32557]]

Nose, Mouth and Throat O.R. Procedures with MCC, with CC, and without 
CC/MCC, respectively). We are also proposing to sequence proposed new 
MS-DRGs 143, 144, and 145 above MS-DRGs 135 and 136 (Sinus and Mastoid 
Procedures with CC/MCC and without CC/MCC, respectively). We also note 
that, based on the changes that we are proposing to make, as discussed 
in section II.D.7b of the preamble of this proposed rule, we are 
proposing to revise the surgical hierarchy for MDC 08 (Diseases and 
Disorders of the Musculoskeletal System and Connective Tissue) as 
follows: In MDC 08, we are proposing to sequence proposed new MS-DRGs 
521 and 522 (Hip Replacement with Principal Diagnosis of Hip Fracture 
with and without MCC, respectively) above MS-DRGs 469 (Major Hip and 
Knee Joint Replacement or Reattachment of Lower Extremity with MCC or 
Total Ankle Replacement) and 470 (Major Hip and Knee Joint Replacement 
or Reattachment of Lower Extremity without MCC). We further note that, 
based on the changes we are proposing to make, as discussed in section 
II.D. 8 of the preamble of this proposed rule, we are proposing to 
revise the surgical hierarchy for MDC 11 (Diseases and Disorders of the 
Kidney and Urinary Tract) as follows: In MDC 11, we are proposing to 
sequence proposed new MS-DRGs 650 and 651 (Kidney Transplant with 
Hemodialysis with and without MCC, respectively) above MS-DRG 652 
(Kidney Transplant).
    Our proposal for Appendix D MS-DRG Surgical Hierarchy by MDC and 
MS-DRG of the ICD-10 MS-DRG Definitions Manual Version 38 is 
illustrated in the following tables.
[GRAPHIC] [TIFF OMITTED] TP29MY20.104

[GRAPHIC] [TIFF OMITTED] TP29MY20.105

[GRAPHIC] [TIFF OMITTED] TP29MY20.106

[GRAPHIC] [TIFF OMITTED] TP29MY20.107


[[Page 32558]]


16. Maintenance of 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 Centers for Disease Control and Prevention's (CDC) 
National Center for Health Statistics (NCHS) 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 2021 at a public meeting held on September 10-11, 
2019, and finalized the coding changes after consideration of comments 
received at the meetings and in writing by November 8, 2019.
    The Committee held its 2020 meeting on March 17-18, 2020. The 
deadline for submitting comments on these code proposals was April 17, 
2020. It was announced at this meeting that any new diagnosis and 
procedure codes for which there was consensus of public support and for 
which complete tabular and indexing changes would be made by June 2020 
would be included in the October 1, 2020 update to the ICD-10-CM 
diagnosis and ICD-10-PCS procedure code sets. As discussed in earlier 
sections of the preamble of this proposed rule, there are new, revised, 
and deleted ICD-10-CM diagnosis codes and ICD-10-PCS procedure codes 
that are captured in Table 6A.--New Diagnosis Codes, Table 6B.--New 
Procedure Codes, Table 6C.--Invalid Diagnosis Codes, and Table 6E.--
Revised Diagnosis Code Titles for this proposed rule, which are 
available via the internet on the CMS website at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html. 
The code titles are adopted as part of the ICD-10 (previously ICD-9-CM) 
Coordination and Maintenance Committee process. Therefore, although we 
make the code titles available for the IPPS proposed rule, they are not 
subject to comment in the proposed rule. Because of the length of these 
tables, they are 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 the diagnosis and 
procedure codes at the Committee's September 10-11, 2019 meeting and a 
recording of the virtual meeting held on March 17-18, 2020 can be 
obtained from the CMS website at: https://www.cms.gov/Medicare/Coding/ICD10/C-and-M-Meeting-Materials. The materials for the discussions 
relating to diagnosis codes at the September 10-11, 2019 meeting and 
March 17-18, 2020 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 or participating in a Committee meeting, and 
timeline requirements and meeting dates.
    We encourage commenters to address suggestions on coding issues 
involving diagnosis codes via 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) of Public Law 108-173 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

[[Page 32559]]

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 3 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. 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 requestor at the Committee's public meeting. The request 
must identify the reason why a new code is needed in April for purposes 
of the new technology process. The participants at the meeting and 
those reviewing the Committee meeting materials and live webcast 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 submitted for an expedited April 1, 
2020 implementation of a new code at the September 10-11, 2019 
Committee meeting. However, as announced by the CDC on December 9, 
2019, a new ICD-10 emergency code was established by the World Health 
Organization (WHO) in response to recent occurrences of vaping related 
disorders. Consistent with this update, the CDC/NCHS implemented a new 
ICD-10-CM diagnosis code, U07.0 (Vaping-related disorder) for U.S. 
reporting of vaping-related disorders effective April 1, 2020. In 
addition, as announced by the CDC, a new emergency code was established 
by the WHO on January 31, 2020, in response to the 2019 Novel 
Coronavirus (2019-nCoV) disease outbreak that was declared a public 
health emergency of international concern. Consistent with this update, 
the CDC/NCHS implemented a new ICD-10-CM diagnosis code, U07.1 (COVID-
19) for U.S. reporting of the 2019 Novel Coronavirus disease effective 
April 1, 2020. We refer the reader to the CDC web page at https://www.cdc.gov/nchs/icd/icd10cm.htm for additional details regarding the 
implementation of these new diagnosis codes.
    We have provided the MS-DRG assignments for these codes effective 
with discharges on and after April 1, 2020, consistent with our 
established process for assigning new diagnosis codes. Specifically, we 
review the predecessor diagnosis code and MS-DRG assignment most 
closely associated with the new diagnosis code, and consider other 
factors that may be relevant to the MS-DRG assignment, including the 
severity of illness, treatment difficulty, and the resources utilized 
for the specific condition/diagnosis. We note that this process does 
not automatically result in the new diagnosis code being assigned to 
the same MS-DRG as the predecessor code. Effective with discharges on 
and after April 1, 2020, diagnosis code U07.0 is assigned to MDC 04 
(Diseases and Disorders of the Respiratory System) in MS-DRGs 205 and 
206 (Other Respiratory System Diagnoses with and without MCC, 
respectively), consistent with the assignment of the predecessor 
diagnosis code. Effective with discharges on and after April 1, 2020, 
diagnosis code U07.1 is assigned to MDC 04 in MS-DRGs 177, 178 and 179 
(Respiratory Infections and Inflammations with MCC, with CC, and 
without CC/MCC, respectively), MDC 15 (Newborns and Other Neonates with 
Conditions Originating in Perinatal Period) in MS-DRG 791 (Prematurity 
with Major Problems) and MS-DRG 793 (Full Term Neonate with Major 
Problems), and MDC 25 (Human Immunodeficiency Virus Infections) in MS-
DRGs 974, 975, and 976 (HIV with Major Related Condition with MCC, with 
CC, and without CC/MCC, respectively).
    These assignments for diagnosis codes U07.0 and U07.1 are reflected 
in Table 6A--New Diagnosis Codes (which is available via the internet 
on the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS. As with the other new diagnosis 
codes and MS-DRG assignments included in Table 6A of this proposed 
rule, we are soliciting public comments on the most appropriate MDC, 
MS-DRG, and severity level assignments for these codes for FY 2021, as 
well as any other options for the GROUPER logic. We also note that 
Change Request (CR) 11623, Transmittal 4499, titled ``Update to the 
International Classification of Diseases, Tenth Revision, Clinical 
Modification (ICD-10-CM) for Vaping Related Disorder'', was issued on 
January 24, 2020 (available via the internet on the CMS website at: 
https://www.cms.gov/files/document/r4499cp.pdf) regarding the release 
of an updated version of the ICD-10 MS-DRG Grouper and Medicare Code 
Editor (MCE) software, Version 37.1, to be effective with discharges on 
or after April 1, 2020 reflecting new diagnosis code U07.0. The updated 
software, along with the updated ICD-10 MS-DRG V37.1 Definitions Manual 
and the Definitions of Medicare Code Edits V37.1 manual was made 
available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPSMS-DRG-Classifications-and-Software. In 
response to the implementation of diagnosis code U07.1 (COVID-19), we 
subsequently released a new updated version of the ICD-10 MS-DRG 
Grouper and Medicare Code Editor (MCE) software, Version 37.1 R1, 
effective with discharges on or after April 1, 2020 reflecting this new 
code, which replaced the ICD-10 MS-DRG Grouper and Medicare Code Editor 
(MCE) software, Version 37.1. The updated software, along with the 
updated ICD-10 MS-DRG V37.1 R1 Definitions Manual and the Definitions 
of Medicare Code Edits V37.1 R1 manual are available at https://
www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/

[[Page 32560]]

AcuteInpatientPPS/MS-DRG-Classifications-and-Software.
    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 diagnosis and ICD-10-PCS procedure 
codes is provided to the AHA for publication in the Coding Clinic for 
ICD-10. AHA also distributes coding update information to publishers 
and software vendors.
    The following chart shows the number of ICD-10-CM and ICD-10-PCS 
codes and code changes since FY 2016 when ICD-10 was implemented.
[GRAPHIC] [TIFF OMITTED] TP29MY20.108

    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.
17. Replaced Devices Offered Without Cost or With a Credit
a. Background
    In the FY 2008 IPPS final rule with comment period (72 FR 47246 
through 47251), we discussed the topic of Medicare payment for devices 
that are replaced without cost or where credit for a replaced device is 
furnished to the hospital. We implemented a policy to reduce a 
hospital's IPPS payment for certain MS-DRGs where the implantation of a 
device that subsequently failed or was recalled determined the base MS-
DRG assignment. At that time, we specified that we will reduce a 
hospital's IPPS payment for those MS-DRGs where the hospital received a 
credit for a replaced device equal to 50 percent or more of the cost of 
the device.
    In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51556 through 
51557), we clarified this policy to state that the policy applies if 
the hospital received a credit equal to 50 percent or more of the cost 
of the replacement device and issued instructions to hospitals 
accordingly.
b. Proposed Changes for FY 2021
    As discussed in section II.D.4. of the preamble of this proposed 
rule, for FY 2021, under MDC 03, we are proposing to delete MS-DRGs 129 
and 130 and to

[[Page 32561]]

add new MS-DRGs 140, 141, and 142 (Major Head and Neck Procedures with 
MCC, with CC, and without CC/MCC, respectively). A subset of the 
procedures currently assigned to MS-DRGs 129 and 130 are being proposed 
for assignment to proposed new MS-DRGs 140, 141, and 142.
    Additionally, as discussed in section II.D.7.b. of the preamble of 
this proposed rule, for FY 2021, under MDC 08, we are proposing to 
create new MS-DRGs 551 and 552 (Hip Replacement with Principal 
Diagnosis of Hip Fracture with and without MCC, respectively). A subset 
of the procedures currently assigned to MS-DRGs 469 through 470 are 
being proposed for assignment to proposed new MS-DRGs 551 and 552.
    As stated in the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24409), 
we generally map new MS-DRGs onto the list when they are formed from 
procedures previously assigned to MS-DRGs that are already on the list. 
Currently, MS-DRGs 129, 130, 469 and 470 are on the list of MS-DRGs 
subject to the policy for payment under the IPPS for replaced devices 
offered without cost or with a credit. Therefore, if the applicable 
proposed MS-DRG changes are finalized, we also would add proposed new 
MS-DRGs 140, 141, 142, 551 and 552 to the list of MS-DRGs subject to 
the policy for payment under the IPPS for replaced devices offered 
without cost or with a credit and make conforming changes as reflected 
in the table. We are also proposing to continue to include the existing 
MS-DRGs currently subject to the policy as also displayed in the table.
BILLING CODE 4120-01-P

[[Page 32562]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.110


[[Page 32563]]


[GRAPHIC] [TIFF OMITTED] TP29MY20.111

BILLING CODE 4120-01-C
    The final list of MS-DRGs subject to the IPPS policy for replaced 
devices offered without cost or with a credit will be included in the 
FY2021 IPPS/LTCH

[[Page 32564]]

PPS final rule and also will be issued to providers in the form of a 
Change Request (CR).

E. Recalibration of the FY 2021 MS-DRG Relative Weights

    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.
1. Data Sources for Developing the Relative Weights
    Consistent with our established policy, in developing the MS-DRG 
relative weights for FY 2021, we are proposing to use two data sources: 
claims data and cost report data. The claims data source is the MedPAR 
file, which includes fully coded diagnostic and procedure data for all 
Medicare inpatient hospital bills. The FY 2019 MedPAR data used in this 
proposed rule include discharges occurring on October 1, 2018, through 
September 30, 2019, based on bills received by CMS through December 31, 
2019, 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 2019 MedPAR file used in calculating the proposed 
relative weights includes data for approximately 9,184,114 Medicare 
discharges from IPPS providers. Discharges for Medicare beneficiaries 
enrolled in a Medicare Advantage managed care plan are excluded from 
this analysis. These discharges are excluded when the MedPAR ``GHO 
Paid'' indicator field on the claim record is equal to ``1'' or when 
the MedPAR DRG payment field, which represents the total payment for 
the claim, is equal to the MedPAR ``Indirect Medical Education (IME)'' 
payment field, indicating that the claim was an ``IME only'' claim 
submitted by a teaching hospital on behalf of a beneficiary enrolled in 
a Medicare Advantage managed care plan. In addition, the December 31, 
2019 update of the FY 2019 MedPAR file complies with version 5010 of 
the X12 HIPAA Transaction and Code Set Standards, and includes a 
variable called ``claim type.'' Claim type ``60'' indicates that the 
claim was an inpatient claim paid as fee-for-service. Claim types 
``61,'' ``62,'' ``63,'' and ``64'' relate to encounter claims, Medicare 
Advantage IME claims, and HMO no-pay claims. Therefore, the calculation 
of the proposed relative weights for FY 2021 also excludes claims with 
claim type values not equal to ``60.'' The data exclude CAHs, including 
hospitals that subsequently became CAHs after the period from which the 
data were taken. We note that the proposed FY 2021 relative weights are 
based on the ICD-10-CM diagnosis codes and ICD-10-PCS procedure codes 
from the FY 2019 MedPAR claims data, grouped through the ICD-10 version 
of the proposed FY 2021 GROUPER (Version 38).
    The second data source used in the cost-based relative weighting 
methodology is the Medicare cost report data files from the HCRIS. 
Normally, we use the HCRIS dataset that is 3 years prior to the IPPS 
fiscal year. Specifically, we used cost report data from the December 
31, 2019 update of the FY 2018 HCRIS for calculating the proposed FY 
2021 cost-based relative weights. Consistent with our historical 
practice, for this FY 2021 proposed rule, we are providing the version 
of the HCRIS from which we calculated these proposed 19 CCRs on the CMS 
website at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html. Click on the link on the left 
side of the screen titled ``FY 2021 IPPS Proposed Rule Home Page'' or 
``Acute Inpatient Files for Download.''
2. Methodology for Calculation of the Relative Weights
a. General
    We calculated the proposed FY 2021 relative weights based on 19 
CCRs, as we did for FY 2020. The methodology we are proposing to use to 
calculate the FY 2021 MS-DRG cost-based relative weights based on 
claims data in the FY 2019 MedPAR file and data from the FY 2018 
Medicare cost reports is as follows:
     To the extent possible, all the claims were regrouped 
using the proposed FY 2021 MS-DRG classifications discussed in sections 
II.B. and II.F. of the preamble of this proposed rule.
     The transplant cases that were used to establish the 
proposed relative weights for heart and heart-lung, liver and/or 
intestinal, and lung transplants (MS-DRGs 001, 002, 005, 006, and 007, 
respectively) were limited to those Medicare-approved transplant 
centers that have cases in the FY 2019 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 92.8 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

[[Page 32565]]

condition was present at the time of inpatient admission) in the POA 
field.
    Under current payment policy, the presence of specific HAC codes, 
as indicated by the POA field values, can generate a lower payment for 
the claim. Specifically, if the particular condition is present on 
admission (that is, a ``Y'' indicator is associated with the diagnosis 
on the claim), it is not a HAC, and the hospital is paid for the higher 
severity (and, therefore, the higher weighted MS-DRG). If the 
particular condition is not present on admission (that is, an ``N'' 
indicator is associated with the diagnosis on the claim) and there are 
no other complicating conditions, the DRG GROUPER assigns the claim to 
a lower severity (and, therefore, the lower weighted MS-DRG) as a 
penalty for allowing a Medicare inpatient to contract a HAC. While the 
POA reporting meets policy goals of encouraging quality care and 
generates program savings, it presents an issue for the relative 
weight-setting process. Because cases identified as HACs are likely to 
be more complex than similar cases that are not identified as HACs, the 
charges associated with HAC cases are likely to be higher as well. 
Therefore, if the higher charges of these HAC claims are grouped into 
lower severity MS-DRGs prior to the relative weight-setting process, 
the relative weights of these particular MS-DRGs would become 
artificially inflated, potentially skewing the relative weights. In 
addition, we want to protect the integrity of the budget neutrality 
process by ensuring that, in estimating payments, no increase to the 
standardized amount occurs as a result of lower overall payments in a 
previous year that stem from using weights and case-mix that are based 
on lower severity MS-DRG assignments. If this would occur, the 
anticipated cost savings from the HAC policy would be lost.
    To avoid these problems, we reset the POA indicator field to ``Y'' 
only for relative weight-setting purposes for all claims that otherwise 
have an ``N'' or a ``U'' in the POA field. This resetting ``forced'' 
the more costly HAC claims into the higher severity MS-DRGs as 
appropriate, and the relative weights calculated for each MS-DRG more 
closely reflect the true costs of those cases.
    In addition, in the FY 2013 IPPS/LTCH PPS final rule, for FY 2013 
and subsequent fiscal years, we finalized a policy to treat hospitals 
that participate in the Bundled Payments for Care Improvement (BPCI) 
initiative the same as prior fiscal years for the IPPS payment modeling 
and ratesetting process without regard to hospitals' participation 
within these bundled payment models (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. For additional information on the BPCI initiative, we refer 
readers to the CMS' Center for Medicare and Medicaid Innovation's 
website at: http://innovation.cms.gov/initiatives/Bundled-Payments/index.html and to section IV.H.4. of the preamble of the FY 2013 IPPS/
LTCH PPS final rule (77 FR 53341 through 53343).
    The participation of hospitals in the BPCI initiative concluded on 
September 30, 2018. The participation of hospitals in the BPCI Advanced 
model started on October 1, 2018. The BPCI Advanced model, tested under 
the authority of 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/. Consistent with our 
policy for FY 2020, and consistent with how we have treated hospitals 
that participated in the BPCI Initiative, for FY 2021, we continue to 
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 previously, these hospitals are still receiving IPPS payments 
under section 1886(d) of the Act. Consistent with FY 2020 IPPS/LTCH PPS 
final rule, we also are proposing to include all applicable data from 
subsection (d) hospitals participating in the Comprehensive Care for 
Joint Replacement (CJR) Model in our IPPS payment modeling and 
ratesetting calculations.
    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 proposed national average CCRs 
developed from the FY 2018 cost report data.
    The 19 cost centers that we used in the proposed relative weight 
calculation are shown in a supplemental data file posted via the 
internet on the CMS website for this proposed rule and available at 
http://www.cms.hhs.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html. The supplemental data file shows the 
lines on the cost report and the corresponding revenue codes that we 
used to create the proposed 19 national cost center CCRs. If we receive 
comments about the groupings, we may consider those comments as we 
finalize our policy.
    We are inviting public comments on our proposals related to 
recalibration of the proposed FY 2021 relative weights and the changes 
in relative weights from FY 2020.
    We note that in the FY 2020 IPPS/LTCH PPS final rule, we adopted a 
temporary one-time measure for FY 2020 for an MS-DRG where the FY 2018 
relative weight declined by 20 percent from the FY 2017 relative 
weight, and the FY 2020 relative weight would have declined by 20 
percent or more from the FY 2019 relative weight, which was maintained 
at the FY 2018 relative weight. For an MS-DRG meeting this criterion, 
the FY 2020 relative weight was set equal to the FY 2019 relative 
weight, which in turn had been set equal to the FY 2018 relative weight 
(84 FR 42167). For FY 2020, the only MS-DRG meeting this criterion was 
MS-

[[Page 32566]]

DRG 215. We are inviting public comments on the proposed FY 2021 weight 
for MS-DRG 215 (Other Heart Assist System Implant) as set forth in 
Table 5 associated with this proposed rule, including comments on 
whether we should consider a policy under sections 1886(d)(4)(B) and 
(C) of the Act similar to the measure adopted in the FY 2020 IPPS/LTCH 
PPS final rule to maintain the FY 2021 relative weight equal to the FY 
2020 relative weight for MS-DRG 215, or an alternative approach such as 
averaging the FY 2020 relative weight and the otherwise applicable FY 
2021 weight.
b. Proposed Relative Weight Calculation for Proposed New MS-DRG 018 for 
CAR T-Cell Therapy
    As discussed in section II.D.2.b. of this proposed rule, we are 
proposing to create new MS-DRG 018 for cases that include procedures 
describing CAR T-cell therapies, which are currently reported using 
ICD-10-PCS procedure codes XW033C3 or XW043C3. As discussed in section 
IV.I. of this proposed rule, given the high cost of the CAR T-cell 
product, we are proposing a differential payment for cases where the 
CAR T-cell product is provided without cost as part of a clinical trial 
to ensure that the payment amount for CAR T-cell therapy clinical trial 
cases appropriately reflects the relative resources required for 
providing CAR T-cell therapy as part of a clinical trial.
    We also believe it would be appropriate to modify our existing 
relative weight methodology to ensure that the relative weight for 
proposed new MS-DRG 018 appropriately reflects the relative resources 
required for providing CAR T-cell therapy outside of a clinical trial, 
while still accounting for the clinical trial cases in the overall 
average cost for all MS-DRGs. Specifically, we are proposing that 
clinical trial claims that group to proposed new MS-DRG 018 would not 
be included when calculating the average cost for proposed new MS-DRG 
018 that is used to calculate the relative weight for this MS-DRG, so 
that the relative weight reflects the costs of the CAR T-cell therapy 
drug. Consistent with our analysis of the FY 2019 MedPAR claims data as 
discussed in section IV.I. of this proposed rule, we identified 
clinical trial claims as claims that contain ICD-10-CM diagnosis code 
Z00.6 or contain standardized drug charges of less than $373,000, which 
is the average sales price of KYMRIAH and YESCARTA, which are the two 
CAR T-cell medicines approved to treat relapsed/refractory diffuse 
large B-cell lymphoma as of the time of the development of this 
proposed rule. We are also proposing to calculate the following 
adjustment to account for the CAR T-cell therapy cases identified as 
clinical trial cases in calculating the national average standardized 
cost per case that is used to calculate the relative weights for all 
MS-DRGs and for purposes of budget neutrality and outlier simulations:
     Calculate the average cost for cases to be assigned to 
proposed new MS-DRG 018 that contain ICD-10-CM diagnosis code Z00.6 or 
contain standardized drug charges of less than $373,000.
     Calculate the average cost for cases to be assigned to 
proposed new MS-DRG 018 that do not contain ICD-10-CM diagnosis code 
Z00.6 or standardized drug charges of at least $373,000.
     Calculate an adjustor by dividing the average cost 
calculated in step 1 by the average cost calculated in step 2.
     Apply the adjustor calculated in step 3 to the cases 
identified in step 1 as clinical trial cases, then add this adjusted 
case count to the non-clinical trial case count prior to calculating 
the average cost across all MS-DRGs.
    Each year, when we calculate the relative weights, we use a 
transfer-adjusted case count for each MS-DRG, which accounts for 
payment adjustments resulting from our postacute care transfer policy. 
This process is described in the FY 2006 IPPS/LTCH PPS final rule (70 
FR 47697). We propose to apply this adjustor to the case count for MS-
DRG 018 in a similar manner. We propose to first calculate the 
transfer-adjusted case count for MS-DRG 018, and then further adjust 
the transfer-adjusted case count by the adjustor described previously. 
Then, we propose to use this adjusted case count for MS-DRG 018 in 
calculating the national average cost per case, which is used in the 
calculation of the relative weights. Based on the December 2019 update 
of the FY 2019 MedPAR file, we estimate that the average costs of CAR 
T-cell therapy cases identified as clinical trial cases ($42,164) are 
15 percent of the average costs of CAR T-cell therapy cases identified 
as non-clinical trial cases ($277,592), and therefore, in calculating 
the national average cost per case, each case identified as a clinical 
trial case was adjusted to 0.15. We expect to recalculate this adjustor 
for the CAR T cell therapy clinical trial cases for the final rule 
based on the updated data available. We also note that we are applying 
this proposed adjustor for CAR T-cell therapy clinical trial cases for 
purposes of budget neutrality and outlier simulations, as discussed 
further in section II.A. of the Addendum to this proposed rule.
    We are inviting public comments on our proposal.
3. Development of Proposed National Average CCRs
    We developed the proposed national average CCRs as follows:
    Using the FY 2018 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. Then we created CCRs for each provider for each cost 
center (see the supplemental data file 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. Then we took the logs of the normalized cost center 
CCRs and removed any cost center CCRs where the log of the cost center 
CCR was greater or less than the mean log plus/minus 3 times the 
standard deviation for the log of that cost center CCR. Once the cost 
report data were trimmed, we calculated a Medicare-specific CCR. The 
Medicare-specific CCR was determined by taking the Medicare charges for 
each line item from Worksheet D-3 and deriving the Medicare-specific 
costs by applying the hospital-specific departmental CCRs to the 
Medicare-specific charges for each line item from Worksheet D-3. Once 
each hospital's Medicare-specific costs were established, we summed the 
total Medicare-specific costs and divided by the sum of the total 
Medicare-specific charges to produce national average, charge-weighted 
CCRs.
    After we multiplied the total charges for each MS-DRG in each of 
the 19 cost centers by the corresponding national average CCR, we 
summed the 19 ``costs'' across each MS-DRG to produce a total 
standardized cost for the MS-DRG. The average standardized cost for 
each MS-DRG was then computed as the total standardized cost for the 
MS-DRG divided by the transfer-adjusted case count for the MS-DRG. The 
average cost for each MS-DRG was then divided by the national average 
standardized cost per case to determine the proposed relative weight.
    The proposed FY 2021 cost-based relative weights were then 
normalized by a proposed adjustment factor of 1.818392 so that the 
average case weight

[[Page 32567]]

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 proposed 19 national average CCRs for FY 2021 are as follows:
    [GRAPHIC] [TIFF OMITTED] TP29MY20.116
    
    Since FY 2009, the relative weights have been based on 100 percent 
cost weights based on our MS-DRG grouping system.
    When we recalibrated the DRG weights for previous years, we set a 
threshold of 10 cases as the minimum number of cases required to 
compute a reasonable weight. We are proposing to use that same case 
threshold in recalibrating the proposed MS-DRG relative weights for FY 
2021. Using data from the FY 2019 MedPAR file, there were 7 MS-DRGs 
that contain fewer than 10 cases. For FY 2021, because we do not have 
sufficient MedPAR data to set accurate and stable cost relative weights 
for these low-volume MS-DRGs, we are proposing to compute relative 
weights for the low-volume MS-DRGs by adjusting their final FY 2020 
relative weights by the percentage change in the average weight of the 
cases in other MS-DRGs from FY 2020 to FY 2021. The crosswalk table is 
as follows.

[[Page 32568]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.117

G. Proposed Add-On Payments for New Services and Technologies for FY 
2021

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 Sec.  412.87(b) specifies 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. In addition, certain transformative new devices and 
Qualified Infectious Disease Products may qualify under an alternative 
inpatient new technology add-on payment pathway, as set forth in the 
regulations at Sec.  412.87(c) and (d). In this rule, 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) and the FY 2020 IPPS/LTCH PPS final rule (84 FR 42288 
through 42300).
a. New Technology Add On Payment Criteria
(1) Newness Criterion
    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 medical product 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 
another medical product 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).
(2) Cost Criterion
    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. 
The MS-DRG threshold amounts generally used in evaluating new 
technology add-on payment applications for FY 2021 are presented in a 
data file that is available, along with the other data files associated 
with the FY 2020 IPPS/LTCH PPS final rule and correction notice, on the 
CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index. However, as we discuss in section 
II.F.5.i. of the

[[Page 32569]]

preamble of this proposed rule, we are proposing to apply the proposed 
threshold value for proposed new MS-DRG 018 in evaluating the cost 
criterion for the CAR T-cell therapy technologies for purposes of FY 
2021 new technology add-on payments.
    As finalized in the FY 2019 IPPS/LTCH PPS final rule (83 FR 41275), 
beginning with FY 2020, we include the thresholds applicable to the 
next fiscal year (previously included in Table 10 of the annual IPPS/
LTCH PPS proposed and final rules) in the data files associated with 
the prior fiscal year. Accordingly, the proposed thresholds for 
applications for new technology add-on payments for FY 2022 are 
presented in a data file that is available on the CMS website, along 
with the other data files associated with this FY 2021 proposed rule, 
by clicking on the FY 2021 IPPS Proposed Rule Home Page at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index. We note that, under our proposal discussed in 
section II.F.5.i of the preamble of this proposed rule, beginning with 
FY 2022, we would use the proposed threshold values associated with the 
proposed rule for that fiscal year to evaluate the cost criterion for 
all other applications for new technology add-on payments and 
previously approved technologies that may continue to receive new 
technology add-on payments, if those technologies would be assigned to 
a proposed new MS-DRG for that same fiscal year. In the September 7, 
2001 final rule that established the new technology add-on payment 
regulations (66 FR 46917), we discussed that applicants should submit a 
significant sample of data to demonstrate that the medical service or 
technology meets the high-cost threshold. Specifically, applicants 
should submit a sample of sufficient size to enable us to undertake an 
initial validation and analysis of the data. We also discussed in the 
September 7, 2001 final rule (66 FR 46917) 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.
b. Substantial Clinical Improvement Criterion
    Under the third criterion at Sec.  412.87(b)(1), a medical service 
or technology must represent an advance that substantially improves, 
relative to technologies previously available, the diagnosis or 
treatment of Medicare beneficiaries. In the FY 2020 IPPS/LTCH PPS final 
rule (84 FR 42288 through 42292) we prospectively codified in our 
regulations at Sec.  412.87(b) the following aspects of how we evaluate 
substantial clinical improvement for purposes of new technology add-on 
payments under the IPPS:
     The totality of the circumstances is considered when 
making a determination that a new medical service or technology 
represents an advance that substantially improves, relative to services 
or technologies previously available, the diagnosis or treatment of 
Medicare beneficiaries.
     A determination that a new medical service or technology 
represents an advance that substantially improves, relative to services 
or technologies previously available, the diagnosis or treatment of 
Medicare beneficiaries means--
    ++ The new medical service or technology offers a treatment option 
for a patient population unresponsive to, or ineligible for, currently 
available treatments;
    ++ The new medical service or technology offers the ability to 
diagnose a medical condition in a patient population where that medical 
condition is currently undetectable, or offers the ability to diagnose 
a medical condition earlier in a patient population than allowed by 
currently available methods, and there must also be evidence that use 
of the new medical service or technology to make a diagnosis affects 
the management of the patient;
    ++ The use of the new medical service or technology significantly 
improves clinical outcomes relative to services or technologies 
previously available as demonstrated by one or more of the following: A 
reduction in at least one clinically significant adverse event, 
including a reduction in mortality or a clinically significant 
complication; a decreased rate of at least one subsequent diagnostic or 
therapeutic intervention; a decreased number of future hospitalizations 
or physician visits; a more rapid beneficial resolution of the disease 
process treatment including, but not limited to, a reduced length of 
stay or recovery time; an improvement in one or more activities of 
daily living; an improved quality of life; or, a demonstrated greater 
medication adherence or compliance; or
    ++ The totality of the circumstances otherwise demonstrates that 
the new medical service or technology substantially improves, relative 
to technologies previously available, the diagnosis or treatment of 
Medicare beneficiaries.
     Evidence from the following published or unpublished 
information sources from within the United States or elsewhere may be 
sufficient to establish that a new medical service or technology 
represents an advance that substantially improves, relative to services 
or technologies previously available, the diagnosis or treatment of 
Medicare beneficiaries: Clinical trials, peer reviewed journal 
articles; study results; meta-analyses; consensus statements; white 
papers; patient surveys; case studies; reports; systematic literature 
reviews; letters from major healthcare associations; editorials and 
letters to the editor; and public comments. Other appropriate 
information sources may be considered.
     The medical condition diagnosed or treated by the new 
medical service or technology may have a low prevalence among Medicare 
beneficiaries.
     The new medical service or technology may represent an 
advance that substantially improves, relative to services or 
technologies previously available, the diagnosis or treatment of a 
subpopulation of patients with the medical condition diagnosed or 
treated by the new medical service or technology.
    We refer the reader to the FY 2020 IPPS/LTCH PPS final rule for 
additional discussion of the evaluation of substantial clinical 
improvement for purposes of new technology add-on payments under the 
IPPS.
    We note, consistent with the discussion in the FY 2003 IPPS Final 
Rule (67 FR 50015), although we are affiliated with the FDA and we do 
not question the FDA's regulatory responsibility for decisions related 
to marketing authorization (for example, approval, clearance, etc.), we 
do not use FDA criteria to determine what drugs, devices, or 
technologies qualify for new technology add-on payments under Medicare. 
Our criteria do not depend on the standard of safety and efficacy on 
which the FDA relies but on a demonstration of substantial clinical 
improvement in the Medicare population (particularly patients over age 
65).
c. Alternative Inpatient New Technology Add-On Payment Pathway
    Under Sec.  412.87(c) and (d) of the regulations, beginning with 
applications for new technology add-on payments for FY 2021, certain 
transformative new devices and Qualified Infectious Disease Products 
(QIDPs) may qualify for the new technology add-on payment under

[[Page 32570]]

an alternative pathway, as described in this section. We refer the 
reader to the FY 2020 IPPS/LTCH PPS final rule for complete discussion 
on this policy (84 FR 42292 through 42297). We note, in section 
II.F.9.b. of this preamble, we are proposing to expand our current 
alternative new technology add-on payment pathway for QIDPs to include 
products approved under the Limited Population Pathway for 
Antibacterial and Antifungal Drugs (LPAD) pathway. In addition, we are 
proposing to refer more broadly to ``certain antimicrobial products'' 
rather than specifying the particular FDA programs for antimicrobial 
products (that is, QIDPs and LPADs) that are the subject of the 
alternative new technology add-on payment pathway. (We refer the reader 
to section II.F.9.b. of this preamble below for a complete discussion 
regarding this proposal.) We note that a technology is not required to 
have the specified FDA designation at the time the new technology add-
on payment application is submitted. CMS will review the application 
based on the information provided by the applicant under the 
alternative pathway specified by the applicant. However, to receive 
approval for the new technology add-on payment under that alternative 
pathway, the technology must have the applicable designation and meet 
all other requirements in the regulations in Sec.  412.87(c) and (d), 
as applicable.
(1) Alternative Pathway for Certain Transformative New Devices
    For applications received for new technology add-on payments for FY 
2021 and subsequent fiscal years, if a medical device is part of FDA's 
Breakthrough Devices Program nd received FDA marketing authorization, 
it will be considered new and not substantially similar to an existing 
technology for purposes of the new technology add-on payment under the 
IPPS, and will not need to meet the requirement under Sec.  
412.87(b)(1) that it represent an advance that substantially improves, 
relative to technologies previously available, the diagnosis or 
treatment of Medicare beneficiaries. This policy is codified at Sec.  
412.87(c). Under this alternative pathway, a medical device that has 
received FDA marketing authorization (that is, has been approved or 
cleared by, or had a De Novo classification request granted by, FDA) 
and that is part of FDA's Breakthrough Devices Program will need to 
meet the cost criterion under Sec.  412.87(b)(3), as reflected in Sec.  
412.87(c)(3), and will be considered new as reflected in Sec.  
412.87(c)(2). We note, in section II.F.8. of this preamble, we are 
clarifying our policy that a new medical device under this alternative 
pathway must receive marketing authorization for the indication covered 
by the Breakthrough Devices Program designation. (We refer the reader 
to section II.F.8. of this preamble below for a complete discussion 
regarding this clarification.)
(2) Alternative Pathway for Qualified Infectious Disease Products 
(QIDPs)
    For applications received for new technology add-on payments for FY 
2021 and subsequent fiscal years, if a technology is designated by FDA 
as a QIDP and received FDA marketing authorization, it will be 
considered new and not substantially similar to an existing technology 
for purposes of new technology add-on payments and will not need to 
meet the requirement that it represent an advance that substantially 
improves, relative to technologies previously available, the diagnosis 
or treatment of Medicare beneficiaries. We codified this policy at 
Sec.  412.87(d). Under this alternative pathway for QIDPs, a medical 
product that has received FDA marketing authorization and is designated 
by FDA as a QIDP will need to meet the cost criterion under Sec.  
412.87(b)(3), as reflected in Sec.  412.87(d)(3), and will be 
considered new as reflected in Sec.  412.87(d)(2).
    We refer the reader to the FY 2020 IPPS/LTCH PPS final rule for 
complete discussion on this policy (84 FR 42292 through 42297). We 
note, in section II.F.9.b. of this preamble, we are clarifying a new 
medical product seeking approval for the new technology add-on payment 
under the alternative pathway for QIDPs must receive marketing 
authorization for the indication covered by the QIDP designation. (We 
refer the reader to section II.F.9.b. of this preamble. below for a 
complete discussion regarding this clarification.)
d. Additional Payment for New Medical Service or Technology
    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. For discharges 
occurring before October 1, 2019, under Sec.  412.88, if the costs of 
the discharge (determined by applying CCRs as described in Sec.  
412.84(h)) exceed the full DRG payment (including payments for IME and 
DSH, but excluding outlier payments), Medicare made an add-on payment 
equal to the lesser of: (1) 50 percent of the costs of the new medical 
service or technology; or (2) 50 percent of the amount by which the 
costs of the case exceed the standard DRG payment.
    Beginning with discharges on or after October 1, 2019, for the 
reasons discussed in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42297 
through 42300), we finalized an increase in the new technology add-on 
payment percentage, as reflected at Sec.  412.88(a)(2)(ii). 
Specifically, for a new technology other than a medical product 
designated by FDA as a QIDP, beginning with discharges on or after 
October 1, 2019, if the costs of a discharge involving a new technology 
(determined by applying 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) 65 percent of the costs of the new medical service or 
technology; or (2) 65 percent of the amount by which the costs of the 
case exceed the standard DRG payment. For a new technology that is a 
medical product designated by FDA as a QIDP, beginning with discharges 
on or after October 1, 2019, if the costs of a discharge involving a 
new technology (determined by applying 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) 75 percent of the costs of the new 
medical service or technology; or (2) 75 percent of the amount by which 
the costs of the case exceed the standard DRG payment. As set forth in 
Sec.  412.88(b)(2), unless the discharge qualifies for an outlier 
payment, the additional Medicare payment will be limited to the full 
MS-DRG payment plus 65 percent (or 75 percent for a medical product 
designated by FDA as a QIDP) of the estimated costs of the new 
technology or medical service.
    We refer the reader to the FY 2020 IPPS/LTCH PPS final rule (84 FR 
42297 through 42300) for complete discussion on the increase in the new 
technology add on payment beginning with discharges on or after October 
1, 2019. We note, in section II.F.9.c. of this preamble, we are 
proposing an increase in the new technology add-on payment percentage 
to 75 percent for products approved under FDA's LPAD pathway. (We refer 
the reader to section II.F.9.c. of this preamble below for a complete 
discussion regarding this proposal.)

[[Page 32571]]

    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 subsequent years have not been subjected to budget neutrality.
e. Evaluation of Eligibility Criteria for New Medical Service or 
Technology Applications
    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 
by July 1 of the year prior to the beginning of the fiscal year for 
which the application is being considered. We note, in section 
II.F.9.c. of this preamble, we are proposing a process by which a 
technology for which an application for new technology add-on payments 
is submitted under the alternative pathway for certain antimicrobial 
products would receive conditional approval for such payment, provided 
the product receives FDA marketing authorization by July 1 of the year 
for which the new technology add-on payment application was submitted. 
(We refer the reader to section II.F.9.c. of this preamble below for a 
complete discussion regarding this proposal.)
f. Council on Technology and Innovation (CTI)
    The Council on Technology and Innovation at CMS oversees the 
agency's cross-cutting priority on coordinating coverage, coding and 
payment processes for Medicare with respect to new technologies and 
procedures, including new drug therapies, as well as promoting the 
exchange of information on new technologies and medical services 
between CMS and other entities. The CTI, composed of senior CMS staff 
and clinicians, was established under section 942(a) of Public Law 108-
173. The Council is co-chaired by the Director of the Center for 
Clinical Standards and Quality (CCSQ) and the Director of the Center 
for Medicare (CM), who is also designated as the CTI's Executive 
Coordinator.
    The specific processes for coverage, coding, and payment are 
implemented by CM, CCSQ, and the local Medicare Administrative 
Contractors (MACs) (in the case of local coverage and payment 
decisions). The CTI supplements, rather than replaces, these processes 
by working to assure that all of these activities reflect the agency-
wide priority to promote high-quality, innovative care. At the same 
time, the CTI also works to streamline, accelerate, and improve 
coordination of these processes to ensure that they remain up to date 
as new issues arise. To achieve its goals, the CTI works to streamline 
and create a more transparent coding and payment process, improve the 
quality of medical decisions, and speed patient access to effective new 
treatments. It is also dedicated to supporting better decisions by 
patients and doctors in using Medicare-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].
g. Application Information for New Medical Services or Technologies
    Applicants for add-on payments for new medical services or 
technologies for FY 2022 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 (unless the application is under one of the 
alternative pathways as previously described), 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 2022, 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 and approved under OMB 
control number 0938-1347.
    As discussed previously, in the FY 2020 IPPS/LTCH PPS final rule, 
we adopted an alternative inpatient new technology add-on payment 
pathway for certain transformative new devices and for Qualified 
Infectious Disease Products, as set forth in the regulations at Sec.  
412.87(c) and (d). The change in burden associated with these changes 
to the new technology add-on payment application process were discussed 
in a revision of the information collection requirement (ICR) request 
currently approved under OMB control number 0938-1347. In accordance 
with the implementing regulations of the PRA, we detailed the revisions 
of the ICR and published the required 60-day notice on August 15, 2019 
(84 FR 41723) and 30-day notice on December 17, 2019 (84 FR 68936) to 
solicit public comments. The ICR is currently pending OMB approval.
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

[[Page 32572]]

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 2021 prior 
to publication of this FY 2021 IPPS/LTCH PPS proposed rule, we 
published a notice in the Federal Register on October 8, 2019 (84 FR 
53732), and held a town hall meeting at the CMS Headquarters Office in 
Baltimore, MD, on December 16, 2019. 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 the FY 2021 new medical service and technology add-on 
payment applications before the publication of the FY 2021 IPPS/LTCH 
PPS proposed rule.
    Approximately 100 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 morning and afternoon sessions of the town hall on the CMS YouTube 
web page at: https://www.youtube.com/watch?v=4z1AhEuGHqQ and https://www.youtube.com/watch?v=m26Xj1EzbIY, respectively. We considered each 
applicant's presentation made at the town hall meeting, as well as 
written comments submitted on the applications that were received by 
the due date of January 3, 2020, in our evaluation of the new 
technology add-on payment applications for FY 2021 in the development 
of this FY 2021 IPPS/LTCH PPS proposed rule.
    In response to the published notice and the December 16, 2019 New 
Technology Town Hall meeting, we received written comments regarding 
the applications for FY 2021 new technology add-on payments. We note 
that we do not summarize comments that are unrelated to the 
``substantial clinical improvement'' criterion. As explained earlier 
and in the Federal Register notice announcing the New Technology Town 
Hall meeting (84 FR 53732 through 53734), 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 2021. Therefore, we are not summarizing those 
written comments in this proposed rule that are unrelated to the 
substantial clinical improvement criterion. In section II.F.5. of the 
preamble of this proposed rule, we are summarizing comments regarding 
individual applications, or, if applicable, indicating that there were 
no comments received in response to the New Technology Town Hall 
meeting notice or New Technology Town Hall meeting, at the end of each 
discussion of the individual applications.
3. ICD-10-PCS Section ``X'' Codes for Certain New Medical Services and 
Technologies
    As discussed in the FY 2016 IPPS/LTCH PPS final rule (80 FR 49434), 
the ICD-10-PCS includes a new section containing the new Section ``X'' 
codes, which began being used with discharges occurring on or after 
October 1, 2015. Decisions regarding changes to ICD-10-PCS Section 
``X'' codes will be handled in the same manner as the decisions for all 
of the other ICD-10-PCS code changes. That is, proposals to create, 
delete, or revise Section ``X'' codes under the ICD-10-PCS structure 
will be referred to the ICD-10 Coordination and Maintenance Committee. 
In addition, several of the new medical services and technologies that 
have been, or may be, approved for new technology add-on payments may 
now, and in the future, be assigned a Section ``X'' code within the 
structure of the ICD-10-PCS. We posted ICD-10-PCS Guidelines on the CMS 
website at: http://www.cms.gov/Medicare/Coding/ICD10/2016-ICD-10-PCS-and-GEMs.html, including guidelines for ICD-10-PCS Section ``X'' codes. 
We encourage providers to view the material provided on ICD-10-PCS 
Section ``X'' codes.
4. Proposed FY 2021 Status of Technologies Approved for FY 2020 New 
Technology Add-On Payments
    In this section of the proposed rule, we discuss the proposed FY 
2021 status of 18 technologies approved for FY 2020 new technology add-
on payments. 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. We refer readers to a table at the end of this section 
summarizing for FY 2021 the name of each technology, newness start 
date, whether we are proposing to continue or discontinue the add-on 
payment for FY 2021, relevant final rule citations, proposed maximum 
add-on payment amount and coding assignments.
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[supreg] (tisagenlecleucel) and 
YESCARTA[supreg] (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). On May 1, 2018, Novartis Pharmaceuticals Corporation 
received FDA approval for KYMRIAH[supreg]'s second indication, the 
treatment of adult patients with relapsed or refractory (r/r) large B-
cell lymphoma after two or more lines of systemic therapy including 
diffuse large B-cell lymphoma (DLBCL) not otherwise specified, high 
grade B-cell lymphoma and DLBCL arising from follicular lymphoma. On 
October 18, 2017, Kite Pharma, Inc. received FDA approval for the use 
of YESCARTA[supreg] indicated 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, primary mediastinal large B-
cell lymphoma, high grade B-cell lymphoma, and DLBCL arising from 
follicular lymphoma. With respect to the newness criterion, because 
potential cases representing patients who may be eligible for treatment 
using KYMRIAH[supreg] and YESCARTA[supreg] would group to the same

[[Page 32573]]

MS-DRGs (because the same ICD-10-CM diagnosis codes and ICD-10-PCS 
procedures codes are used to report treatment using either 
KYMRIAH[supreg] or YESCARTA[supreg]), and because 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 considered these two technologies to be substantially similar to 
each other. We refer readers to the FY 2019 IPPS/LTCH PPS final rule 
(83 FR 41285 through 41286) and FY 2020 IPPS/LTCH/PPS final rule (84 FR 
42185 through 42187) for a complete discussion. We stated in the FY 
2019 IPPS/LTCH PPS final rule (83 FR 41285 through 41286) and FY 2020 
IPPS/LTCH PPS final rule (84 FR 42185 through 42186) that in accordance 
with our policy, since we consider the technologies to be substantially 
similar to each other, it is appropriate to use the earliest market 
availability date submitted as the beginning of the newness period for 
both technologies. According to the applicant for YESCARTA[supreg], the 
first commercial shipment of YESCARTA[supreg] was received by a 
certified treatment center on November 22, 2017. Therefore, based on 
our policy, with regard to both technologies, we stated that the 
beginning of the newness period would be November 22, 2017. 
KYMRIAH[supreg] and YESCARTA[supreg] were approved for new technology 
add-on payments for FY 2019 (83 FR 41299). We refer readers to section 
II.H.5.a. of the preamble of the FY 2019 IPPS/LTCH PPS final rule (83 
FR 41283 through 41299) and section II.H.4.d. of the preamble of the FY 
2020 IPPS/LTCH PPS final rule (84 FR 42185 through 42187) for a 
complete discussion of the new technology add-on payment application, 
coding and payment amount for KYMRIAH[supreg] and YESCARTA[supreg] for 
FY 2019 and FY 2020.
    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 KYMRIAH[supreg] and 
YESCARTA[supreg], as discussed in the FY 2019 IPPS/LTCH PPS final rule, 
according to the applicant for YESCARTA[supreg], the first commercial 
shipment of YESCARTA[supreg] was received by a certified treatment 
center on November 22, 2017. As previously stated, we use the earliest 
market availability date submitted as the beginning of the newness 
period for both KYMRIAH[supreg] and YESCARTA[supreg]. Therefore, we 
consider the beginning of the newness period for both KYMRIAH[supreg] 
and YESCARTA[supreg] to commence November 22, 2017. Because the 3-year 
anniversary date of the entry of the technology onto the U.S. market 
(November 22, 2020) will occur in the first half of FY 2021, we are 
proposing to discontinue new technology add-on payments for this 
technology for FY 2021. We are inviting public comments on our proposal 
to discontinue new technology add-on payments for KYMRIAH[supreg] and 
YESCARTA[supreg] for FY 2021.
    As discussed in section II.D.2.b. of the preamble of this proposed 
rule, currently procedures involving CAR T-cell therapies are 
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 became effective October 1, 2017. As 
discussed in section II.D.2.b. of the preamble of this proposed rule, 
we are proposing to create a new MS-DRG 018 for cases reporting ICD-10-
PCS procedure codes XW033C3 or XW043C3 for FY 2021. We also refer 
readers to section II.F.5.i of the preamble of this proposed rule for a 
complete discussion of our proposal that, effective for FY 2022, for 
applications for new technology add-on payments and for previously 
approved technologies that may continue to receive new technology add-
on payments, the proposed threshold for the upcoming fiscal year for a 
proposed new MS-DRG would be used to evaluate the cost criterion for 
any new technologies that would be assigned to a proposed new MS-DRG. 
As we also discuss in section II.F.5.i. of the preamble of this 
proposed rule, in light of the significant variance in the threshold 
amount for proposed new MS-DRG 018 for cases involving CAR T-cell 
therapies, we are proposing to apply this policy in evaluating the CAR 
T-cell therapy technologies for FY 2021 new technology add-on payments. 
This would include both the new FY 2021 CAR T-cell therapy 
applications, KTE-X19 and Liso-cel, and those CAR T-cell therapy 
technologies previously approved for new technology add-on payments, 
KYMRIAH[supreg] and YESCARTA[supreg]. Therefore, even if 
KYMRIAH[supreg] and/or YESCARTA[supreg] were still considered new and 
within the 3-year anniversary date of the entry of the technology onto 
the U.S. market, in determining whether these technologies would 
continue to be eligible for the new technology add-on payment, we are 
proposing to evaluate whether they meet the cost criterion using the 
proposed threshold for the proposed new MS-DRG 018 for FY 2021 payment. 
We refer readers to section II.F.5.i. of the preamble of this proposed 
rule for a complete discussion on our proposal to use the proposed 
threshold for proposed new MS-DRG 018 to evaluate the cost criterion 
for CAR T-cell therapy technologies for purposes of FY 2021 new 
technology add-on payments.
    Per the applicants' cost analyses in the FY 2019 IPPS/LTCH PPS 
final rule (83 FR 41291), the final inflated average case-weighted 
standardized charge per case for KYMRIAH[supreg] and YESCARTA[supreg] 
is $39,723 (not including the charges related to the technology) and 
$118,575 (not including the charges related to the technology), 
respectively. However, we now have cases involving the use of CAR T-
cell therapy within the FY 2019 MedPAR data that we believe represent 
cases that would be eligible for KYMRIAH[supreg] and YESCARTA[supreg] 
and which can be used to estimate the average standardized charge per 
case for purposes of this proposed rule. This charge information from 
the FY 2019 MedPAR data can be found in the FY 2021 Proposed Before 
Outliers Removed (BOR) File (available on the CMS website) for Version 
38 of the MS-DRGs. Based on information from the FY 2021 Proposed BOR 
File for Version 38 of the MS-DRGs, the standardized charge per case 
for MS-DRG 018 is $913,224. The average case-weighted threshold amount 
based on the proposed new MS-DRG 018 is $1,237,393. Because this 
estimated average case-weighted standardized charge per case for 
KYMRIAH[supreg] and YESCARTA[supreg] ($913,224) does not exceed the 
average case-weighted threshold amount for proposed new MS-DRG 018 
($1,237,393), we do not

[[Page 32574]]

believe that the technology would meet the cost criterion and, as 
previously stated, are proposing to discontinue new technology add-on 
payments for this technology for FY 2021. We are inviting public 
comment on our proposals.
b. VYXEOSTM (Daunorubicin and Cytarabine) Liposome for 
Injection
    Jazz Pharmaceuticals, Inc. submitted an application for new 
technology add-on payments for the VYXEOSTM technology for 
FY 2019. 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). CMS approved VYXEOSTM for new technology add on 
payments for FY 2019 (83 FR 41299). We refer readers to section 
II.H.5.b. of the preamble of the FY 2019 IPPS/LTCH PPS final rule (83 
FR 41299 through 41305) and section II.H.4.e. of the preamble of the FY 
2020 IPPS/LTCH PPS final rule (84 FR 42187 through 42188) for a 
complete discussion of the new technology add on payment application, 
coding, and payment amount for VYXEOSTM for FY 2019 and FY 
2020.
    With regard to the newness criterion for VYXEOSTM, we 
consider the beginning of the newness period to commence when 
VYXEOSTM was approved by the FDA (August 3, 2017). Because 
the 3-year anniversary date of the entry of the VYXEOSTM 
onto the U.S. market (August 3, 2020) will occur in FY 2020, we are 
proposing to discontinue new technology add-on payments for this 
technology for FY 2021. We are inviting public comments on our proposal 
to discontinue new technology add-on payments for VYXEOSTM 
for FY 2021.
c. VABOMERETM> (Meropenem and 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 and was approved for new technology add on payments for 
FY 2019 (83 FR 41311). We refer readers to section II.H.5.c. of the 
preamble of the FY 2019 IPPS/LTCH PPS final rule (83 FR 41305 through 
41311) and section II.H.4.f. of the preamble of the FY 2020 IPPS/LTCH 
PPS final rule (84 FR 42188 through 42189) for a complete discussion of 
the new technology add on payment application, coding, and payment 
amount for VABOMERETM for FY 2019 and FY 2020.
    With regard to the newness criterion for VABOMERETM, we 
consider the beginning of the newness period to commence when 
VABOMERETM received FDA approval (August 29, 2017). Because 
the 3-year anniversary date of the entry of VABOMERETM onto 
the U.S. market (August 29, 2020) will occur in FY 2020, we are 
proposing to discontinue new technology add-on payments for this 
technology for FY 2021. We are inviting public comments on our proposal 
to discontinue new technology add-on payments for VABOMERETM 
for FY 2021.
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. 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 (CSA). On 
October 6, 2017, the remed[emacr][supreg] System was approved by FDA. 
The remed[emacr][supreg] System was approved for new technology add on 
payments for FY 2019. We refer readers to section II.H.5.d. of the 
preamble of the FY 2019 IPPS/LTCH PPS final rule (83 FR 41311 through 
41320) and section II.H.4.g. of the preamble of the FY 2020 IPPS/LTCH 
PPS final rule (84 FR 42189 through 42190) for a complete discussion of 
the new technology add on payment application, coding and payment 
amount for the remed[emacr][supreg] System for FY 2019 and FY 2020.
    With regard to the newness criterion for the remed[emacr][supreg] 
System, as we have discussed in prior rulemaking, we consider the 
beginning of the newness period to commence when the 
remed[emacr][supreg] System was approved by FDA on October 6, 2017. 
However, as we summarized in the FY 2020 IPPS/LTCH PPS final rule (84 
FR 42189 through 42190), a commenter on the FY 2020 IPPS/LTCH PPS 
proposed rule, who was also the applicant, believed that the newness 
period for the remed[emacr][supreg] System should start on February 1, 
2018, instead of the FDA approval date of October 6, 2017. The 
commenter stated that due to the required build out of operational and 
commercial capabilities, the remed[emacr][supreg] System was not 
commercially available upon FDA approval and the first case involving 
its use did not occur until February 1, 2018. The commenter asserted 
that the date of the first implant should mark the start of the newness 
period since before that, the technology was not commercially 
available. In response to that comment, we indicated that we would 
consider the additional information the applicant provided when 
proposing whether to continue new technology add-on payments for the 
remed[emacr][supreg] System for FY 2021.
    As we have discussed in prior rulemaking (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. With regard to the commenter's assertion that the date 
of the first implant should mark the start of the newness period, we 
note that while we may consider a documented delay in a technology's 
availability on the U.S. market in determining when the newness period 
begins, under our historical policy, we do not consider how frequently 
the medical service or technology has been used in our determination of 
newness (70 FR 47349). Without additional information from the 
applicant, we cannot determine a newness date based on such a 
documented delay in commercial availability (and not the first case 
involving use of the remed[emacr][supreg] System on February 1, 2018). 
However, even if we were to consider the newness period to commence on 
February 1, 2018, as recommended by the commenter, such that the 3-year 
anniversary date of the entry of the remed[emacr][supreg] System onto 
the U.S. market would be February 1, 2021 rather than October 6, 2020, 
that 3-year anniversary date would still occur within the first half of 
FY 2021. Because the 3-year anniversary date of the entry of the 
remed[emacr][supreg] System onto the U.S. market will occur in the 
first half of FY 2021, we are proposing to discontinue new technology 
add-on payments for this technology for FY 2021. We are inviting public 
comments on our proposal to discontinue new technology add-on payments 
for the remed[emacr][supreg] System for FY 2021.
e. ZEMDRITM (Plazomicin)
    Achaogen, Inc. submitted an application for new technology add-on 
payments for ZEMDRITM (plazomicin) for FY 2019. According to 
the applicant, ZEMDRITM is a next generation aminoglycoside 
antibiotic, which has been found in vitro to have enhanced activity 
against many multidrug resistant (MDR) gram-negative bacteria. The 
applicant received approval from FDA on June 25, 2018, for use in the 
treatment of adults who have been diagnosed with cUTIs, including 
pyelonephritis. ZEMDRITM was

[[Page 32575]]

approved for new technology add on payments for FY 2019 (83 FR 41334). 
We refer readers to section II.H.5.f. of the preamble of the FY 2019 
IPPS/LTCH PPS final rule (83 FR 41326 through 41334) and section 
II.H.4.h. of the preamble of the FY 2020 IPPS/LTCH PPS final rule (84 
FR 42190 through 42191) for a complete discussion of the new technology 
add on payment application, coding and payment amount for 
ZEMDRITM for FY 2019 and FY 2020.
    With regard to the newness criterion for ZEMDRITM, we 
consider the beginning of the newness period to commence when 
ZEMDRITM was approved by FDA on June 25, 2018. 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 ZEMDRITM onto the U.S. market (June 25, 2021) will 
occur in the second half of FY 2021, we are proposing to continue new 
technology add-on payments for this technology for FY 2021. We are 
proposing that the maximum new technology add-on payment amount for a 
case involving the use of ZEMDRITM would remain at $4,083.75 
for FY 2021 (we refer readers to the FY 2020 IPPS/LTCH PPS final rule 
for complete discussion of the calculation of the new technology add on 
payment amount for ZEMDRITM). Cases involving 
ZEMDRITM that are eligible for new technology add-on 
payments are identified by ICD-10-PCS procedure codes XW033G4 
(Introduction of Plazomicin anti-infective into peripheral vein, 
percutaneous approach, new technology group 4) or XW043G4 (Introduction 
of Plazomicin antiinfective into central vein, percutaneous approach, 
new technology group 4). We are inviting public comments on our 
proposal to continue new technology add-on payments for 
ZEMDRITM for FY 2021.
f. GIAPREZATM (Angiotensin II)
    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. GIAPREZATM was granted a Priority Review 
designation under FDA's expedited program 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. GIAPREZATM was approved 
for new technology add on payments for FY 2019 (83 FR 41342). We refer 
readers to section II.H.5.g. of the preamble of the FY 2019 IPPS/LTCH 
PPS final rule (83 FR 41334 through 41342) and section II.H.4.i. of the 
preamble of the FY 2020 IPPS/LTCH PPS final rule (84 FR 42191) for a 
complete discussion of the new technology add on payment application, 
coding and payment amount for GIAPREZATM for FY 2019 and FY 
2020.
    With regard to the newness criterion for GIAPREZATM, we 
consider the beginning of the newness period to commence when 
GIAPREZATM was approved by FDA (December 21, 2017). 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 GIAPREZATM onto the U.S. 
market (December 21, 2020) will occur in the first half of FY 2021, we 
are proposing to discontinue new technology add-on payments for this 
technology for FY 2021. We are inviting public comments on our proposal 
to discontinue new technology add-on payments for GIAPREZATM 
for FY 2021.
g. 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. The Sentinel Cerebral Protection System 
was approved for new technology add on payments for FY 2019 (83 FR 
41348). We refer readers to section II.H.5.h. of the preamble of the FY 
2019 IPPS/LTCH PPS final rule (83 FR 41342 through 41348) and section 
II.H.4.j. of the preamble of the FY 2020 IPPS/LTCH PPS final rule (84 
FR 42191 through 42192) for a complete discussion the new technology 
add on payment application, coding, and payment amount for the 
Sentinel[supreg] Cerebral Protection System for FY 2019 and FY 2020.
    With regard to the newness criterion for the Sentinel[supreg] 
Cerebral Protection System, we consider the beginning of the newness 
period to commence when FDA granted the De Novo request for the 
Sentinel[supreg] Cerebral Protection System (June 1, 2017). Because the 
3-year anniversary date of the entry of the Sentinel[supreg] Cerebral 
Protection System onto the U.S. market (June 1, 2020) will occur in FY 
2020, we are proposing to discontinue new technology add-on payments 
for this technology for FY 2021. We are inviting public comments on our 
proposal to discontinue new technology add-on payments for the 
Sentinel[supreg] Cerebral Protection System for FY 2021.
h. 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). 
FDA granted the AQUABEAM System'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 AQUABEAM System was approved for new 
technology add on payments for FY 2019 (83 FR 41355). We refer readers 
to section II.H.5.i. of the preamble of the FY 2019 IPPS/LTCH PPS final 
rule (83 FR 41348 through 41355) and section II.H.4.k. of the preamble 
of the FY 2020 IPPS/LTCH PPS final rule (84 FR 42192 through 42193) for 
a complete discussion of the new technology add on payment application, 
coding, and payment for the AQUABEAM System for FY 2019 and FY 2020.
    With regard to the newness criterion for the AQUABEAM System, we 
consider the beginning of the newness period to commence on the date 
FDA granted the De Novo request (December 21, 2017). 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 AQUABEAM System

[[Page 32576]]

onto the U.S. market (December 21, 2020) will occur in the first half 
of FY 2021, we are proposing to discontinue new technology add-on 
payments for this technology for FY 2021. We are inviting public 
comments on our proposal to discontinue new technology add-on payments 
for the AQUABEAM System for FY 2021.
i. AndexXaTM (Coagulation Factor Xa (Recombinant), 
Inactivated-zhzo)
    Portola Pharmaceuticals, Inc. (Portola) submitted an application 
for new technology add-on payments for FY 2019 for the use of 
AndexXaTM (coagulation factor Xa (recombinant), inactivated-
zhzo). AndexXaTM received FDA approval on May 3, 2018, and 
is indicated for use in the treatment of patients who are receiving 
treatment with rivaroxaban and apixaban, when reversal of 
anticoagulation is needed due to life-threatening or uncontrolled 
bleeding. AndexXaTM was approved for new technology add on 
payments for FY 2019 (83 FR 41362). We refer readers to section 
II.H.5.j. of the preamble of the FY 2019 IPPS/LTCH PPS final rule (83 
FR 41355 through 41362) and section II.H.4.k. of the preamble of the FY 
2020 IPPS/LTCH PPS final rule (84 FR 42193 through 42194) for a 
complete discussion of the new technology add on payment application, 
coding, and payment amount for AndexXaTM for FY 2019 and FY 
2020.
    With regard to the newness criterion for AndexXaTM, we 
consider the beginning of the newness period to commence when 
AndexXaTM received FDA approval (May 3, 2018). 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 AndexXaTM onto the U.S. market (May 3, 2021) will 
occur in the second half of FY 2021, we are proposing to continue new 
technology add-on payments for this technology for FY 2021. We are 
proposing that the maximum new technology add-on payment for a case 
involving AndexXaTM would remain at $18,281.25 for FY 2021 
(we refer readers to the FY 2020 IPPS/LTCH PPS final rule for complete 
discussion of the calculation of the new technology add on payment 
amount for AndexXaTM). Cases involving the use of 
AndexXaTM that are eligible for new technology add-on 
payments are identified by ICD-10-PCS procedure codes XW03372 
(Introduction of inactivated coagulation factor Xa into peripheral 
vein, percutaneous approach, new technology group 2) or XW04372 
(Introduction of inactivated coagulation factor Xa into central vein, 
percutaneous approach, new technology group 2). We are inviting public 
comments on our proposal to continue new technology add-on payments for 
AndexXaTM for FY 2021.
j. AZEDRA[supreg] (Iobenguane Iodine-131) Solution
    Progenics Pharmaceuticals, Inc. submitted an application for new 
technology add-on payments for AZEDRA[supreg] (iobenguane Iodine-131) 
for FY 2020. AZEDRA[supreg] is a drug solution formulated for 
intravenous (IV) use in the treatment of patients who have been 
diagnosed with obenguane avid malignant and/or recurrent and/or 
unresectable pheochromocytoma and paraganglioma (PPGL). AZEDRA was 
approved by FDA on July 30, 2018, as a radioactive therapeutic agent 
indicated for the treatment of adult and pediatric patients 12 years 
and older with iobenguane scan positive, unresectable, locally advanced 
or metastatic pheochromocytoma or paraganglioma who require systemic 
anticancer therapy. AZEDRA[supreg] was approved for new technology add 
on payments for FY 2020. We refer readers to section II.H.5.a. of the 
preamble of the FY 2020 IPPS/LTCH PPS final rule (84 FR 42194 through 
42201) for a complete discussion of the new technology add on payment 
application, coding and payment amount for AZEDRA[supreg] for FY 2020.
    With regard to the newness criterion for AZEDRA[supreg], we 
consider the beginning of the newness period to commence when 
AZEDRA[supreg] was approved by FDA (July 30, 2018). 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 AZEDRA[supreg] onto the U.S. market (July 30, 2021) will occur 
in the second half of FY 2021, we are proposing to continue new 
technology add-on payments for this technology for FY 2021. We are 
proposing that the maximum new technology add-on payment for a case 
involving AZEDRA[supreg] would remain at $98,150 for FY 2021 (we refer 
readers to the FY 2020 IPPS/LTCH PPS final rule for complete discussion 
of the calculation of the new technology add on payment amount for 
AZEDRA[supreg]). Cases involving the use of AZEDRA[supreg] that are 
eligible for new technology add-on payments are identified by ICD-10-
PCS procedure codes XW033S5 (Introduction of Iobenguane I-131 
antineoplastic into peripheral vein, percutaneous approach, new 
technology group 5), and XW043S5 (Introduction of Iobenguane I-131 
antineoplastic into central vein, percutaneous approach, new technology 
group 5). We are inviting public comments on our proposal to continue 
new technology add-on payments for AZEDRA[supreg] for FY 2021.
k. CABLIVI[supreg] (Caplacizumab-yhdp)
    The Sanofi Company submitted an application for new technology add-
on payments for CABLIVI[supreg] (caplacizumab-yhdp) for FY 2020. The 
applicant described CABLIVI[supreg] as a humanized bivalent nanobody 
consisting of two identical building blocks joined by a tri alanine 
linker, which is administered through intravenous and subcutaneous 
injection to inhibit microclot formation in adult patients who have 
been diagnosed with acquired thrombotic thrombocytopenic purpura 
(aTTP). CABLIVI[supreg] received FDA approval on February 6, 2019, for 
the treatment of adult patients with acquired aTTP, in combination with 
plasma exchange and immunosuppressive therapy. CABLIVI[supreg] was 
approved for new technology add on payments for FY 2020. We refer 
readers to section II.H.5.b. of the preamble of the FY 2020 IPPS/LTCH 
PPS final rule (84 FR 42201 through 42208) for a complete discussion of 
the new technology add on payment application, coding, and payment 
amount for CABLIVI[supreg] for FY2020.
    With regard to the newness criterion for CABLIVI[supreg], we 
consider the beginning of the newness period to commence when 
CABLIVI[supreg] was approved by FDA (February 6, 2019). Because the 3-
year anniversary date of the entry of CABLIVI[supreg] onto the U.S. 
market (February 6, 2022) will occur after FY 2021, we are proposing to 
continue new technology add-on payments for this technology for FY 
2021. We are proposing that the maximum new technology add-on payment 
for a case involving CABLIVI[supreg] would remain at $33,215 for FY 
2021 (we refer readers to the FY 2020 IPPS/LTCH PPS final rule for 
complete discussion of the calculation of the new technology add on 
payment amount for CABLIVI[supreg]). Cases involving the use of 
CABLIVI[supreg] that are eligible for new technology add-on payments 
are identified by ICD-10-PCS procedure codes XW013W5 (Introduction of 
Caplacizumab into subcutaneous tissue, percutaneous approach, new 
technology group 5), XW033W5 (Introduction of

[[Page 32577]]

Caplacizumab into peripheral vein, percutaneous approach, new 
technology group 5) and XW043W5 (Introduction of Caplacizumab into 
central vein, percutaneous approach, new technology group 5). We are 
inviting public comments on our proposal to continue new technology 
add-on payments for CABLIVI[supreg] for FY 2021.
l. ELZONRISTM (Tagraxofusp-erzs)
    Stemline Therapeutics submitted an application for new technology 
add-on payments for ELZONRISTM for FY 2020. 
ELZONRISTM (tagraxofusp-erzs) is a targeted therapy for the 
treatment of blastic plasmacytoid dendritic cell neoplasm (BPDCN) 
administered via infusion. On December 21, 2018, the FDA approved 
ELZONRISTM for the treatment of blastic plasmacytoid 
dendritic cell neoplasm in adults and in pediatric patients 2 years old 
and older. ELZONRISTM was approved for new technology add on 
payments for FY 2020. We refer readers to section II.H.5.e. of the 
preamble of the FY 2020 IPPS/LTCH PPS final rule (84 FR 42231 through 
42237) for a complete discussion of the new technology add on payment 
application, coding and payment amount for ELZONRISTM for FY 
2020.
    With regard to the newness criterion for ELZONRISTM, we 
consider the beginning of the newness period to commence when 
ELZONRISTM was approved by FDA (December 21, 2018). Because 
the 3-year anniversary date of the entry of ELZONRISTM onto 
the U.S. market (December 21, 2021) will occur after FY 2021, we are 
proposing to continue new technology add-on payments for this 
technology for FY 2021. We are proposing that the maximum new 
technology add-on payment for a case involving ELZONRISTM 
would remain at $125,448.05 for FY 2021 (we refer readers to the FY 
2020 IPPS/LTCH PPS final rule for complete discussion of the 
calculation of the new technology add on payment amount for 
ELZONRISTM). Cases involving the use of 
ELZONRISTM that are eligible for new technology add-on 
payments are identified by ICD-10-PCS procedure codes XW033Q5 
(Introduction of Tagraxofusp-erzs antineoplastic into peripheral vein, 
percutaneous approach, new technology, group 5) and XW043Q5 
(Introduction of Tagraxofusp-erzs antineoplastic into central vein, 
percutaneous approach, new technology group 5). We are inviting public 
comments on our proposal to continue new technology add-on payments for 
ELZONRISTM for FY 2021.
m. BalversaTM (Erdafitinib)
    Johnson & Johnson Health Care Systems, Inc. (on behalf of Janssen 
Oncology, Inc.) submitted an application for new technology add-on 
payments for BalversaTM for FY 2020. BalversaTM 
is indicated for the second line treatment of adult patients who have 
been diagnosed with locally advanced or metastatic urothelial carcinoma 
whose tumors exhibit certain fibroblast growth factor receptor (FGFR) 
genetic alterations as detected by an FDA-approved test, and who have 
disease progression during or following at least one line of prior 
chemotherapy including within 12 months of neoadjuvant or adjuvant 
chemotherapy. BalversaTM received FDA approval on April 12, 
2019. BalversaTM was approved for new technology add on 
payments for FY 2020. We refer readers to section II.H.5.f. of the 
preamble of the FY 2020 IPPS/LTCH PPS final rule (84 FR 42237 through 
42242) for a complete discussion of the new technology add on payment 
application, coding and payment amount for BalversaTM for FY 
2020.
    With regard to the newness criterion for BalversaTM, we 
consider the beginning of the newness period to commence when 
BalversaTM was approved by FDA (April 12, 2019). Because the 
3-year anniversary date of the entry of BalversaTM onto the 
U.S. market (April 12, 2022) will occur after FY 2021, we are proposing 
to continue new technology add-on payments for this technology for FY 
2021. We are proposing that the maximum new technology add-on payment 
for a case involving BalversaTM would remain at $3,563.23 
for FY 2021 (we refer readers to the FY 2020 IPPS/LTCH PPS final rule 
for complete discussion of the calculation of the new technology add on 
payment amount for BalversaTM). Cases involving the use of 
BalversaTM that are eligible for new technology add-on 
payments are identified by ICD-10-PCS procedure code XW0DXL5 
(Introduction of Erdafitinib antineoplastic into mouth and pharynx, 
external approach, new technology group 5). We are inviting public 
comments on our proposal to continue new technology add-on payments for 
BalversaTM for FY 2021.
n. ERLEADATM (Apalutamide)
    Johnson & Johnson Health Care Systems Inc., on behalf of Janssen 
Products, LP, Inc., submitted an application for new technology add-on 
payments for ERLEADATM (apalutamide) for FY 2020. This oral 
drug is an androgen receptor inhibitor indicated for the treatment of 
patients who have been diagnosed with non-metastatic castration-
resistant prostate cancer (nmCRPC). ERLEADATM received FDA 
approval on February 14, 2018. ERLEADATM was approved for 
new technology add on payments for FY 2020. We refer readers to section 
II.H.5.g. of the preamble of the FY 2020 IPPS/LTCH PPS final rule (84 
FR 42242 through 42247) for a complete discussion of the new technology 
add on payment application, coding and payment amount for 
ERLEADATM for FY 2020.
    With regard to the newness criterion for ERLEADATM, we 
consider the beginning of the newness period to commence when 
ERLEADATM was approved by FDA (February 14, 2018). 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 ERLEADATM onto the U.S. 
market (February 14, 2021) will occur in the first half of FY 2021, we 
are proposing to discontinue new technology add-on payments for this 
technology for FY 2021. We are inviting public comments on our proposal 
to discontinue new technology add-on payments for ERLEADATM 
for FY 2021.
o. SPRAVATOTM (Esketamine)
    Johnson & Johnson Health Care Systems, Inc., on behalf of Janssen 
Pharmaceuticals, Inc., submitted an application for new technology add-
on payments for SPRAVATOTM (Esketamine) nasal spray for FY 
2020. The FDA-approved indication for SPRAVATOTM is 
treatment resistant depression (TRD). SPRAVATOTM Nasal Spray 
was approved by FDA March 5, 2019. SPRAVATOTM was approved 
for new technology add on payments for FY 2020. We refer readers to 
section II.H.5.h. of the preamble of the FY 2020 IPPS/LTCH PPS final 
rule (84 FR 42247 through 42256) for a complete discussion of the new 
technology add on payment application, coding and payment amount for 
SPRAVATOTM for FY 2020.
    With regard to the newness criterion for SPRAVATOTM, we 
consider the beginning of the newness period to commence when 
SPRAVATOTM was approved by FDA (March 5, 2019). Because the 
3-year anniversary date of the entry of SPRAVATOTM onto the 
U.S. market (March 5, 2022) will occur after FY 2021, we are proposing 
to continue new technology add-on payments for

[[Page 32578]]

this technology for FY 2021. We are proposing that the maximum new 
technology add-on payment for a case involving SPRAVATOTM 
would remain at $1,014.79 for FY 2021 (we refer readers to the FY 2020 
IPPS/LTCH PPS final rule for complete discussion of the calculation of 
the new technology add on payment amount for SPRAVATOTM).
    In the FY 2020 IPPS/LTCH PPS proposed rule (84 FR 19329), we noted 
that the applicant had submitted a request to the ICD-10 Coordination 
and Maintenance Committee for approval for a unique ICD-10-PCS 
procedure code to specifically identify cases involving the use of 
SPRAVATOTM, beginning in FY 2020. As of the time of the 
development of the FY 2020 IPPS/LTCH PPS final rule, a unique ICD-10-
PCS procedure code to specifically identify cases involving the use of 
SPRAVATOTM had not yet been finalized in response to the 
applicant's request. Therefore, we stated that cases reporting 
SPRAVATOTM would be identified by ICD-10-PCS procedure code 
3E097GC (Introduction of other therapeutic substance into nose, via 
natural or artificial opening) for FY 2020. Subsequent to the FY 2020 
IPPS/LTCH PPS final rule, a unique ICD-10-PCS procedure code to 
specifically identify cases involving the use of SPRAVATOTM 
was finalized, effective October 1, 2020. As a result, cases involving 
the use of SPRAVATOTM that are eligible for new technology 
add-on payments would be identified by ICD-10-PCS procedure code 
XW097M5 (Introduction of Esketamine Hydrochloride into nose, via 
natural or artificial opening, new technology group 5) for FY 2021. 
Because new ICD-10-PCS procedure code XW097M5 is not effective until 
October 1, 2020, ICD-10-PCS procedure code 3E097GC is the only code 
available to report the use of the SPRAVATOTM for FY 2020. 
For FY 2021, beginning with discharges on or after October 1, 2020, 
cases involving SPRAVATOTM that are eligible for new 
technology add-on payments will be identified using the new ICD-10-PCS 
procedure code XW097M5 (that is effective for FY 2021). We are inviting 
public comments on our proposal to continue new technology add-on 
payments for SPRAVATOTM for FY 2021.
p. XOSPATA[supreg] (Gilteritinib)
    Astellas Pharma U.S., Inc. submitted an application for new 
technology add-on payments for XOSPATA[supreg] (gilteritinib) for FY 
2020. XOSPATA[supreg] received FDA approval November 28, 2018 and is 
indicated for the treatment of adult patients who have been diagnosed 
with relapsed or refractory acute myeloid leukemia (AML) with a FMS-
like tyrosine kinase 3 (FLT3) mutation as detected by an FDA approved 
test. XOSPATA[supreg] was approved for new technology add on payments 
for FY 2020. We refer readers to section II.H.5.i. of the preamble of 
the FY 2020 IPPS/LTCH PPS final rule (84 FR 42256 through 42260) for a 
complete discussion of the new technology add on payment application, 
coding and payment amount for XOSPATA[supreg].
    With regard to the newness criterion for XOSPATA[supreg], we 
consider the beginning of the newness period to commence when 
XOSPATA[supreg] was approved by FDA (November 28, 2018). Because the 3-
year anniversary date of the entry of XOSPATA[supreg] onto the U.S. 
market (November 28, 2021) will occur after FY 2021, we are proposing 
to continue new technology add-on payments for this technology for FY 
2021. We are proposing that the maximum new technology add-on payment 
for a case involving XOSPATA[supreg] would remain at $7,312.50 for FY 
2021 (we refer readers to the FY 2020 IPPS/LTCH PPS final rule for 
complete discussion of the calculation of the new technology add on 
payment amount for XOSPATA[supreg]). Cases involving the use of 
XOSPATA[supreg] that are eligible for new technology add-on payments 
are identified by ICD-10-PCS procedure code XW0DXV5 (Introduction of 
Gilteritinib antineoplastic into mouth and pharynx, external approach, 
new technology group 5). We are inviting public comments on our 
proposal to continue new technology add-on payments for XOSPATA[supreg] 
for FY 2021.
q. JAKAFITM (Ruxolitinib)
    Incyte Corporation submitted an application for new technology add-
on payments for JAKAFITM (ruxolitinib) for FY 2020. 
According to the applicant, JAK inhibition represents a therapeutic 
approach for the treatment of acute graft-versus-host disease (aGVHD) 
in patients who have had an inadequate response to corticosteroids. 
JAKAFITM received FDA approval on May 24, 2019 for the 
treatment of steroid-refractory aGVHD in adult and pediatric patients 
12 years and older. JAKAFITM was approved for new technology 
add on payments for FY 2020. We refer readers to section II.H.5.k. of 
the preamble of the FY 2020 IPPS/LTCH PPS final rule (84 FR 42265 
through 42273) for a complete discussion of the new technology add on 
payment application, coding and payment amount for JAKAFITM 
for FY 2020.
    With regard to the newness criterion for JAKAFITM, we 
consider the beginning of the newness period to commence when 
JAKAFITM was approved by FDA (May 24, 2019). Because the 3-
year anniversary date of the entry of JAKAFITM onto the U.S. 
market (May 24, 2022) will occur after FY 2021, we are proposing to 
continue new technology add-on payments for this technology for FY 
2021. We are proposing that the maximum new technology add-on payment 
for a case involving JAKAFITM would remain at $3,977.06 for 
FY 2021 (we refer readers to the FY 2020 IPPS/LTCH PPS final rule for 
complete discussion of the calculation of the new technology add on 
payment amount for JAKAFITM). Cases involving the use of 
JAKAFITM that are eligible for new technology add-on 
payments are identified by ICD-10-PCS procedure code XW0DXT5 
(Introduction of Ruxolitinib into mouth and pharynx, external approach, 
new technology group 5). We are inviting public comments on our 
proposal to continue new technology add-on payments for 
JAKAFITM for FY 2021.
r. T2Bacteria[supreg] Panel (T2Bacteria Test Panel)
    T2Biosystems, Inc. submitted an application for new technology add-
on payments for the T2Bacteria Test Panel (T2Bacteria[supreg] Panel) 
for FY 2020. The T2Bacteria[supreg] Panel received 510(k) clearance 
from FDA on May 24, 2018 for use as an aid in the diagnosis of 
bacteremia, bacterial presence in the blood, which is a precursor for 
sepsis. Per the FDA cleared indication, results from the 
T2Bacteria[supreg] Panel are not intended to be used as the sole basis 
for diagnosis, treatment, or other patient management decisions in 
patients with suspected bacteremia. Concomitant blood cultures are 
necessary to recover organisms for susceptibility testing or further 
identification, and for organisms not detected by the 
T2Bacteria[supreg] Panel. The T2Bacteria[supreg] Panel was approved for 
new technology add on payments for FY 2020. We refer readers to section 
II.H.5.m. of the preamble of the FY 2020 IPPS/LTCH PPS final rule (84 
FR 42278 through 42288) for a complete discussion of the new technology 
add on payment application, coding and payment amount for the 
T2Bacteria[supreg] Panel for FY 2020.
    With regard to the newness criterion for the T2Bacteria[supreg] 
Panel, we consider the beginning of the newness period to commence when 
the T2Bacteria[supreg] Panel was cleared by FDA (May 24, 2018). 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 32579]]

occurs in the latter half of the upcoming fiscal year. Because the 3-
year anniversary date of the entry of the T2Bacteria[supreg] Panel onto 
the U.S. market (May 24, 2021) will occur in the second half of FY 
2021, we are proposing to continue new technology add-on payments for 
this technology for FY 2021. We are proposing that the maximum new 
technology add-on payment for a case involving the T2Bacteria[supreg] 
Panel would remain at $97.50 for FY 2021 (we refer readers to the FY 
2020 IPPS/LTCH PPS final rule for complete discussion of the 
calculation of the new technology add on payment amount for the 
T2Bacteria[supreg] Panel). Cases involving the use of the 
T2Bacteria[supreg] Panel that are eligible for new technology add-on 
payments are identified by ICD-10-PCS procedure code XXE5XM5 
(Measurement of infection, whole blood nucleic acid-base microbial 
detection, new technology group 5). We are inviting public comments on 
our proposal to continue new technology add-on payments for the 
T2Bacteria[supreg] Panel for FY 2021.
BILLING CODE 4120-01-P

[[Page 32580]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.118


[[Page 32581]]


BILLING CODE 4120-01-C
5. Proposed FY 2021 Applications for New Technology Add-On Payments 
(Traditional Pathway)
a. Accelerate Pheno Test BC kit for Use With Accelerate Pheno System
    Accelerate Diagnostics, Inc. submitted an application for new 
technology add-on payments for the Accelerate PhenoTestTM BC 
kit for FY 2021. According to the applicant, the Accelerate 
PhenoTestTM BC kit is for use with the Accelerate 
PhenoTM system and is the only commercially available 
technology in the U.S. that provides microorganism (bacteria and yeast) 
identification (ID) and phenotypic (MIC-based) antimicrobial 
susceptibility test (AST) results for patients with bacteremia/fungemia 
and a positive blood culture. The applicant stated that the Accelerate 
PhenoTM system is a novel technology for fast diagnosis of 
bloodstream infection that provides these results in approximately 7 
hours, as opposed to standard of care methods that typically take 2-3 
days.
    The applicant stated that other methods that provide phenotypic AST 
results such as current automated ID/AST systems, antibiotic gradient 
strips and disk diffusion require overnight culturing of the bacteria 
to produce an isolated colony of the pathogen, and therefore take 1-2 
days longer than the Accelerate PhenoTestTM BC kit. The 
applicant explained that other isolate-based methods include matrix-
assisted laser desorption/ionization time-of-flight mass spectrometry 
(MALDI-TOF MS) and biochemical methods which only provide 
identification results, but not antibiotic susceptibilities which would 
indicate possible drug resistance in common pathogens and the efficacy 
of the drugs of choice for particular infections. The applicant stated 
that similarly, T2 Dx Biosystems with T2 Bacterial Panel provides a 
rapid organism ID but does not provide antibiotic susceptibility 
results.
    The applicant explained that the Accelerate PhenoTestTM 
BC kit identifies the following Gram-positive and Gram-negative 
bacteria and yeast utilizing fluorescent in-situ hybridization (FISH) 
probes targeting organism-specific ribosomal RNA sequences and tests 
the antimicrobial agents and resistance phenotypes in the organism(s) 
identified in the following table.
[GRAPHIC] [TIFF OMITTED] TP29MY20.119


[[Page 32582]]


[GRAPHIC] [TIFF OMITTED] TP29MY20.120

    The applicant stated that the laboratory workflow for the 
Accelerate PhenoTestTM BC kit is simple and requires ~2 
minutes of hands on laboratory technologist time, in three steps: (1) 
Aliquot 0.5 mL positive blood culture into sample vial; (2) load the 
sample into the Accelerate PhenoTestTM BC kit; and (3) load 
the Accelerate PhenoTestTM BC kit into the Accelerate 
PhenoTM system.
    The applicant explained and stated the following regarding use of 
the Accelerate PhenoTestTM BC kit:
     Microorganism identification (ID) is performed using 
fluorescence in situ hybridization (FISH). Colocalization of target 
(green fluorescence) and universal (red fluorescence) probe signal 
confirms presence and identity of the target organism while 
differentiating from non-specific staining. ID results are produced in 
approximately 2 hours. AST is performed using morphokinetic cellular 
analysis (MCA), which measures morphological and kinetic changes over 
time of organisms exposed to antibiotics.
     MCA is a computer vision-based analytical method that uses 
digital microscopy inputs and machine learning technology to observe 
individual live cells and recognize patterns of change over time. This 
technology tracks and analyzes multiple morphological and kinetic 
changes of individual cells and microcolonies under a variety of 
conditions. These changes include morphokinetic features such as cell 
morphology, mass as measured by light intensity of a growing cells, 
division rate, anomalous growth patterns, and heterogeneity. During 
this period, morphokinetic features are measured and used for analysis; 
the precise quantitative measurement of individual cell growth rate 
over time is a powerful indicator of antimicrobial efficacy. Onboard 
software algorithms derive minimum inhibitory concentration (MIC) 
values from the measured features, and apply appropriate expert rules 
for proper interpretation and reporting of categorical interpretations: 
S, I, or R (susceptible, intermediate, or resistant). According to the 
applicant, AST results are reported in approximately 7 hours from the 
start of the run.
    The applicant stated that rapid ID/genotypic resistance marker 
tests using polymerase chain reaction (PCR) provide partial results and 
no MIC values. The applicant further stated that the clinically 
actionable results using resistant marker tests are less definitive in 
that the absence or presence of a resistance gene does not necessarily 
indicate susceptibility or resistance to an antibiotic.
    According to the applicant, theoretical studies and research not 
conducted with the Accelerate PhenoTestTM BC kit have 
illustrated the strong connection between time to appropriate 
antimicrobial therapy and clinical outcomes for bacteremic patients. 
The applicant stated that time to phenotypic susceptibility results is 
critical for patients with serious infections as studies show a 
measurable increase in mortality for each hour appropriate treatment is 
delayed in patients with septic shock.\1\ The applicant further stated 
that based on these and other results, guidelines from the Surviving 
Sepsis Campaign recommend prescribing empiric broad- spectrum 
antimicrobials within 1 hour of recognition for both sepsis and septic 
shock.\2\ However, the applicant explained that initial empiric therapy 
can be inappropriate in as high as 30-50 percent of 
cases.3 4 The applicant stated that patients treated with 
appropriate versus inappropriate initial antimicrobial therapy have 
been shown to have improved patient outcomes including mortality, 
hospital length of stay (LOS), intensive care unit (ICU) LOS, and days 
on mechanical ventilation.\5\
---------------------------------------------------------------------------

    \1\ Kumar A, et al. Duration of hypotension before initiation of 
effective antimicrobial therapy is the critical determinant of 
survival in human septic shock. Crit Care Med 2006; 34(6):1589-96.
    \2\ Rhodes A, et al. Surviving Sepsis Campaign: International 
Guidelines for Management of Severe Sepsis and Septic Shock: 2016. 
Intensive Care Med 2017; 43(3):304-77.
    \3\ Hecker MT, et al. Unnecessary Use of Antimicrobials in 
Hospitalized Patients. Arch Intern Med 2003; 163:972-8.
    \4\ Herzke CA, et al. Empirical Antimicrobial Therapy for 
Bloodstream Infection Due to Methicillin-Resistant Staphylococcus 
aureus: No Better Than a Coin Toss. Infect Control Hosp Epidemiol 
2009; 30(11):1057-61.
    \5\ Burnham J, et al. Clinical Impact of Expedited Pathogen 
Identification and Susceptibility Testing for Gram-negative 
Bacteremia and Candidemia Using the Accelerate PhenoTM System. 
Poster presented at: IDWeekTM; October 2017, San Diego, CA.
---------------------------------------------------------------------------

    With respect to the newness criterion, the Accelerate 
PhenoTestTM BC kit received FDA de novo clearance on 
February 23, 2017. According to applicant, the technology was on the

[[Page 32583]]

market immediately after FDA approval in February 2017. According to 
the applicant, on September 22, 2019, Accelerate Diagnostics, Inc. 
(AXDX) submitted a 510(k) submission to FDA, which details several 
changes to the Accelerate PhenoTestTM BC kit. According to 
the applicant, the purpose of the 510(k) submission is to present 
product enhancements and include an additional organism-antimicrobial 
combination to the panel. There are currently no ICD-10-PCS procedure 
codes that uniquely identify the use of the Accelerate 
PhenoTM BC kit. We note the applicant submitted a request 
for approval for a unique ICD-10-PCS procedure code to identify use of 
the technology beginning in FY 2021. The applicant provided the 
following ICD-10 codes that they stated would identify cases for which 
their technology is used, in the interim.

[[Page 32584]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.121

    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 purposes of new technology add-on payments.
    With regard to the first criterion, whether a product used the same 
or similar mechanism of action to achieve a therapeutic outcome, 
according to the applicant, the Accelerate PhenoTestTM BC 
kit for use with the Accelerate PhenoTM system is the only 
fast, automated, phenotypic, direct-from-positive blood culture ID/AST 
technology available. The applicant

[[Page 32585]]

explained that it provides MIC values as well as SIR categorical 
designations (that is, susceptible, intermediate, resistant). The 
applicant further explained that MIC results are used to not only 
choose which antimicrobial(s) is/are active for a patient's infection, 
but also may be used to modify dosing, based on the relative degree of 
resistance to an antimicrobial the MIC indicates. The applicant also 
stated that both results are significantly faster than other methods 
(approximately 40 hours faster).
    The applicant stated that in support of the uniqueness of the test 
compared to other technologies, in 2017 the Accelerate 
PhenoTestTM BC kit used with the Accelerate 
PhenoTM system was granted marketing authorization by the 
FDA under the de novo pathway, which is reserved for devices of a new 
type with low-to-moderate risk for which there are no legally marketed 
predicates.
    The applicant explained that other FDA-cleared identification (ID) 
technologies include Bruker Daltonics MALDI TOF-MS, bioMerieux 
Vitek[supreg] MS. Additionally, the applicant noted several FDA-cleared 
AST methods, which are based on broth microdilution (BMD), including 
bioMerieux VITEK[supreg]2, ThermoFisher SensititreTM AST 
system, BD PhoenixTM AST system, and Beckman Coulter 
MicroScan Walkaway. Additionally, the applicant noted that AST can be 
determined using antibiotic gradient strips and disk diffusion. The 
applicant notes all of these technologies require overnight culturing 
to produce an isolated colony of the pathogen, and therefore take 1 to 
2 days longer than the Accelerate PhenoTestTM BC kit.
    According to the applicant, FDA-cleared genotypic technologies 
provide organism identification results and presence/absence of some 
antibiotic resistance genes. The applicant explained that knowledge 
that a gene is present can be used to rule out therapy, but the absence 
of a resistance gene generally does not allow a clinician to rule-in 
antibiotic therapy, unlike phenotypic AST, which can do both. According 
to the applicant, genotypic tests that are FDA cleared and available in 
the US include the BioFire[supreg] FilmArray, Luminex[supreg] 
Verigene[supreg] Nanosphere, GenMark ePlex[supreg] BCID Panel, Curetis 
Unyvero A50 system, iCubate[supreg] iC-systemTM, T2 Dx 
Biosystems with T2 Bacterial Panel, and Cepheid GeneXpert[supreg] 
(Table 2). The applicant explained that rapid ID/genotypic resistance 
marker tests can provide fast results in hours directly from positive 
blood culture; however these methods only provide partial results, 
resulting in less diagnostic certainty. The applicant further explained 
that unlike phenotypic AST results, the absence or presence of a 
resistance gene does not definitively indicate susceptibility or 
resistance to an antibiotic, respectively. The applicant noted that 
resistance can be caused by multiple mutations across >1 gene (that is, 
porin or efflux pump), and resistance depends not only on the presence 
of a gene, but also on its level of expression. The applicant further 
explained that while clinicians can use these partial results to 
prescribe effective therapy in select cases, patients are often left on 
overly broad spectrum therapy, which may or may not be effective for 
that individual because the resistance marker results only allow 
clinicians to rule-out certain therapies.\6\
---------------------------------------------------------------------------

    \6\ Dien Bard J. and Lee F. Why Can't We Just Use PCR? The Role 
of Genotypic versus Phenotypic Testing for Antimicrobial Resistance 
Testing. Clin Microb 40(11): 87.
---------------------------------------------------------------------------

    According to the applicant, in contrast, phenotypic MIC-based 
results are key drivers for clinical decisions when determining 
antibiotics, dose regimen, and de-escalation. The applicant also stated 
that in a recent conference publication, one institution that 
implemented a genotypic resistance marker test found that even after 5 
years of use, clinicians did not de-escalate from empiric 
antimicrobials for 62 percent of patients with E. coli and Klebsiella 
pneumoniae bloodstream infections until phenotypic antimicrobial 
susceptibility results were available.\7\ To address whether the 
version of the Accelerate PhenoTest BC kit currently pending 510(k) 
clearance uses the same or similar mechanism of action to achieve a 
therapeutic outcome as the version that has been on the market since 
February 2017, the applicant provided the following table describing 
the differences between the two products:
---------------------------------------------------------------------------

    \7\ Mead P., Raimondi T., Farrell J. Money For Nothing--
Prospective Examination of Impact of Biofire BC ID PCR on Empiric 
Antibiotic Treatment in Escherichia coli & Klebsiella pneumoniae 
Bacteremia. Poster presented at: ASM Microbe; June 2019, San 
Francisco, CA.
---------------------------------------------------------------------------

BILLING CODE 4120-01-P

[[Page 32586]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.122


[[Page 32587]]


[GRAPHIC] [TIFF OMITTED] TP29MY20.123


[[Page 32588]]


[GRAPHIC] [TIFF OMITTED] TP29MY20.124

BILLING CODE 4120-01-C
    According to the applicant, while this product originally received 
FDA de novo status in February 2017, it should still be considered new 
for the following two reasons. First, the applicant stated that there 
is still no other comparable integrated rapid ID and rapid AST 
diagnostic for positive blood cultures commercially available in the 
US. The applicant stated that this technology was completely novel when 
it was launched and remains alone in its class today. The applicant 
added that this particular technology has yet to experience widespread 
adoption in U.S. hospitals. Second, the applicant stated that it 
submitted an FDA 510(k) submission on Sept. 22, 2019 for a product 
addendum, which contains clinically relevant modifications to the 
originally cleared product, impacting both the organism identification 
and the antibiotic susceptibility testing reportability. The applicant 
stated that it believes the software updates and assay changes 
contained in this submission, and as set forth in the previous table, 
are substantive and meet the criteria for newness.
    With respect to the second criterion, the applicant did not 
indicate whether the Accelerate PhenoTestTM BC kit would be 
assigned to the same MS-DRGs as cases representing patients who receive 
diagnostic information from competing technologies, or from the version 
of the Accelerate PhenoTestTM BC kit that was approved in 
February 2017. However, we believe that cases involving the use of the 
technology would be assigned to the same MS-DRGs as cases involving the 
use of the previous version of the Accelerate PhenoTestTM BC 
Kit that was approved in 2017, as well as cases representing patients 
who receive diagnostic information from competing technologies.
    With respect to the third criterion, the applicant did not specify 
whether the Accelerate PhenoTestTM BC kit involves the 
treatment of the same or similar type of disease and the same or 
similar patient population as existing technologies, including the 
version of the Accelerate PhenoTestTM BC kit that was 
approved in February 2017. However, we believe that both the current 
version of the Accelerate PhenoTestTM BC kit and the 
predicate version of the Accelerate PhenoTestTM BC kit, as 
well as competing technologies that may also aid in diagnosing patients 
with bloodstream infections, would treat the same or similar type of 
disease and patient population.
    The applicant is seeking new technology add-on payments for the 
version of the Accelerate PhenoTestTM BC kit that is the 
subject of the September 2019 510(k) submission to FDA. We are 
concerned that this updated technology may be substantially similar to 
the first version of the Accelerate PhenoTestTM BC kit that 
was first available on the U.S. market in February 2017 and, therefore, 
the technology would not meet the newness criterion. It is not clear 
that the changes made to the product currently pending 510(k) clearance 
would distinguish the mechanism of action of this updated product from 
the mechanism of action of the first version of the technology, which 
received FDA de novo clearance on February 23, 2017. Although we 
understand that the updated version includes software updates and assay 
changes, we believe both tests may nonetheless use the same mechanism 
of action, consisting of phenotypic, direct-from-positive blood culture 
identification and AST technology that provides MIC values as well as 
SIR categorical designations.

[[Page 32589]]

Furthermore, like other available diagnostic tests, the Accelerate 
PhenotypeTM BC Kit uses positive blood cultures to identify 
microorganisms.
    We also are concerned with regard to the lack of information from 
the applicant regarding the second and third substantial similarity 
criteria. Because the first version of the Accelerate 
PhenoTestTM BC kit was first available on the U.S. market in 
February 2017 and because we believe the version that is currently 
pending 510(k) clearance may be substantially similar, we are concerned 
that the product may not be considered new for the purposes of new 
technology add-on payments. We believe the costs associated with the 
Accelerate PhenoTestTM BC kit should be reflected in the 
relative payment weights for the MS-DRGs to which cases involving 
treatment with the Accelerate PhenoTestTM BC kit would be 
assigned, because the product has been on the market and available 
since 2017. Also, similar to our discussion in the FY 2006 IPPS final 
rule (70 FR 47349), whether a technology has yet to experience 
widespread adoption in U.S. hospitals is not relevant to the 
determination of whether the technology is ``new.'' Consistent with the 
statute, a technology no longer qualifies as ``new'' once it is more 
than 2 to 3 years old, irrespective of how frequently it has been used 
in the Medicare population. Therefore, if a product is more than 2 to 3 
years old, we consider its costs to be included in the MS-DRG relative 
weights whether its use in the Medicare population has been frequent or 
infrequent. We are inviting public comments on whether the Accelerate 
PhenoTestTM BC kit is substantially similar to other 
technologies, including the version of this technology that received 
FDA de novo clearance on February 23, 2017, and whether the Accelerate 
PhenoTestTM BC kit 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. The applicant identified 43 ICD-10-CM diagnosis codes that 
apply to conditions for which its technology may be used, and then 
applied these 43 codes to the MEDPAR Limited Data Set (LDS)--Hospital 
(National) FY 2018 (Proposed Rule) data, in order to identify cases for 
which the use of Accelerate PhenoTestTM BC kit could be 
appropriate. These diagnosis codes are the 41 diagnosis codes listed in 
the previous table, along with ICD-10-CM codes R78.81 (Bacteremia) and 
B49 (Unspecified mycosis).
    According to the applicant, this process resulted in 27,971 cases 
spanning 411 MS-DRGs, with approximately 80 percent of those cases 
mapping to the following top 8 MS-DRGs:
[GRAPHIC] [TIFF OMITTED] TP29MY20.125

    The applicant performed two analyses to demonstrate that the 
technology meets the cost criterion. The first analysis was based on 
100 percent of the claims that included the specified ICD-10 codes, 
while the second analysis was based on the 80 percent of claims that 
mapped to the top 8 MS-DRGs listed previously.
    Under both analyses, the applicant removed charges for prior 
technology or technology being replaced. Using Accelerate Diagnostics 
customer cost and utilization information and the National Average 
Laboratory Cost-to-Charge Ratio (CCR) of 0.109 (84 FR 42179), the 
applicant estimated the charge for prior technology as approximately 
$339. Specifically, the applicant multiplied an 80 percent utilization 
by a cost of $15 for the MALDI-TOF MS-based test and multiplied a 25 
percent utilization by a cost of $100 for the Molecular BCID. The 
applicant then added these calculations, reaching a sum of $37 of 
estimated cost. The applicant divided this cost by the National Average 
Laboratory CCR (0.109), reaching an estimated charge of $339.45. The 
applicant also removed other charges related to the prior technology, 
assuming cost savings related to reduced LOS, vancomycin avoidance, C. 
difficile infection avoidance, and acute kidney injury avoidance based 
on data from provided studies.8 9 10 11 12 13 14
---------------------------------------------------------------------------

    \8\ 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):2039-46.
    \9\ Chertow GM, et al. Acute kidney injury, mortality, length of 
stay, and costs in hospitalized patients. J Am Soc Nephrol 2005; 
16:3365-70.
    \10\ Sheth S, et al. Impact of Rapid Identification (ID) and 
Antimicrobial Susceptibility Testing (AST) on Antibiotic Therapy and 
Outcomes for Patients with Bacteraemia/Candidaemia. Poster presented 
at: ECCMID; April 2019, Amsterdam, Netherlands.
    \11\ Henry J Kaiser Family Foundation. Hospital Adjusted 
Expenses per Inpatient Day by Ownership. KFF website: https://www.kff.org/health-costs/state-indicator/expenses-per-inpatient-day-by-ownership. Published 2016. Accessed June 6, 2019.
    \12\ Suryadevara M, et al. Inappropriate Vancomycin Therapeutic 
Drug Monitoring in Hospitalized Pediatric Patients Increases 
Pediatric Trauma and Hospital Costs. J Pediatr Pharmacol Ther 2012; 
17(2):159-65.
    \13\ 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):2039-46.
    \14\ Dare R, et al. Impact of Accelerate PhenoTM 
Rapid Blood Culture Detection System on Laboratory and Clinical 
Outcomes in Bacteremic Patients. Oral presentation at: 
IDWeekTM; October 2018, San Francisco, CA.
---------------------------------------------------------------------------

    The applicant then standardized the charges and applied the 2-year 
outlier inflation factor of 11.1 percent used to update the outlier 
threshold in the FY 2020 IPPS final rule (84 FR 42629). The applicant 
indicated an estimated per patient cost for the Accelerate 
PhenoTestTM BC kit of $375.17 (based on current average 
sales price of the Accelerate PhenoTestTM BC kit, plus 
market data on several other associated elements of per-patient cost 
enumerated by the applicant). The applicant then added charges for the 
Accelerate PhenoTestTM BC kit by dividing the average 
hospital cost per patient of $375.17 by the National Average Laboratory 
CCR of 0.109.
    The applicant reported that these analyses met the cost criterion 
in each instance. For the analysis based on 100 percent of cases, the 
applicant

[[Page 32590]]

computed a final inflated average case weighted standardized charge per 
case of $107,432, as compared to an average case-weighted threshold 
amount of $75,101. For the analysis based on the 80 percent of cases in 
the top eight MS-DRGs, the applicant computed a final inflated average 
case weighted standardized charge per case of $86,956, as compared to 
the average case-weighted threshold amount of $71,401. Because the 
final inflated average case-weighted standardized charge per case 
exceeded the average case-weighted threshold amount under both analyses 
described previously, the applicant asserted that the technology meets 
the cost criterion.
    We are inviting public comments on whether the Accelerate 
PhenoTestTM BC Kit meets the cost criterion.
    With respect to the substantial clinical improvement criterion, the 
applicant asserted that the Accelerate PhenoTest BC kit represents a 
substantial clinical improvement over existing technology because data 
from studies show that it offers the ability to diagnose a medical 
condition earlier than allowed by currently available methods. 
Additionally, the applicant stated that these studies suggest the 
Accelerate PhenoTest BC kit improves clinical outcomes relative to 
services or technologies previously available. Specifically, according 
to the applicant, the studies demonstrate a reduction in clinically 
significant adverse events such as lower mortality, a decrease in 
inappropriate therapy, a more rapid resolution, and the termination of 
antibiotic therapy.
    The applicant submitted fifteen published peer-reviewed articles 
that the applicant stated demonstrate the ability to diagnose a medical 
condition earlier than allowed by currently available methods. Per the 
applicant, the results demonstrated the following: reduction in time to 
AST results, de-escalation or escalation, and hands-on time; decreased 
time to step-down therapy, initiation of definitive therapy (TTDT), 
optimal therapy (TTOT), effective therapy (TTET) and active therapy; 
and decreased use of aminopenicillin + B-lactamase, cefepime, 
aminoglycosides, piperacillin-tazobactam, and vancomycin. The applicant 
also asserted that the results demonstrated reduced length of stay, 
total antibiotic days on therapy (DOT), antibiotic intensity score, 
average number of antibiotic days, median days of broad-spectrum 
antibiotics, time to first antibiotic modification and first Gram 
negative antibiotic modification, and inpatient mortality. We summarize 
the studies the applicant provided as follows:
     Brazelton de Cardenas, et al.\15\ is an equivalency 
performance (methods comparison) paper and showed identification 
sensitivity of 91.2 percent and AST categorical agreement (CA) of 91.2-
91.8 percent. The applicant explained that the time to results for the 
Accelerate PhenoTestTM BC kit for use with the Accelerate 
PhenoTM system were 40.1 hours faster than standard of care 
(VITEK[supreg]2 and BMD).
---------------------------------------------------------------------------

    \15\ Brazelton de Cardenas JN, Su Y, Rodriguez A, et al. 
Evaluation of rapid phenotypic identification and antimicrobial 
susceptibility testing in a pediatric oncology center. Diagn 
Microbiol Infect Dis 2017; 89: 52-7.
---------------------------------------------------------------------------

     Bowler, et al.\16\ is an equivalency performance paper 
that examined Acinetobacter clinical isolates showing ID sensitivity of 
97.6 percent and specificity of 86.6 percent and AST essential 
agreement of 98.0 percent. The applicant stated that standard of care 
was MALDI-TOF MS for ID and broth microdilution (BMD) for AST.
---------------------------------------------------------------------------

    \16\ Bowler et al. Evaluation of the Accelerate 
PhenoTM System for identification of Acinetobacter 
clinical isolates and minocycline susceptibility testing. J Clin 
Microbiol. 2019 57(3):e01711-18.
---------------------------------------------------------------------------

     Burnham, et al.\17\ is an equivalency performance paper 
showing ID sensitivity of 91.5 percent and specificity of 99.6 percent 
and AST CA of 91.0 percent. The applicant explained that the time to 
results for the Accelerate PhenoTestTM BC kit for use with 
the Accelerate PhenoTM system was 40.8 hours faster than 
standard of care (VITEK[supreg]2 or DD for AST).
---------------------------------------------------------------------------

    \17\ Burnham JP, Wallace MA, Fuller BM, et al. Clinical Effect 
of Expedited Pathogen Identification and Susceptibility Testing for 
Gram-Negative Bacteremia and Candidemia by Use of the Accelerate 
PhenoTM System. J Appl Lab Med 2019. 3(6):569.
---------------------------------------------------------------------------

     Charnot-Katsikas, et al.\18\ is an equivalency performance 
paper showing ID sensitivity of 95.6 percent and specificity of 99.5 
percent and AST EA of 95.1 percent and CA of 95.5 percent. The 
applicant explained that the time to results for the Accelerate 
PhenoTestTM BC kit for use with the Accelerate 
PhenoTM system was 41.86 hours faster than standard of care 
(VITEK MS for ID and VITEK2 for AST) and reduction in hands-on time was 
25.5 minutes per culture.
---------------------------------------------------------------------------

    \18\ Charnot-Katsikas A, Tesic V, Love N, et al. Use of the 
Accelerate PhenoTM System for Identification and 
Antimicrobial Susceptibility Testing of Pathogens in Positive Blood 
Cultures and Impact on Time to Results and Workflow. J Clin 
Microbiol 2018; 56.
---------------------------------------------------------------------------

     De Angelis, et al.\19\ is an equivalency performance paper 
showing antimicrobial susceptibility testing (AST) categorical 
agreement (CA) of 92.7 percent for gram-positive and 99.0 percent for 
gram-negative organisms. The applicant explained that the standard of 
care was BMD for AST.
---------------------------------------------------------------------------

    \19\ De Angelis G, Posteraro B, Menchinelli G, et al. 
Antimicrobial susceptibility testing of pathogens isolated from 
blood culture: a performance comparison of Accelerate 
PhenoTM and VITEK[supreg]2 systems with broth 
microdilution method. J Antimicrob Chemother 2019. 74 
(Supplement_1):i24-i31.
---------------------------------------------------------------------------

     Descours, et al.\20\ is an equivalency performance paper 
showing ID sensitivity of 96.2 percent and AST EA of 92.3 percent and 
CA of 93.7 percent. The applicant explained that the time to results 
for the Accelerate PhenoTestTM BC kit for use with the 
Accelerate PhenoTM system was 24.4 hours faster than MALDI-
TOF MS for ID and VITEK[supreg]2/traditional BMD for AST. According to 
the applicant, the study concluded that overall categorical agreement 
was decreased for beta-lactams (cefepime 84.4 percent, piperacillin-
tazobactam 86.5 percent, ceftazidime 87.6 percent) or Pseudomonas 
aeruginosa (71.9 percent; with cefepime 33.3 percent, piperacillin-
tazobactam 77.8 percent, ceftazidime 0 percent).
---------------------------------------------------------------------------

    \20\ Descours G, Desmurs L, Hoang TLT, et al. Evaluation of the 
Accelerate PhenoTM system for rapid identification and 
antimicrobial susceptibility testing of Gram-negative bacteria in 
bloodstream infections. Eur J Clin Microbiol Infect Dis 2018; 37: 
1573-83.
---------------------------------------------------------------------------

     Giordano, et al.\21\ is an equivalency performance paper 
showing ID sensitivity of 97 percent and AST CA of 91.3 percent 
(breakdown of 94.7 percent gram-positive (GP) and 90.2 percent gram-
negative (GN) organisms) and EA of 81.8 percent. Standard of care was 
MALDI-TOF MS for ID and Sensitire/traditional BMD for AST. According to 
the applicant, the paper concluded that both methodologies provided 
comparable results, showing no statistically significant differences. 
The study concluded that the time to obtain ID and AST as well as costs 
are lower for Alfred 60AST combined with MALDI-TOF MS; however, the 
PhenoTest BC kit provides both identification and MIC determination in 
one cartridge. The study noted that both systems were determined to 
allow for proper diagnostic stewardship in order to hinder sepsis and 
minimize the spread of bacterial resistance.
---------------------------------------------------------------------------

    \21\ Giordano C, Piccoli E, Brucculeri V, et al. A Prospective 
Evaluation of Two Rapid Phenotypical Antimicrobial Susceptibility 
Technologies for the Diagnostic Stewardship of Sepsis. Biomed Res 
Int 2018; 2018: 6976923.
---------------------------------------------------------------------------

     Lutgring et al.\22\ is an equivalency performance paper 
showing ID sensitivity of 94.7 percent and

[[Page 32591]]

specificity of 98.9 percent and AST CA of 94.1 percent. The applicant 
explained that the time to results for the Accelerate 
PhenoTestTM BC kit for use with the Accelerate 
PhenoTM system was 48.4 hours faster than standard of care 
(MicroScan WalkAway (ID and AST), MALDI or biochemical or API strips 
(ID)).
---------------------------------------------------------------------------

    \22\ Lutgring JD, Bittencourt C, McElvania TeKippe E, et al. 
Evaluation of the Accelerate PhenoTM System: Results from 
Two Academic Medical Centers. J Clin Microbiol 2018; 56.
---------------------------------------------------------------------------

     The applicant explained that Marschal, et al.\23\ is an 
equivalency performance paper showing ID sensitivity of 97.1 percent 
and AST CA of 96.4 percent. The applicant explained that the time to 
results for the Accelerate PhenoTestTM BC kit for use with 
the Accelerate PhenoTM system was 40.39 hours faster than 
standard of care (MALDI-TOF MS for ID and VITEK[supreg]2/Etest for 
AST).
---------------------------------------------------------------------------

    \23\ Marschal M, Bachmaier J, Autenrieth I, et al. Evaluation of 
the Accelerate Pheno System for Fast Identification and 
Antimicrobial Susceptibility Testing from Positive Blood Cultures in 
Bloodstream Infections Caused by Gram-Negative Pathogens. J Clin 
Microbiol 2017; 55: 2116-26.
---------------------------------------------------------------------------

     Pancholi, et al.\24\ is an equivalency performance paper 
showing ID sensitivity of 97.5 percent and specificity of 99.5 percent 
and AST CA of 97.6 percent (GP) and 95.4 percent (GN) and AST EA of 
97.9 percent (GP) and 94.3 percent GN. The applicant noted that 
standard of care was VITEK[supreg]2 for ID and BMD or DD for AST.
---------------------------------------------------------------------------

    \24\ Pancholi P, Carroll KC, Buchan BW, et al. Multicenter 
Evaluation of the Accelerate PhenoTestTM BC Kit for Rapid 
Identification and Phenotypic Antimicrobial Susceptibility Testing 
Using Morphokinetic Cellular Analysis. J Clin Microbiol 2018; 56.
---------------------------------------------------------------------------

     Pantel, et al.\25\ is an equivalency performance paper 
showing ID sensitivity of 100 percent and AST CA of 94.9 percent. The 
applicant explained that the standard of care was VITEK MS and 
VITEK[supreg]2 for ID and DD Etest for AST.
---------------------------------------------------------------------------

    \25\ Pantel A, Monier J, Lavigne JP. Performance of the 
Accelerate PhenoTM system for identification and 
antimicrobial susceptibility testing of a panel of multidrug-
resistant Gram-negative bacilli directly from positive blood 
cultures. J Antimicrob Chemother 2018; 73: 1546-52.
---------------------------------------------------------------------------

     Sofjan, et al.,\26\ is an equivalency performance paper 
showing ID sensitivity of 98.0 percent and specificity of 99.5 percent 
and AST EA of 97.4 percent and CA of 97.9 percent. The applicant 
explained that the time to results for the Accelerate 
PhenoTestTM BC kit for use with the Accelerate 
PhenoTM system was 63.3 hours faster than standard of care 
(VITEK2 (ID and AST), Etest (AST)).
---------------------------------------------------------------------------

    \26\ Sofjan AK, Casey BO, Xu BA, et al. Accelerate 
PhenoTestTM BC Kit Versus Conventional Methods for 
Identification and Antimicrobial Susceptibility Testing of Gram-
Positive Bloodstream Isolates: Potential Implications for 
Antimicrobial Stewardship. Ann Pharmacother 2018; 52: 754-62.
---------------------------------------------------------------------------

     Schneider, et al.\27\ is an equivalency performance paper 
showing an AST CA of 94.7 percent. The applicant explained that the 
time to results for the Accelerate PhenoTestTM BC kit for 
use with the Accelerate PhenoTM system was 22.6 hours faster 
than standard of care (VITEK2 (AST)).
---------------------------------------------------------------------------

    \27\ Schneider JG, Wood JB, Smith NW, et al. (2019) Direct 
antimicrobial susceptibility testing of positive blood cultures: A 
comparison of the accelerate PhenoTM and VITEK[supreg]2 
systems. Diagn Microbiol Infect Dis [epub ahead of print].
---------------------------------------------------------------------------

     Ward, et al.\28\ is an equivalency performance paper 
showing ID sensitivity of 88.0 percent and AST EA of 91.6 percent and 
CA of 93.4 percent. According to the applicant, the time to results for 
the Accelerate PhenoTestTM BC kit for use with the 
Accelerate PhenoTM system was 41.95 hours faster than 
standard of care (MALDI-TOF MS for ID and VITEK2 + Verigene (BC-GP) for 
AST).
---------------------------------------------------------------------------

    \28\ Ward E, Weller K, Gomez J, et al. Evaluation of a Rapid 
System for Antimicrobial Identification and Antimicrobial 
Susceptibility Testing in Pediatric Bloodstream Infections. J Clin 
Microbiol 2018. 56(9). pii: e00762-18.
---------------------------------------------------------------------------

     Starr, et al.\29\ is an equivalency performance paper 
showing AST EA of 96.5 percent and CA of 94.6 percent. The applicant 
explained that the average time to ID was reduced by 24.9  
6.9 hours and AST by 36.7 18.9 hours compared with standard 
of care (MALDI-TOF MS for ID and MicroScan and BMD for AST).
---------------------------------------------------------------------------

    \29\ Starr KF, Robinson DC, and Hazen KC. Performance of the 
Accelerate Diagnostics PhenoTM system with resin-
containing BacT/ALERT[supreg] Plus blood culture bottles. Diagn 
Microbiol Infect Dis 2019 pii: S0732-8893(18)30345-6.
---------------------------------------------------------------------------

    Additionally, the applicant provided four outcomes peer reviewed 
articles that it stated suggest the Accelerate PhenoTestTM 
BC kit for use with the Accelerate PhenoTM system improves 
clinical outcomes relative to services or technologies previously 
available as demonstrated by reducing clinically significant adverse 
events.
     Ehren, et al.\30\ is a prospective outcome study that 
found statistically significant reduction for (1) time to step-down Abx 
therapy (p=0.019), (2) time to optimal antibiotic therapy (p=0.024), 
and (3) time to definitive therapy (p=0.005). The applicant noted that 
statistical significance was achieved despite low sample size of 204.
---------------------------------------------------------------------------

    \30\ Ehren K, Mei[beta]ner A, Jazmati N, et al. Clinical impact 
of rapid species identification from positive blood cultures with 
same-day phenotypic antimicrobial susceptibility testing on the 
management and outcome of bloodstream infections. Clin Infect Dis 
2019. ciz406 [Epub ahead of print].
---------------------------------------------------------------------------

     Henig, et al., 2018 \31\ is a retrospective outcome study 
reporting time to effective therapy (TTET) and time to definitive 
therapy (TTDT) of 25.9 h (Interquartile Range (IQR) 18.5, 42.1) and 
47.6 h (IQR, 24.9, 79.6), respectively. The applicant explained that 
almost half of the patients had potential improvement in TTET and/or 
TTDT with Accelerate PhenoTM system. The applicant explained 
that in patients who would have had a benefit the median potential 
decreases in TTET and TTDT were 16.6 h (IQR, 5.5 to 30.6) and 29.8 h 
(IQR, 13.6 to 43), respectively.
---------------------------------------------------------------------------

    \31\ Henig O, Kaye KS, Chandramohan S, et al. The Hypothetical 
Impact of Accelerate PhenoTM (ACC) on Time to Effective 
Therapy and Time to Definitive Therapy for bloodstream infections 
due to drug-resistant Gram-negative bacilli. Antimicrob Agents 
Chemother. 2018. Epub ahead of print.
---------------------------------------------------------------------------

     Henig, et al., 2019 \32\ is a retrospective outcome study 
reporting a median time to effective therapy (TTET) of 2.4 h (IQR 0.5, 
15.1), and Accelerate PhenoTM system results could have 
improved TTET in 4 patients (2.4%) by a median decrease of 18.9 h (IQR 
11.3, 20.4). The applicant explained that the median time to definitive 
therapy (TTDT) was 41.4 h (IQR 21.7, 73.3) and Accelerate 
PhenoTM system results could have improved TTDT among 51 
patients (30.5%), by a median decrease of 25.4 h (IQR 18.7, 37.5). The 
applicant explained that the Accelerate PhenoTM system 
implementation could have led to decreased usage of cefepime (16% 
less), aminoglycosides (23%), piperacillin-tazobactam (8%), and 
vancomycin (4%). The study noted that the impact of the Accelerate 
PhenoTM system on TTET was small, likely related to the 
availability of other rapid diagnostic tests at the study location.
---------------------------------------------------------------------------

    \32\ Henig O, Cooper CC, Kaye KS, et al. The hypothetical impact 
of Accelerate Pheno on time to effective therapy and time to 
definitive therapy in an institution with an established 
antimicrobial stewardship program current utilizing rapid genotypic 
organism/resistance marker identification. J Antimicrob Chemother 
2019. 74 (Supplement_1):i32-i39.
---------------------------------------------------------------------------

     Schneider, et al.\33\ paper had both an outcome and a 
performance component. The applicant explained that if Accelerate 
PhenoTest results had been available to inform patient care, 25 percent 
of patients could have been put on active therapy sooner, while 78 
percent of patients who had therapy optimized during hospitalization 
could have had therapy optimized sooner. The applicant explained that 
additionally, Accelerate PhenoTM system results

[[Page 32592]]

could have reduced time to de-escalation (16 versus 31 h) and 
escalation (19 versus 31 h) compared with SOC. The applicant further 
explained that the paper reported an ID sensitivity of 95.9 percent, 
specificity of 99.9 percent, AST EA of 94.5 percent, and CA of 93.5 
percent. The applicant explained that the time to results for the 
Accelerate PhenoTestTM BC kit for use with the Accelerate 
PhenoTM system was 26 hours faster than SOC (Verigene BCID-
GN and MALDI-TOF MS for ID, and VITEK2 and BMD for AST).
---------------------------------------------------------------------------

    \33\ Schneider JC, Wood JB, Bryan H, et al. Susceptibility 
Provision Enhances Effective De-Escalation (SPEED). Utilizing Rapid 
Phenotypic Susceptibility Testing in Gram-Negative Bloodstream 
Infections and its Potential Clinical Impact. J Antimicrob Chemother 
2019. 74 (Supplement_1):i16-i23.
---------------------------------------------------------------------------

    Additionally, the applicant provided six posters that were 
presented at conferences to support its claims of substantial clinical 
improvement.
     Dare, et al.\34\ poster provided an interim analysis of a 
dataset (N=154) from single center, retrospective chart review study 
that showed 3-day reduction in length of stay (LOS) (p=0.03), 2-day 
reduction in days on therapy (DOT) (p=0.05), and 36-hour reduction in 
time to optimal therapy (TTOT) (p<0.001).
---------------------------------------------------------------------------

    \34\ Dare, R., McCain, K., Lusardi, K., et al. Impact of 
Accelerate PhenoTM Rapid Blood Culture Detection System 
on Laboratory and Clinical Outcomes in Bacteremic Patients. Poster 
presented at: ID Week; October 2018, San Francisco, CA. https://idsa.confex.com/idsa/2018/webprogram/Paper70067.html.
---------------------------------------------------------------------------

     Sheth, et al.\35\ poster provided an interim analysis of a 
dataset (N=173) from a quasi-experimental outcome study (with a 
prospective and retrospective arm). The applicant explained that it 
showed a 2-day reduction in length of stay (LOS) (p=0.002), reduction 
in antibiotic intensity score (p=0.0002), and reduction of median days 
broad-spectrum antibiotics (p<0.0001).
---------------------------------------------------------------------------

    \35\ Sheth S, Miller M, Baker S. Impact of rapid identification 
and antimicrobial susceptibility testing on antibiotic therapy and 
outcomes for patients with Gram-negative bacteraemia or candidaemia 
at an acute care hospital. Poster presented at: The 2019 European 
Congress of Clinical Microbiology and Infectious Disease (ECCMID); 
Amsterdam.
---------------------------------------------------------------------------

     Chirca, et al.\36\ poster provided a prospective analysis 
of positive blood cultures. The applicant explained that it showed that 
after the implementation of the Accelerate PhenoTM system, 
there was a decrease in sepsis due to bloodstream infections (BSI) as a 
percentage of inpatient mortality and average number of antibiotic 
days.
---------------------------------------------------------------------------

    \36\ Chirca I, Albrecht A, Patel A, et al. Integration of a new 
rapid diagnostic test with antimicrobial stewardship in a community 
hospital. Poster presented at: The Society for Healthcare 
Epidemiology of America 2019 Boston, MA.
---------------------------------------------------------------------------

     Banerjee, et al.\37\ was a prospective randomized study of 
448 patients. The applicant explained that it showed a significant 
reduction in the time to results (AST: 13 vs. 54.6 h, p<0.001), time to 
first antibiotic modification (8.6 vs. 14.9 h, p=0.02) and time to gram 
negative antibiotic modification (17.4 vs. 42.1 h, p<0.0001).
---------------------------------------------------------------------------

    \37\ Banerjee R, Komarow L, Virk A, et al. Randomized Clinical 
Trial Evaluating Clinical Impact of RAPid IDentification and 
Antimicrobial Susceptibility Testing for Gram-Negative Bacteremia 
(RAPIDS-GN). Poster presented at: ID Week; October 2019, Washington, 
DC.
---------------------------------------------------------------------------

     Pearson, et al.,\38\ provided a quasi-experimental before/
after study of 496 patients. The applicant explained that it showed 
significant reduction in length of stay (LOS) (9.54 vs 11.89 days, 
p<0.01). reduction in time to optimal therapy days (TTOT) (1.58 v 2.69, 
p<0.01), and reduction in time to optimal treatment (95.4% vs 84.6%, 
p<0.01).
---------------------------------------------------------------------------

    \38\ Pearson C, Lusardi K, McCain K, et al. Impact of Accelerate 
PhenoTM Rapid Blood Culture Detection System with Real 
Time Notification versus Standard Antibiotic Stewardship on Clinical 
Outcomes in Bacteremic Patients. Abstract and Poster presented at: 
ID Week; October 2019, Washington, DC.
---------------------------------------------------------------------------

     Kinn, et al.\39\ showed that recommendations (bug-drug 
mismatch, de-escalation, dose optimization, and infectious disease 
consult) were accepted at a rate of 97.4 percent, according to the 
applicant.
---------------------------------------------------------------------------

    \39\ Kinn et al. Real-World Impact of Accelerate Pheno 
Implementation with Antimicrobial Stewardship Intervention. Poster 
presented at IDWeekTM 2019.
---------------------------------------------------------------------------

    The applicant also explained that an oral presentation by Walsh, et 
al.\40\ detailed the clinical improvements an institution realized 
since implementing the Accelerate PhenoTestTM BC kit, 
including a 4.6 day reduction in days of antimicrobial therapy, a 2.2 
day reduction in ICU length of stay, and a decrease in sepsis-related 
readmission rates from 21.8 percent to 14.3 percent.
---------------------------------------------------------------------------

    \40\ Walsh, Thomas. Impact of Accelerate PhenoTM 
System on Management of Gram Negative Bacteremia at an Academic 
Medical Center. Oral presentation given at SCACM West Virginia 2019.
---------------------------------------------------------------------------

    The applicant asserted that these studies supported that the 
technology represents a substantial clinical improvement, for the 
following reasons:
     The claim of reduction in time to AST results is supported 
by evidence, per the applicant, from 10 out of 19 studies that show the 
time to AST results over standard of care (SOC) are 40.1, 40.8, 41.86, 
24.4, 48.4, 40.39, 63.3, 22.6, 41.96, and 36.7 hours, which averages to 
40.05 hours. The applicant asserted that this reduction shows the 
ability to diagnose a medical condition (antibiotic resistance or 
susceptibility) earlier than allowed by currently available methods. 
The applicant cited the following studies to support this claim: 
Brazelton,\41\ Burnham,\42\ Charnot-Katsikas,\43\ Descours,\44\ 
Lutgring,\45\ Marschal,\46\ Sofjan,\47\ Schneider,\48\ Ward,\49\ and 
Starr.\50\
---------------------------------------------------------------------------

    \41\ Brazelton de Cardenas JN, Su Y, Rodriguez A, et al. 
Evaluation of rapid phenotypic identification and antimicrobial 
susceptibility testing in a pediatric oncology center. Diagn 
Microbiol Infect Dis 2017; 89: 52-7.
    \42\ Burnham JP, Wallace MA, Fuller BM, et al. Clinical Effect 
of Expedited Pathogen Identification and Susceptibility Testing for 
Gram-Negative Bacteremia and Candidemia by Use of the Accelerate 
PhenoTM System. J Appl Lab Med 2019. 3(6):569.
    \43\ Charnot-Katsikas A, Tesic V, Love N, et al. Use of the 
Accelerate PhenoTM System for Identification and 
Antimicrobial Susceptibility Testing of Pathogens in Positive Blood 
Cultures and Impact on Time to Results and Workflow. J Clin 
Microbiol 2018; 56.
    \44\ Descours G, Desmurs L, Hoang TLT, et al. Evaluation of the 
Accelerate PhenoTM system for rapid identification and 
antimicrobial susceptibility testing of Gram-negative bacteria in 
bloodstream infections. Eur J Clin Microbiol Infect Dis 2018; 37: 
1573-83.
    \45\ Lutgring JD, Bittencourt C, McElvania TeKippe E, et al. 
Evaluation of the Accelerate PhenoTM System: Results from 
Two Academic Medical Centers. J Clin Microbiol 2018; 56.
    \46\ Marschal M, Bachmaier J, Autenrieth I, et al. Evaluation of 
the Accelerate Pheno System for Fast Identification and 
Antimicrobial Susceptibility Testing from Positive Blood Cultures in 
Bloodstream Infections Caused by Gram-Negative Pathogens. J Clin 
Microbiol 2017; 55: 2116-26.
    \47\ Sofjan AK, Casey BO, Xu BA, et al. Accelerate 
PhenoTestTM BC Kit Versus Conventional Methods for 
Identification and Antimicrobial Susceptibility Testing of Gram-
Positive Bloodstream Isolates: Potential Implications for 
Antimicrobial Stewardship. Ann Pharmacother 2018; 52: 754-62.
    \48\ Schneider JG, Wood JB, Smith NW, et al. (2019) Direct 
antimicrobial susceptibility testing of positive blood cultures: A 
comparison of the accelerate PhenoTM and VITEK[supreg] 2 
systems. Diagn Microbiol Infect Dis [epub ahead of print].
    \49\ Ward E, Weller K, Gomez J, et al. Evaluation of a Rapid 
System for Antimicrobial Identification and Antimicrobial 
Susceptibility Testing in Pediatric Bloodstream Infections. J Clin 
Microbiol 2018. 56(9). pii: e00762-18.
    \50\ Starr KF, Robinson DC, and Hazen KC. Performance of the 
Accelerate Diagnostics PhenoTM system with resin-
containing BacT/ALERT[supreg] Plus blood culture bottles. Diagn 
Microbiol Infect Dis 2019 pii: S0732-8893(18)30345-6.
---------------------------------------------------------------------------

     The claim of reduction in hands-on time is supported, 
according to the applicant, by evidence from the Charnot-Katsikas \51\ 
study, which the applicant stated shows a reduction in hands on time 
observed of 25.5 min per culture over standard of care methods.
---------------------------------------------------------------------------

    \51\ Charnot-Katsikas A, Tesic V, Love N, et al. Use of the 
Accelerate PhenoTM System for Identification and 
Antimicrobial Susceptibility Testing of Pathogens in Positive Blood 
Cultures and Impact on Time to Results and Workflow. J Clin 
Microbiol 2018; 56.
---------------------------------------------------------------------------

     The applicant stated that the Ehren \52\ study supports 
four of its

[[Page 32593]]

claims regarding substantial clinical improvement.
---------------------------------------------------------------------------

    \52\ Ehren K, Mei[beta]ner A, Jazmati N, et al. Clinical impact 
of rapid species identification from positive blood cultures with 
same-day phenotypic antimicrobial susceptibility testing on the 
management and outcome of bloodstream infections. Clin Infect Dis 
2019. Ciz406 [Epub ahead of print].
---------------------------------------------------------------------------

    ++ Per the applicant, the claim of decreased time to step-down 
therapy is supported by the findings in that study that the time to 
step-down antimicrobial therapy was significantly decreased in the 
Accelerate PhenoTM BC kit with antimicrobial stewardship 
intervention (12 h; p= 0.019).
    ++ Per the applicant, the claim of decreased time to initiation of 
definitive therapy (TTDT) is supported by the findings that the time to 
recommendation of definitive therapy (26.5 vs. 7.7 h, p=0.000) and time 
to definitive therapy (TTDT) (25.7 vs. 7.5 h, p=0.005) was 
significantly shorter using the Accelerate PhenoTM BC kit 
with antimicrobial stewardship intervention.
    ++ Per the applicant, the claim of decreased time to optimal 
therapy (TTOT) is supported by the findings that the use of Accelerate 
PhenoTM BC kit significantly decreased time from Gram stain 
to ID (23 vs. 2.2 h, p<0.001) and AST (23 vs. 7.4 hours, p<0.001) and 
decreased time from Gram stain to optimal therapy (11 vs. 7 hours, 
p=0.024) and to step-down antimicrobial therapy (27.8 vs. 12 hours, 
p=0.019).
    ++ Per the applicant, the claim of decreased use of aminopenicillin 
+ [szlig]-lactamase is supported by the findings that within 5 days 
after blood culture draw, utilization of aminopenicillins + [szlig]-
lactamase inhibitors was significantly reduced (26.4 vs. 9.7 h, 
p<0.001) in the group with Accelerate PhenoTM BC kit with 
antimicrobial stewardship.
     The applicant stated that the first Henig \53\ study 
supports two of its claims regarding substantial clinical improvement.
---------------------------------------------------------------------------

    \53\ Henig O, Kaye KS, Chandramohan S, et al. The Hypothetical 
Impact of Accelerate PhenoTM (ACC) on Time to Effective 
Therapy and Time to Definitive Therapy for bloodstream infections 
due to drug-resistant Gram-negative bacilli. Antimicrob Agents 
Chemother. 2018. Epub ahead of print.
---------------------------------------------------------------------------

    ++ Per the applicant, the claim of time to effective therapy (TTET) 
is supported by the findings that the TTET was 25.9 h, and almost half 
of the patients had potential improvement in TTET and/or TTDT with 
Accelerate PhenoTM BC kit. The applicant explained that in 
patients who would have had a benefit, the median potential decrease in 
TTET was 16.6 h.
    ++ Per the applicant, the claim of time to definitive therapy 
(TTDT) is supported by the findings that the TTDT was 47.6 h, and 
almost half of the patients had potential improvement in TTET and/or 
TTDT with Accelerate PhenoTM BC kit. The applicant explained 
that in patients who would have had a benefit, the median potential 
decrease in TTDT was 29.8 h.
     The applicant stated that the second Henig \54\ study 
supports three of its claims regarding substantial clinical 
improvement.
---------------------------------------------------------------------------

    \54\ Henig O, Cooper CC, Kaye KS, et al. The hypothetical impact 
of Accelerate PhenoTM on time to effective therapy and 
time to definitive therapy in an institution with an established 
antimicrobial stewardship program current utilizing rapid genotypic 
organism/resistance marker identification. J Antimicrob Chemother 
2019. 74 (Supplement_1):i32-i39.
---------------------------------------------------------------------------

    ++ Per the applicant, the claim of time to effective therapy (TTET) 
is supported by the conclusion that had the Accelerate 
PhenoTM BC kit results been available, TTET could have been 
improved in 2.4 percent of patients by a median decrease of 18.9 h, 
with 75 percent of these patients having blood stream infections with 
ESBL-producing Enterobaceriaceae.
    ++ Per the applicant, the claim of decreased use of cefepime, 
aminoglycosides, piperacillin-tazobactam, and vancomycin is supported 
by the findings that with the Accelerate PhenoTM BC kit, 
results show there was a decreased usage of cefepime (16% less), 
aminoglycosides (23%), piperacillin-tazobactam (8%) and vancomycin 
(4%).
    ++ Per the applicant, the claim of time to definitive therapy 
(TTDT) is supported by the findings that nearly one-third of patients, 
30.5 percent, could have received definitive therapy more rapidly had 
Accelerate PhenoTM BC kit results been available in real 
time. Additionally, the applicant explained that a potential benefit in 
TTDT was demonstrated in 53 percent of patients with CRE, 61.5 percent 
of patients with ESBL,\55\ and 20 percent of patients with non-
fermenting bacteria. The applicant explained that the potential median 
decrease in TTDT among those who could have had a benefit if Accelerate 
PhenoTM BC kit results had been available was 25.4 h (IQR, 
18.7, 37.5).
---------------------------------------------------------------------------

    \55\ CRE = Carbapenem-resistant Enterobacteriaceae, ESBL = 
Extended Spectrum Beta-Lactamases.
---------------------------------------------------------------------------

     The applicant stated that the Schneider \56\ study 
supports two of its claims regarding substantial clinical improvement.
---------------------------------------------------------------------------

    \56\ Schneider JC, Wood JB, Bryan H, et al. Susceptibility 
Provision Enhances Effective De-Escalation (SPEED). Utilizing Rapid 
Phenotypic Susceptibility Testing in Gram-Negative Bloodstream 
Infections and its Potential Clinical Impact. J Antimicrob Chemother 
2019. 74 (Supplement_1):i16-i23.
---------------------------------------------------------------------------

    ++ Per the applicant, the claim of decreased time to active therapy 
and time to optimal therapy (TTOT) is supported by the findings that if 
Accelerate PhenoTest results had been available to inform patient care 
25 percent of patients could have been put on active therapy sooner, 
and 78 percent of patients who had therapy optimized could have had 
therapy optimized sooner.
    ++ Per the applicant, the claim of ``reduce time to de-escalation 
or escalation'' is supported by the findings that the Accelerate 
PhenoTest could have reduced the time to de-escalation (16 versus 31 h) 
and escalation (19 versus 31 h) compared with standard of care (SOC).
     The applicant stated that the Dare \57\ study supports 
three of its claims regarding substantial clinical improvement.
---------------------------------------------------------------------------

    \57\ Dare, R., McCain, K., Lusardi, K., et al. Impact of 
Accelerate PhenoTM Rapid Blood Culture Detection System 
on Laboratory and Clinical Outcomes in Bacteremic Patients. Poster 
presented at: ID Week; October 2018, San Francisco, CA.
---------------------------------------------------------------------------

    ++ Per the applicant, the claim of decreased time to active therapy 
and time to optimal therapy (TTOT) is supported by the findings of a 
decrease in length of stay from a mean of 12.1 days under the standard 
of care to 9.1 days under the Accelerate PhenoTest system.
    ++ Per the applicant, the claim of time to optimal therapy (TTOT) 
is supported by the findings of a reduction from 73.5 hours under the 
standard of care to 37.5 hours under the Accelerate PhenoTest system.
    ++ Per the applicant, the claim of total antibiotic days on therapy 
(DOT) is supported by the findings of a reduction from 9 days under the 
standard of care to 7 days under the Accelerate PhenoTest system.
     The applicant stated that the Sheth \58\ study supports 
three of its claims regarding substantial clinical improvement.
---------------------------------------------------------------------------

    \58\ Sheth S, Miller M, Baker S. Impact of rapid identification 
and antimicrobial susceptibility testing on antibiotic therapy and 
outcomes for patients with Gram-negative bacteraemia or candidaemia 
at an acute care hospital. Poster presented at: The 2019 European 
Congress of Clinical Microbiology and Infectious Disease (ECCMID); 
Amsterdam.
---------------------------------------------------------------------------

    ++ Per the applicant, the claim of reduced length of stay (LOS) is 
supported by the findings of a reduction in length of stay from 8 days 
with VERIGENE to 6 days with the Accelerate PhenoTest system.
    ++ Per the applicant, the claim of reduction in antibiotic 
intensity score is supported by the findings of a reduction from 16 
with VERIGENE to 12 with the Accelerate PhenoTest system.
    ++ Per the applicant, the claim of reduction of median days broad-

[[Page 32594]]

spectrum antibiotics is supported by the findings of a reduction of 
median days on broad-spectrum antibiotics from 2 days with VERIGENE to 
1 day with the Accelerate PhenoTest system.
     The applicant stated that the Chirca \59\ study supports 
two of its claims regarding substantial clinical improvement.
---------------------------------------------------------------------------

    \59\ Chirca I, Albrecht A, Patel A, et al. Integration of a new 
rapid diagnostic test with antimicrobial stewardship in a community 
hospital. Poster presented at: The Society for Healthcare 
Epidemiology of America 2019 Boston, MA.
---------------------------------------------------------------------------

    ++ Per the applicant, the claim of reduction of inpatient mortality 
is supported by the findings of a decrease in sepsis due to BSIs \60\ 
(as a percentage of inpatient mortality) from 10.9 percent to 7 percent 
for the duration of the study, with a consistent downward slope. The 
applicant noted a statistically significant decrease in inpatient 
mortality in cases of proven BSI; the rate of decrease is estimated at 
0.27 percent per month with a 95 percent confidence interval of (0.12%-
0.41%) per month, p = 0.001.
---------------------------------------------------------------------------

    \60\ BSI = bloodstream infections.
---------------------------------------------------------------------------

    ++ Per the applicant, the claim of reduction in average number of 
antibiotic days is supported by the finding that the average number of 
antibiotic days per patient encounter was reduced by 1 full day, from 
6.8 to 5.8 days.
     The applicant stated that the Banerjee \61\ study supports 
three of its claims regarding substantial clinical improvement.
---------------------------------------------------------------------------

    \61\ Banerjee R, Komarow L, Virk A, et al. Randomized Clinical 
Trial Evaluating Clinical Impact of RAPid IDentification and 
Antimicrobial Susceptibility Testing for Gram-Negative Bacteremia 
(RAPIDS-GN). Poster presented at: ID Week; October 2019, Washington, 
DC.
---------------------------------------------------------------------------

    ++ Per the applicant, the claim of time to results is supported by 
the findings that the Accelerate PhenoTM system provided 
identification (ID) results (2.7 vs. 15.6 h, p<0.001) and antimicrobial 
susceptibility test (AST) results (13 vs. 54.6 h, p<0.001) faster than 
standard of care (SOC).
    ++ Per the applicant, the claim of time to first antibiotic 
modification is supported by the finding that the average time to first 
antibiotic modification was reduced from 14.9 hours to 8.6 hours.
    ++ Per the applicant, the claim of time to first gram negative 
antibiotic modification is supported by the finding that the time to 
first gram negative antibiotic modification was reduced from 42.1 hours 
to 17.4 hours. The applicant also explained that time to antimicrobial 
therapy change was reduced by 24.8 hours for patients with Gram-
negative bacteremia.
     The applicant stated that the Pearson \62\ study supports 
three of its claims regarding substantial clinical improvement.
---------------------------------------------------------------------------

    \62\ Pearson C, Lusardi K, McCain K, et al. Impact of Accelerate 
PhenoTM Rapid Blood Culture Detection System with Real 
Time Notification versus Standard Antibiotic Stewardship on Clinical 
Outcomes in Bacteremic Patients. Poster presented at: ID Week; 
October 2019, Washington, DC.
---------------------------------------------------------------------------

    ++ Per the applicant, the claim of reduction in length of stay 
(LOS) is supported by the findings that the Accelerate 
PhenoTM system showed a significant reduction in length of 
stay (9.54 vs 11.89 days, p<0.01).
    ++ Per the applicant, the claim of time to optimal therapy (TTOT) 
is supported by the finding that the Accelerate PhenoTM 
system showed a significant reduction in time to optimal therapy days 
(TTOT) (1.58 v 2.69, p<0.01).
    ++ Per the applicant, the claim of time to optimal treatment 
achieved is supported by the finding that the Accelerate 
PhenoTM system showed a significant reduction in time to 
optimal treatment (95.4% vs 84.6%, p<0.01). The applicant also noted 
that time to optimal antimicrobial therapy was reduced by 19.2 hours, 
overall days of antimicrobial therapy were reduced by 1.6 days, and 
length of stay was reduced by 2.4 days.
    The applicant stated that its claim of acceptance of therapeutic 
recommendations is supported by the Kinn \63\ study, which the 
applicant stated found that recommendations of bug-drug mismatch, de-
escalation, dose optimization, and infectious disease consultation were 
accepted at a rate of 97.4 percent. The applicant also noted that time 
to optimal antimicrobial therapy was reduced by 15.3 hours for 
bacterimic patients.
---------------------------------------------------------------------------

    \63\ Kinn P, Percival K, Ford B, et al. Real-World Impact of 
Accelerate PhenoTM system Implementation with 
Antimicrobial Stewardship Intervention. Poster presented at: ID 
Week; October 2019, Washington, DC.
---------------------------------------------------------------------------

    After reviewing the information submitted by the applicant as part 
of its FY 2021 new technology add-on payment application, we are 
concerned that the studies the applicant provided are either unclear 
about which version of the Accelerate PhenoTestTM BC kit was 
used or indicate that the first version of the device was used in the 
study. The applicant appears to rely mainly on studies conducted on the 
first version of the device, which has been on the market since 
February 2017, as compared to other products to establish substantial 
clinical improvement, although it was not always clear in each study 
which version was being used. The applicant submitted its application 
for new technology add-on payments for the updated version of the 
Accelerate PhenoTestTM BC kit submitted to FDA for 510(k) 
clearance in 2019. However, the applicant did not present any clinical 
data to distinguish the clinical outcomes achieved by the updated 
version as compared to the original version. We would be interested in 
additional information on which studies involved the first version of 
the device, which has been commercially available since February 2017, 
and which studies involved the updated version of the device for which 
the applicant submitted its new technology add-on payment application. 
We note that several of the studies submitted by the applicant in 
support of substantial clinical improvement showed empirical results 
that were less favorable to the Accelerate PhenoTestTM BC 
kit as compared to the current standard of care. For instance, an 
analysis of discrepant results in Decours et al. found impaired 
performance of the Accelerate PhenoTM system for beta-
lactams (except cefepime) in Enterobacteriales (six very major errors) 
and poor performance in P. aeruginosa.\64\ In addition, Giordano et al. 
did not show superiority for the Accelerate PhenoTestTM BC 
kit against SOC comparisons (MALDI-TOF for ID and Sensitive/traditional 
BMD for AST), on any of several measures including sensitivity and time 
to get results back from the testing.\65\
---------------------------------------------------------------------------

    \64\ Descours G, Desmurs L, Hoang TLT, et al. Evaluation of the 
Accelerate PhenoTM system for rapid identification and 
antimicrobial susceptibility testing of Gram-negative bacteria in 
bloodstream infections. Eur J Clin Microbiol Infect Dis 2018; 37: 
1573-83.
    \65\ Giordano C, Piccoli E, Brucculeri V, et al. A Prospective 
Evaluation of Two Rapid Phenotypical Antimicrobial Susceptibility 
Technologies for the Diagnostic Stewardship of Sepsis. Biomed Res 
Int 2018; 2018: 6976923.
---------------------------------------------------------------------------

    We invite public comments on whether the updated version of the 
Accelerate PhenoTestTM BC kit meets the substantial clinical 
improvement criterion.
    In this section, we summarize and respond to written comments we 
received in response to the New Technology Town Hall meeting notice 
published in the Federal Register regarding the substantial clinical 
improvement criterion for the Accelerate PhenoTestTM BC kit.
    Comment: In response to a question presented at the New Technology 
Town Hall meeting, the applicant provided a table with study details on 
the clinical outcomes studies they presented, which are also referenced 
and summarized in part previously, as well as for study data comparing 
clinical outcomes resulting

[[Page 32595]]

from use of the Accelerate PhenoTest[supreg] BC kit to use of standard 
of care methodologies for determining antibiotic susceptibility 
testing. Regarding Banerjee R., et al., the applicant explained that 
the study was conducted at Mayo Clinic and University of California, 
Los Angeles; the study type was a multicenter, prospective randomized 
controlled trial with a sample of 448 (226 SOC, 222 AXDX); SOC testing 
included rapid MALDI-TOF mass spectrometry ID and agar dilution or 
broth microdilution AST; and the conclusions were median (interquartile 
range) hours to first Gram-negative antibiotic modification (including 
escalation and de-escalation) 24.7 hours faster in the AXDX than SOC 
group 17.4 (4.9, 72) vs. 42.1 (10.1, 72), p<0.001.\66\ Regarding 
Pearson C., et al., the applicant explained that the study was 
conducted by University of Arkansas for Medical Science; the study type 
was a single center, quasi-experimental study of bacteremic adult 
inpatients before and after implementation of AXDX; the N was 496 (188 
historical, 155 Intervention 1, 153 Intervention 2); SOC was historical 
ID/AST performed using VITEK[supreg] MS and VITEK[supreg]2; and 
conclusions were reduced inpatient length of stay (LOS) by 2.4 days, 
reduced days on therapy (DOT) by 1.6 days, reduced broad-spectrum Gram-
positive antibiotic therapy by 0.7 days, and reduced broad-spectrum 
Gram-negative antibiotic therapy by 1.7 days.\67\ Regarding Kinn P., et 
al., the applicant explained that the study was conducted at the 
University of Iowa; the study type was observational, which included an 
interrupted time series sub-study; the N was 690 (417 in A; 273 in B); 
SCO as MALDI for organism identification and VITEK[supreg]2 and/or 
SensititreTM for AST; and conclusions were implementation of 
AXDX with AST review resulted in fast identification and antibiotic 
susceptibility results with early optimization of antimicrobial 
therapy.\68\ Regarding Walsh T., the applicant explained that the study 
was conducted at Allegheny General Hospital (AGH); it was a quasi-
experimental study of bacteremic patients before and after 
implementation of AXDX with positive blood cultures tested at AGH from 
both AGH and West Penn Hospital; the N was 208 (of non-ICU patients, 78 
in the pre-AXDX arm and 63 in the post-AXDX arm, and of ICU patients: 
36 in the pre-AXDX arm and 31 in the post-Accelerate arm); 
VITEK[supreg]2 was used for both ID and AST results in the control arm; 
and conclusions were DOT reduced by 4.6 days, 2.2 day reduction in ICU 
LOS, and readmission rate reduced from 21.8 percent to 14.3 
percent.\69\ Regarding Sheth S., et al., the applicant explained that 
the study was conducted at Peninsula Regional Medical Center; the study 
consisted of a retrospective (pre-implementation group with 
VERIGENE[supreg] system testing for 100 patients) arm and a prospective 
(postimplementation of fast ID/AST with AXDX for 100 patients) group; 
the N was 173 (84 in the pre-implementation arm and 89 in the AXDX 
arm); SOC was the VERIGENE[supreg] system; and conclusions were reduced 
inpatient LOS by 2.0 days, reduced broad-spectrum days on therapy by 
2.0 days.\70\
---------------------------------------------------------------------------

    \66\ Banerjee R, Komarow L, Virk A, et al. Randomized Clinical 
Trial Evaluating Clinical Impact of RAPid IDentification and 
Antimicrobial Susceptibility Testing for Gram-Negative Bacteremia 
(RAPIDS-GN). Poster presented at: ID Week; October 2019, Washington, 
DC.
    \67\ Pearson C, Lusardi K, McCain K, et al. Impact of Accelerate 
PhenoTM Rapid Blood Culture Detection System with Real 
Time Notification versus Standard Antibiotic Stewardship on Clinical 
Outcomes in Bacteremic Patients. Presented at: ID Week; October 
2019, Washington, DC.
    \68\ Kinn et al., Real-World Impact of Accelerate Pheno 
Implementation with Antimicrobial Stewardship Intervention. Poster 
presented at IDWeekTM 2019.
    \69\ Walsh, Thomas. Impact of Accelerate PhenoTM 
System on Management of Gram Negative Bacteremia at an Academic 
Medical Center. Oral presentation given at SCACM West Virginia 2019.
    \70\ Sheth S, Miller M, Baker S. Impact of rapid identification 
and antimicrobial susceptibility testing on antibiotic therapy and 
outcomes for patients with Gram-negative bacteraemia or candidaemia 
at an acute care hospital. Presented at: The 2019 European Congress 
of Clinical Microbiology and Infectious Disease (ECCMID); Amsterdam.
---------------------------------------------------------------------------

    Response: We appreciate the applicant's further explanation of 
these study details and data. We will take this information into 
consideration when deciding whether to approve new technology add-on 
payments for the Accelerate PhenoTest[supreg] BC kit.
    Comment: In response to a question presented at the New Technology 
Town Hall meeting, the applicant explained that T2 Biosystems' 
instrument is designed for whole blood samples. The applicant stated 
that T2 Biosystems has two FDA-cleared assays, a Candida panel with 
five target organisms and a Bacteria panel with five target organisms. 
The applicant stated that the assay turnaround times for T2 Biosystems 
vary from 3 hours to 5 hours. The applicant further stated that neither 
of the T2 Biosystems FDA-cleared products provide antibiotic 
susceptibility testing results; in other words, they perform 
identification only, but do not yield antimicrobial susceptibility/
resistance results. The applicant explained that, in contrast, the 
Accelerate PhenoTest[supreg] BC kit contains 116 assays, providing 
organism identification results (16 assays: 8 Gram-negative bacterial 
targets, 6 Gram-positive bacterial targets and 2 Candida spp.) as well 
as antibiotic susceptibility testing (100 assays) information for 
approximately 91 percent of positive blood cultures and that it has a 
turnaround time of approximately 7 hours after blood culture 
positivity. The applicant also stated that antimicrobial susceptibility 
testing with the Accelerate PhenoTest[supreg] BC kit is included for 
Gram-positive organisms: Ampicillin, Ceftaroline, Erythromycin, 
Daptomycin, Linezolid, Vancomycin, Methicillin resistance (cefoxitin), 
MLSb (Erythromycin-clindamycin); and for Gram-negative organisms: 
Ampicillin-sulbactam, Piperacillin-tazobactam, Cefepime, Ceftazidime, 
Ceftriaxone, Ertapenem, Meropenem, Amikacin, Gentamicin, Tobramycin, 
Ciprofloxacin, Aztreonam.
    Response: We appreciate the applicant's explanation of the 
Accelerate PhenoTest[supreg] BC kit and how the technology differs from 
T2 Biosystems' instrument. We will take this information into 
consideration when deciding whether to approve new technology add-on 
payments for the Accelerate PhenoTest[supreg] BC kit.
b. BioFire[supreg] FilmArray[supreg] Pneumonia Panel
    BioFire Diagnostics, LLC submitted an application for new 
technology add-on payments for the BioFire[supreg] FilmArray[supreg] 
Pneumonia Panel for FY 2021. According to the applicant, the 
BioFire[supreg] FilmArray[supreg] Pneumonia Panel identifies 33 
clinically relevant targets, including bacterial and viral targets, 
from sputum (including endotracheal aspirate) and bronchoalveolar 
lavage (including mini-BAL) samples in about an hour. The applicant 
also stated that for 15 bacteria, the BioFire[supreg] FilmArray[supreg] 
Pneumonia Panel provides semi-quantitative results, which may help 
determine whether an organism is a colonizer or a pathogen.
    According to the applicant, lower respiratory tract infections are 
a leading cause of morbidity and mortality. The applicant stated that 
world-wide, they are the leading cause of infectious disease death and 
the 5th leading overall cause of death.\71\ The applicant

[[Page 32596]]

also asserted that in the United States, community acquired pneumonia 
(CAP) is the second most common cause of hospitalization and the most 
common infectious disease cause of death.72 73 The applicant 
also stated that in addition to CAP, Hospital-acquired Pneumonia (HAP) 
and Ventilator-associated Pneumonia (VAP) are the most common hospital 
acquired infections (HAI) accounting for 22 percent of all HAIs.\74\ 
According to the applicant, HAP and VAP are of particular concern for 
patients admitted to intensive care units (ICUs) where mortality rates 
can be up to 50 percent.75 76
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    \71\ Troeger, C., Forouzanfar, M., Rao, P.C., Khalil, I., Brown, 
A., Swartz, S., Fullman, N., Mosser, J., Thompson, R.L., Reiner Jr, 
R.C. and Abajobir, A., ``Estimates of the global, regional, and 
national morbidity, mortality, and aetiologies of lower respiratory 
tract infections in 195 countries: a systematic analysis for the 
Global Burden of Disease Study 2015,'' The Lancet Infectious 
Diseases, 2017, vol. 17(11), pp.1133-1161.
    \72\ Xu, J. Murphy SL, Kochanek KD, Bastian BA, ``Deaths: Final 
Data for 2013'' Natl Vital Stat Rep, 2016, vol. 64(2), p. 1.
    \73\ Pfuntner, A., Wier, L.M., & Stocks, C. ``Most frequent 
conditions in US hospitals, 2011,'' Healthcare Cost and Utilization 
Project (HCUP) Statistical Brief #162, 2013.
    \74\ Magill, S.S., Edwards, J.R., Bamberg, W., Beldavs, Z.G., 
Dumyati, G., Kainer, M.A., Lynfield, R., Maloney, M., McAllister-
Hollod, L., Nadle, J. and Ray, S.M., ``Multistate point-prevalence 
survey of health care-associated infections,'' N. Engl. J. of Med., 
2014, vol. 370(13), pp.1198-1208.
    \75\ Sopena, N., Sabri[agrave], M. and Neunos 2000 Study Group, 
``Multicenter study of hospital-acquired pneumonia in non-ICU 
patients,'' Chest, 2005, vol. 127(1), pp. 213-219.
    \76\ Esperatti, M., Ferrer, M., Giunta, V., Ranzani, O.T., 
Saucedo, L.M., Bassi, G.L., Blasi, F., Rello, J., Niederman, M.S. 
and Torres, A., ``Validation of predictors of adverse outcomes in 
hospital-acquired pneumonia in the ICU,'' Crit. Care Med., 2013. 
Vol. 41(9), pp.2151-2161.
---------------------------------------------------------------------------

    According to the applicant, timely administration of effective 
antibiotics is essential for ensuring a good prognosis. The applicant 
stated that mortality increases for each hour of delay in initiating 
antibiotic therapy for hospitalized pneumonia patients,77 78 
and ideally, antimicrobial therapy would be pathogen specific and 
guided by the results of microbiology tests. However, the applicant 
stated that current microbiologic methods are slow and fail to identify 
a causative pathogen in over 50 percent of patients, even when 
comprehensive methods are used.\79\ As a result, the applicant noted 
that current guidelines recommend empiric treatment with broad spectrum 
antibiotics,\80\ and that broad-spectrum antibiotics lead to overuse of 
antibiotics, which increases the risk of an antibiotic related adverse 
event (for example, diarrhea, allergic reactions, C. difficile 
infection) for the patient and contributes to the well-known problem of 
antimicrobial resistance. In addition, the applicant noted that 6-15 
percent of hospitalized patients with CAP fail to respond to the 
initial antibiotic treatment, in part due to ineffective antibiotic 
therapy.81 82 83 84
---------------------------------------------------------------------------

    \77\ Benenson, R., Magalski, A., Cavanaugh, S. and Williams, E., 
``Effects of a pneumonia clinical pathway on time to antibiotic 
treatment, length of stay, and mortality,'' Acad. Emerg. Med., 1999, 
vol. 6(12), pp.1243-1248.
    \78\ Houck, P.M., Bratzler, D.W., Nsa, W., Ma, A. and Bartlett, 
J.G., ``Timing of antibiotic administration and outcomes for 
Medicare patients hospitalized with community-acquired pneumonia,'' 
Arch. Intern. Med., 2004, vol. 164(6), pp.637-644.
    \79\ Jain, S., Self, W.H., Wunderink, R.G., Fakhran, S., Balk, 
R., Bramley, A.M., Reed, C., Grijalva, C.G., Anderson, E.J., 
Courtney, D.M. and Chappell, J.D., ``Community-acquired pneumonia 
requiring hospitalization among US adults,'' N. Engl. J. Med., 2015, 
vol. 373(5), pp.415-427.
    \80\ Kalil, A.C., Metersky, M.L., Klompas, M., Muscedere, J., 
Sweeney, D.A., Palmer, L.B., Napolitano, L.M., O'Grady, N.P., 
Bartlett, J.G., Carratal[agrave], J. and El Solh, A.A., ``Management 
of adults with hospital-acquired and ventilator-associated 
pneumonia: 2016 clinical practice guidelines by the Infectious 
Diseases Society of America and the American Thoracic Society,'' 
Clin. Infect. Dis., 2016, vol. 63(5), pp.e61-e111.
    \81\ Ros[oacute]n, B., Carratala, J., Fern[aacute]ndez-
Sab[eacute], N., Tubau, F., Manresa, F. and Gudiol, F., ``Causes and 
factors associated with early failure in hospitalized patients with 
community-acquired pneumonia,'' Arch. Intern. Med., 2004, vol. 
164(5), pp.502-508.
    \82\ Menendez, R., Torres, A., Zalacain, R., Aspa, J., 
Villasclaras, J.M., Border[iacute]as, L., Moya, J.B., Ruiz-Manzano, 
J., de Castro, FR, Blanquer, J. and P[eacute]rez, D., ``Risk factors 
of treatment failure in community acquired pneumonia: implications 
for disease outcome,'' Thorax, 2004. Vol. 59(11), pp. 960-965.
    \83\ Arancibia, F., Ewig, S., Martinez, J.A., Ruiz, M., Bauer, 
T., Marcos, M.A., Mensa, J. and Torres, A., ``Antimicrobial 
treatment failures in patients with community-acquired pneumonia: 
causes and prognostic implications,'' Am. J. Respir. Crit. Care 
Med., 2000, vol. 162(1), pp.154-160.
    \84\ Men[eacute]ndez, R., Torres, A., Rodr[iacute]guez de 
Castro, F., Zalaca[iacute]n, R., Aspa, J., Mart[iacute]n 
Villasclaras, J.J., Border[iacute]as, L., Ben[iacute]tez, J.M.M., 
Ruiz-Manzano, J., Blanquer, J. and P[eacute]rez, D., ``Reaching 
stability in community-acquired pneumonia: the effects of the 
severity of disease, treatment, and the characteristics of 
patients,'' Clin. Infect. Dis., 2004, vol. 39(12), pp.1783-1790.
---------------------------------------------------------------------------

    According to the applicant, there are three current methods for 
determining the causative organism of pneumonia: bacterial culture, lab 
developed and commercial singleplex PCR (Polymerase Chain Reaction) 
tests, and off-label use of upper respiratory multiplex syndromic 
panels.
    According to the applicant, semi-quantitative bacterial culture is 
routinely performed on lower respiratory specimens. The applicant 
explained that a calibrated loop is used to spread sample on 
appropriate media. A quadrant streak method is generally employed and, 
depending on how many of the quadrants the organism grows in, 
determines its semi-quantification. According to the applicant, normal 
flora will often grow in all 4 quadrants and technicians must 
differentiate between potential pathogens and normal flora, and 
potential pathogens are picked from the plate and isolated on another 
media plate. According to the applicant, after growing isolate, final 
identification and susceptibility is performed.
    According to the applicant, there are also FDA and lab developed 
tests for single targets that cause pneumonia. The applicant stated 
that that these are for the more serious pathogens (for example. 
Methicillin resistant Staphylococcus aureus, MRSA) or fastidious 
organisms (for example Mycobacterium tuberculosis). According to the 
applicant, these tests range from sample-to-answer (Cepheid[supreg] 
Xpert[supreg] MTB/RIF) to lab developed tests that are often multi-step 
and multiple pieces of equipment that require isolating nucleic acid 
from a sample and then adding appropriate reagents to perform a PCR 
assay on the isolated nucleic acid.
    According to the applicant, a number of academic hospital labs have 
also performed off label validation of commercially available 
respiratory panels designed for upper respiratory syndromes. The 
applicant stated that these tests are used primarily on BAL specimens 
for the rapid detection of viral causes of Pneumonia.
    With respect to the newness criterion, the BioFire[supreg] 
FilmArray[supreg] Pneumonia Panel received FDA clearance via 510(k) on 
November 9, 2018, based on a determination of substantial equivalence 
to a legally marketed predicate device (Curetis UnyveroTM). 
According to the applicant, the Pneumonia Panel was launched globally 
on December 11, 2018. According to the applicant, there was a delay 
between FDA clearance date and U.S. market availability (global launch 
date) in order to satisfy documentation requirements in preparation of 
the global launch. The applicant stated that it has been granted a 
Proprietary Laboratory Analyses (PLA) code by the American Medical 
Association; PLA Code 0151U was published on October 1st, 2019 and 
became effective on January 1st, 2020. According to the applicant, the 
PLA code assigned to the BioFire[supreg] FilmArray[supreg] Pneumonia 
Panel uniquely identifies this test and no other technologies use this 
code. Currently, there are no ICD-10-PCS procedure codes to uniquely 
identify procedures involving the BioFire[supreg] FilmArray[supreg] 
Pneumonia Panel. We note that the applicant has submitted a request for 
approval for a unique ICD-10-PCS code for the administration of the 
BioFire[supreg] FilmArray[supreg] Pneumonia Panel beginning in FY 2021.
    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

[[Page 32597]]

considered ``new'' for purposes of new technology add-on payments.
    With regard to the first criterion, whether a product uses the same 
or similar mechanism of action to achieve a therapeutic outcome, 
according to the applicant, the BioFire[supreg] FilmArray[supreg] 
Pneumonia Panel is the only sample-to-answer, rapid (~1 hour), and 
comprehensive molecular panel available for the diagnosis of the major 
causes of infectious pneumonia. The applicant further explained that 
the BioFire[supreg] FilmArray[supreg] Pneumonia Panel is also the only 
semi-quantitative molecular solution available for rapidly diagnosing 
infectious causes of pneumonia. The applicant noted that this important 
feature allows labs and clinicians to better differentiate whether an 
organism is normal flora or the cause of the patient's illness. The 
applicant asserted that the current best practice is standard culture 
technique, discussed previously. The applicant further stated that 
other comprehensive molecular technologies include Curetis 
UnyveroTM which is a multi-step process, only has bacterial 
targets, and only provides qualitative results for all of its targets.
    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 patients who may be eligible for treatment involving 
the BioFire[supreg] FilmArray[supreg] Pneumonia Panel would be assigned 
to the same MS-DRGs as cases representing patients who receive 
diagnostic information from competing technologies.
    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 BioFire[supreg] FilmArray[supreg] Pneumonia Panel is the 
only FDA cleared comprehensive molecular panel approved for use on both 
sputum (including endotracheal aspirate) and bronchoalveolar lavage 
(including mini-BAL) samples allowing for diagnosis of pneumonia in 
hospital, community, and ventilator associated populations. The 
applicant stated that the BioFire[supreg] FilmArray[supreg] Pneumonia 
Panel is also the only molecular panel that detects both bacterial and 
viral causes of lower respiratory infections and pneumonia.
    In addition, the applicant added that the ability of the 
BioFire[supreg] FilmArray[supreg] Pneumonia Panel to detect pathogens 
and related susceptibility traits is a unique feature of the panel that 
differentiates it from existing respiratory panels that have been 
designed and approved for use on upper respiratory specimens and not 
lower respiratory specimens. The applicant stated that Furukawa, D., et 
al., evaluated the ability of the BioFire[supreg] FilmArray[supreg] 
Pneumonia Panel to detect pathogens and related susceptibility traits, 
specifically looking at the impact of MRSA detection, and showed that 
the BioFire[supreg] FilmArray[supreg] Pneumonia panel has the potential 
to significantly expedite time to MRSA results allowing for rapid 
escalation or de-escalation of therapy.\85\
---------------------------------------------------------------------------

    \85\ Furukawa, D., Kim, B., Jeng, A., BioFire[supreg] 
FilmArray[supreg] Pneumonia Panel: A Powerful Rapid Diagnostic Test 
for Antimicrobial Stewardship. Poster presented at Infectious 
Disease Week; 2019 October 2-6. Washington, DC.
---------------------------------------------------------------------------

    Based on the applicant's statements as presented previously, we are 
concerned there is insufficient information to determine whether the 
BioFire[supreg] FilmArray[supreg] Pneumonia Panel mechanism of action 
is different from existing products. In the FDA decision summary, the 
test is described as a multiplex nucleic acid test, or PCR accompanied 
by the applicant's software. However, it is unclear from the new 
technology add-on payment application how the mechanism of action is 
new or different from other products that utilize PCR. While the 
applicant described this test as the only sample-to-answer, rapid (~1 
hour), and comprehensive molecular panel available for the diagnosis of 
the major causes of infectious pneumonia and as also semi-quantitative, 
and further described another comprehensive molecular product (Curetis 
UnyveroTM) as having only bacterial targets and providing 
only qualitative results for all of its targets, we are uncertain how 
the underlying mechanism of action of the BioFire[supreg] 
FilmArray[supreg] Pneumonia Panel is different from existing PCR-based 
tests. Additionally, based on the information provided by the 
applicant, it appears as though the product does not treat a different 
disease or population compared to other products. Finally, with respect 
to the Furukawa study, which the applicant cited to support that the 
BioFire has the potential to specifically expedite time to MRSA results 
allowing for rapid escalation or de-escalation of therapy, we note that 
the study authors also concluded that the BioFire[supreg] 
FilmArray[supreg] Pneumonia Panel ``has good agreement with SOC for 
detection of bacteria and viruses'' and that the BioFire[supreg] 
FilmArray[supreg] Pneumonia Panel ``detects additional S. aureus 
bacteria not reported by SOC,'' but that ``[a]dditional S. aureus 
detection are more likely to be at low concentration and are of unclear 
clinical significance.'' We are inviting public comments on whether the 
BioFire[supreg] FilmArray[supreg] Pneumonia Panel is substantially 
similar to other technologies and whether the BioFire[supreg] 
FilmArray[supreg] Pneumonia Panel 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.
    The applicant stated that it used 2018 data from Definitive Health 
Care at defhc.com, and that it searched these data for cases in MS-DRGs 
193, 194, and 195 (Simple Pneumonia and Pleurisy with MCC, with CC, and 
without CC/MCC, respectively), which resulted in 297,956 cases. The 
applicant indicated that the data was from proprietary data drawn from 
one hospital in Indianapolis in 2018. However, the scope of the data as 
described by the applicant is unclear to us, as it seems unlikely that 
a single hospital in Indiana would have observed 297, 956 cases of 
simple pneumonia in 1 year. It is also not clear how these cases 
correspond to any of the later steps in the cost analysis. For example, 
the applicant did not indicate whether the charge values from the data 
are based on the same 297,956 cases identified in the three MS-DRGs.
    In its analysis, the applicant stated that no charges were removed 
for any prior technologies as the BioFire[supreg] FilmArray[supreg] 
Pneumonia Panel does not eliminate culture testing of specimens. The 
applicant standardized the charges and then inflated the charges. The 
applicant reported using an inflation factor of 5.50 percent based on 
the charge inflation factor published by CMS in the FY 2020 IPPS/LTCH 
PPS final rule (84 FR 42629). The applicant appears to have made a 
minor error in this inflation factor, since the actual, 1-year 
inflation factor in the FY 2020 IPPS/LTCH PPS final rule was 5.4 
percent. To estimate the cost of the technology, the applicant used the 
per-test list price cost of the BioFire[supreg] FilmArray[supreg] 
Pneumonia Panel. The applicant indicated that it did not incorporate an 
estimate of technician time spent administering the test, asserting 
that ``2-5 minutes of technician time is nearly obsolete due to ease of 
use of the test.'' The applicant also indicated that it did not 
incorporate an estimate of instrumentation cost into its costing of the 
BioFire[supreg] FilmArray[supreg] Pneumonia Panel, noting that ``a 
number of'' labs already have sufficient instrumentation to run the 
BioFire[supreg] FilmArray[supreg] Pneumonia Panel test. The applicant 
added charges for the BioFire[supreg] FilmArray[supreg] Pneumonia Panel 
based on an estimated range of projected

[[Page 32598]]

patient charges for the BioFire[supreg] FilmArray[supreg] Pneumonia 
Panel technology. The applicant stated that the charge to the patient 
varies by location and the methodology of the hospital or lab charge 
master. The applicant noted that the estimate was based on patient 
charges for other BioFire products that had been reported by hospitals 
and reference labs. Based on this analysis, the applicant computed a 
final inflated average case-weighted standardized charge per case of 
$78,156, as compared to an average case-weighted threshold amount of 
$42,812. Because the final inflated average case-weighted standardized 
charge per case exceeded the average case-weighted threshold amount, 
the applicant asserted that the technology meets the cost criterion.
    We are concerned that many of the calculated values in the 
applicant's analysis, such as the average-cost-per case, unweighted and 
unstandardized, were reportedly based on proprietary claims data that 
came from one hospital in Indianapolis. We are concerned that an 
analysis based on one hospital would not adequately represent the cost 
of cases using the BioFire[supreg] FilmArray[supreg] Pneumonia Panel as 
the data could be skewed or biased based on one hospital. We are also 
concerned with the lack of description of how the BioFire[supreg] 
FilmArray[supreg] Pneumonia Panel maps to the three MS-DRGs for simple 
pneumonia (that is, MS-DRGs 193, 194 and 195); for example, whether the 
analysis included all the cases in these MS-DRGs or was limited to 
specific cases. We note there are several additional pneumonia-related 
MS-DRGs to which we believe potential cases that may be eligible for 
the use of the product could be mapped, but which were not included in 
the cost analysis; for example, MS-DRGs 177, 178 and 179 (Respiratory 
Infections and Inflammations with MCC, with CC, and without CC/MCC, 
respectively) and MS-DRGs 974, 975, and 976 (HIV with Major Related 
Condition with MCC, with CC, and without CC/MCC, respectively).
    We are inviting public comments on whether the BioFire[supreg] 
FilmArray[supreg] Pneumonia Panel meets the cost criterion.
    With respect to the substantial clinical improvement criterion, the 
applicant asserted that data from studies conducted with the 
BioFire[supreg] FilmArray[supreg] Pneumonia Panel show that it can 
detect major causes of pneumonia with a high degree of sensitivity and 
specificity in a clinically relevant timeframe. The applicant explained 
that results from the BioFire[supreg] FilmArray[supreg] Pneumonia Panel 
also have the potential to impact antibiotic usage and lead to improved 
stewardship and possible cost savings.
    The applicant submitted four studies presented as posters at 
national conferences to support its assertion that the product 
represents a substantial clinical improvement, noting that data for 
this test is still new and has not yet been published in academic 
journals.
    According to the applicant, Buchan, et al. compared the results of 
conventional testing (bacterial culture and clinician directed 
molecular testing for viruses and atypical bacteria) with the results 
from the BioFire[supreg] FilmArray[supreg] Pneumonia Panel for 259 BAL 
and 48 sputum samples.\86\ We note that in their poster, Buchan, et al. 
specified that conventional testing specifically included bacterial 
culture and PCR based on clinician order. Also, while Buchan, et al. 
did report on the BAL specimens, the poster did not appear to report 
information regarding sputum samples. According to Buchan, et al., 
specimens were obtained from inpatients aged 18 years and older with 
symptoms of respiratory tract infection at 8 hospitals in the US. Chart 
review was conducted to determine type and duration of antibiotic 
therapy for each subject. According to the applicant, at least one 
bacterial pathogen was identified by standard methods and by the 
BioFire[supreg] FilmArray[supreg] Pneumonia Panel for 23 percent of 
BALs samples (n=60) and 35 percent (n=17) of sputum samples; however, 
the BioFire[supreg] FilmArray[supreg] Pneumonia Panel detected a 
bacterial pathogen in an additional 15 percent (n=40) of BAL samples 
and 21 percent (n=10) of the sputum samples. For the 259 BAL samples, 
75 bacteria were identified by both standard methods and by the 
BioFire[supreg] FilmArray[supreg] Pneumonia Panel. The applicant noted 
that the BioFire[supreg] FilmArray[supreg] Pneumonia Panel identified 
an additional 84 bacteria, with the most common detections for 
Staphylococcus aureus (N=21), Haemophilus influenzea (n=19), Moxaella 
catarrhalis (n=8), Pseudomonas aeruginosa (n=6) and Klebsiella oxytoca 
(n=6). The applicant also explained that an evaluation of the medical 
and laboratory records for the affected patients found that 50 percent 
had been on antibiotics within 72 hours of samples collection, 42 
percent of the organisms may have been present in the culture but were 
not reported (due either to low quantification (<10\4\ cfu/mL) or the 
presence of mixed colonies) and only 8 percent of the detections were 
unexplained.
---------------------------------------------------------------------------

    \86\ Buchan, B.W., Windham, S., Faron, M.L., et al. Clinical 
Evaluation and Potential Impact of a Semi-Quantitative Multiplex 
Molecular Assay for the Identification of Pathogenic Bacteria and 
Viruses in Lower Respiratory Specimens. Poster presented at American 
Thoracic Society; 2018 May 02. San Diego, CA.
---------------------------------------------------------------------------

    According to the applicant, an important feature of the 
BioFire[supreg] FilmArray[supreg] Pneumonia Panel is the inclusion of 
assays for viral agents. The applicant noted that in Buchan, et al., 
the BioFire[supreg] FilmArray[supreg] Pneumonia Panel identified at 
least 1 virus in 19 percent of 259 BAL samples from hospitalized adults 
\87\ and viruses were the only pathogen detection in 12 percent (n=31) 
of BAL specimens, while 7 percent (n=18) had both bacterial and viral 
pathogen detections. The applicant summarized that the most common 
viral pathogens were human rhinovirus (n=17), coronavirus (n=9) and 
influenza (n=5). Twenty-three percent of the samples with a viral 
detection had a corresponding test ordered as part of standard of care. 
The applicant stated that this finding highlights that the role of 
viruses in pneumonia is still under appreciated. The applicant further 
stated that identification of a viral agent in the absence of a 
bacterial detection may allow reduction in the use of antibiotics.
---------------------------------------------------------------------------

    \87\ Ibid.
---------------------------------------------------------------------------

    According to the applicant, the ability of the BioFire[supreg] 
FilmArray[supreg] Pneumonia Panel to impact patient management has been 
evaluated by two different groups (Buchan, et al. and Enne, et al). The 
applicant stated that Buchan, et al., performed a theoretical outcomes 
analysis by using the result of the BioFire[supreg] FilmArray[supreg] 
Pneumonia Panel to modify antimicrobial therapy and then judge if the 
modification was correct using the final microbiology results. The 
applicant explained that in this analysis of 243 BAL samples, 68 
percent (n=165) could have had an antibiotic adjustment; 48 percent 
(n=122) would have had antibiotics appropriately de-escalated or 
discontinued, 31 percent (n=78) would have had no change, and 2 percent 
(n=5) would have had appropriate escalation or initiation of 
antibiotics.\88\ Alternately, 17 percent (n=42) would have received 
inappropriate escalation and 2 percent (n=6) would have received 
inappropriate de-escalation when compared to culture results. The 
applicant summarized that the most common de-escalations occurred due 
to discontinuation of vancomycin due to non-detection of MRSA (35 
percent) and discontinuation of piperacillin/tazobactam due to non-
detection of Enterobacteriaceae (23 percent).

[[Page 32599]]

According to the applicant, the de-escalation due to non-detection of 
these pathogens is possible because the increased sensitivity of the 
BioFire[supreg] FilmArray[supreg] Pneumonia Panel for detection of 
bacterial pathogen provides a high negative predictive value for these 
non-detections. The applicant explained that the authors estimated the 
results could have potentially saved >18,000 antibiotic hours equating 
to an average of 6.5 days/patient (we note that in the poster by 
Buchan, et al., they reported an average of 6.2 d/patient rather than 
6.5 mentioned in the application).\89\
---------------------------------------------------------------------------

    \88\ Ibid.
    \89\ Ibid.
---------------------------------------------------------------------------

    According to the applicant, in an analysis of 120 ICU patients (79 
males and 41 females; 33 children, with a median age of 1; and adults 
with a median age of 68) in the UK by Enne, et al., patients were 
divided into a group with positive outcomes (pneumonia resolved within 
21 days) and negative outcomes (pneumonia not resolved in 21 days or 
contributed to the patient's death). Enne, et al., evaluated the 
appropriateness of antimicrobials used for HAP/VAP versus both routine 
culture and two rapid PCR tests, BioFire[supreg] FilmArray[supreg] 
Pneumonia Panel (1h) and Curetis UnyveroTM Pneumonia Panel 
(5.5h). Consented or assented ICU patients were recruited at 4 diverse 
UK hospitals: 1 district general, 1 tertiary referral, 1 children's and 
1 private. Patients were those starting or changing antibiotics for 
suspected pneumonia, already hospitalized for >48h and with a timely 
respiratory sample. According to the applicant, the results of the 
BioFire[supreg] FilmArray[supreg] Pneumonia Panel and routine culture 
were evaluated to determine if the test results would have identified 
the antibiotic therapy as active or inactive. The applicant explained 
that in the group with positive outcomes, the results of the 
BioFire[supreg] FilmArray[supreg] Pneumonia Panel were able to 
correctly classify the patient's therapy as active for 35 percent of 
patients compared to only 20 percent for routine culture (p=0.005). The 
applicant also explained that in the group of 27 percent of patients 
that had negative outcomes, the results of the BioFire[supreg] 
FilmArray[supreg] Pneumonia Panel would have classified the initial 
antibiotic therapy as inactive for 41 percent of patients compared to 
only 15.6 percent for routine culture.\90\ The study authors also 
reported that routine microbiology and Curetis UnyveroTM 
detected a potential pathogen in 41.7 percent and 59.2 percent of 
specimens respectively, whereas BioFire[supreg] FilmArray[supreg] 
Pneumonia Panel detected a potential pathogen in 66.7 percent of 
respiratory samples from patients enrolled in the study. The applicant 
stated that these study results indicate that the test results of the 
BioFire[supreg] FilmArray[supreg] Pneumonia Panel provide information 
that can lead to more targeted and effective therapy in a shorter 
period of time, and may help to improve patient outcomes.
---------------------------------------------------------------------------

    \90\ Enne, V.I., Baldan, R., Russell, C., et al. INHALE WP2: 
Appropriateness of Antimicrobial Prescribing for Hospital-acquired 
and Ventilator-associated Pneumonia (HAP/VAP) in UK ICUs assessed 
against PCR-based Molecular Diagnostic Tests. Poster presented at 
European Congress of Clinical Microbiology and Infectious Disease; 
2019 April 13-16. Amsterdam, Netherlands.
---------------------------------------------------------------------------

    The applicant also submitted Rand et al., which conducted a 
retrospective analysis of BAL (n=197) and endotracheal aspirates (n=93) 
samples from 270 unique hospitalized patients that were collected and 
stored at -70 [deg]C until thawed and tested on the BioFire[supreg] 
FilmArray[supreg] Pneumonia Panel compared to routine microbiology 
results.\91\ Patient data were extracted from the electronic medical 
record. Cultures were performed by standard methods and identified by 
Vitek II and mass spectrometry. The applicant explained that the 
authors found a high correlation between standard methods and 
BioFire[supreg] FilmArray[supreg] results and that the authors 
concluded the BioFire[supreg] FilmArray[supreg] Pneumonia Panel would 
have had a significant impact on time to result which could potentially 
lead to more rapid and appropriate use of antibiotics. The applicant 
also noted that the authors found significant association with 
clinical/outcome variables and that the BioFire[supreg] 
FilmArray[supreg] Pneumonia Panel's semi-quantification was ``at least 
as strong'' as standard culture methods, which according to the 
applicant, have been developed and improved over decades.
---------------------------------------------------------------------------

    \91\ Rand, K.H., Beal S.G., Cherabuddi, K., et al. Relationship 
of a Multiplex Molecular Pneumonia Panel (PP) Results with Hospital 
Outcomes and Clinical Variables. Poster presented at Infectious 
Disease Week; 2019 October 2-6. Washington, DC.
---------------------------------------------------------------------------

    The applicant also submitted White et al., which conducted a 
comparison of the BioFire[supreg] FilmArray[supreg] Pneumonia Panel on 
sputum samples to a multi-test diagnostic bundle for patients admitted 
from the emergency department (ED) with community acquired pneumonia 
(CAP).\92\ We note that White et al., specifically described the 
diagnostic bundle as including the following: (1) Blood Cultures; (2) 
Sputum culture and sensitivity; (3) Urine antigens: Legionella and S. 
pneumoniae; (4) Nasal swab (NS) PCR for MRSA and S. pneumoniae; (5) 
FilmArray (Biofire) PCR Panel (NS): Detects 17 viruses, 4 bacteria. Of 
585 enrolled patients, 278 were evaluable. The applicant explained that 
the authors found that the BioFire[supreg] FilmArray[supreg] Pneumonia 
Panel detected a higher rate of potential pathogens than the multi-test 
bundle (90.6 percent versus 81 percent). The applicant also noted that 
the authors determined that the urine antigen testing, S. aureus and S. 
pnuemoniae, and PCR upper respiratory panel use could be eliminated for 
this sample/patient type in the future.\93\
---------------------------------------------------------------------------

    \92\ White, E., Ferdosian, S., Gelfer, G., et al., Sputum 
FilmArray Pneumonia Panel Outperforms A Diagnostic Bundle in 
Hospitalized CAP Patients. Poster presented at Infectious Disease 
Week; 2019 October 2-6. Washington, DC.
    \93\ Ibid.
---------------------------------------------------------------------------

    The applicant also submitted a poster by Furukawa et al., which 
reported a retrospective case review of 43 samples (17 used for 
clinical use and 26 obtained randomly by microbiology lab) in which 
BioFire[supreg] FilmArray[supreg] Multiplex PCR was utilized.\94\ 
According to the applicant, initial use of BioFire FilmArray Pneumonia 
panel had 100 percent intervention rate leading to de-escalation or 
prevention of inappropriate antibiotics and the authors found that 
there was a low risk of unnecessary antibiotics being administered due 
to the increased sensitivity of the BioFire[supreg] FilmArray[supreg] 
Pneumonia panel. The applicant added that the authors believe that with 
additional data they may be able to discontinue empiric broad spectrum 
coverage due to the rapid and sensitive nature of the BioFire FilmArray 
Pneumonia Panel. The applicant also noted that they have a number of 
ongoing prospective studies being conducted to further support their 
claims.
---------------------------------------------------------------------------

    \94\ Furukawa, D., Kim, B., Jeng, A., BioFire[supreg] 
FilmArray[supreg] Pneumonia Panel: A Powerful Rapid Diagnostic Test 
for Antimicrobial Stewardship. Poster presented at Infectious 
Disease Week; 2019 October 2-6. Washington, DC.
---------------------------------------------------------------------------

    The applicant asserted that Buchan, et al. and Rand et al. support 
their claim of decreased time to actionable results based on-- (1) the 
conclusion in Buchan, et al., that greater than 60 percent of patients 
potentially could have had an antibiotic adjustment 3-4 days earlier 
than standard methods based on BioFire[supreg] FilmArray[supreg] 
Pneumonia Panel results, and (2) the conclusion in Rand et al., that 
the BioFire[supreg] FilmArray[supreg] Pneumonia Panel would have a 
major impact on the time to report potential pathogens that may cause 
Pneumonia in intubated/ICU patients.
    The applicant asserted that Buchan, et al., and Enne V.I. et al. 
support their

[[Page 32600]]

claim of improved antibiotic stewardship. The applicant pointed to the 
conclusions in Buchan, et al., that >60 percent of patients potentially 
could have had an antibiotic adjustment with BioFire[supreg] 
FilmArray[supreg] Pneumonia Panel results and 50 percent of potential 
antibiotic adjustments from BioFire[supreg] FilmArray[supreg] Pneumonia 
Panel testing were discontinuation or narrowing, as well as the 
estimate that the BioFire[supreg] FilmArray[supreg] Pneumonia Panel 
results enabled >18,000 antibiotic hours saved on 243 patients. The 
applicant pointed to Enne V.I. et al., for the results that of the 27 
percent of patients who had negative outcomes, 15.6 percent had a 
pathogen resistant to initial therapy based on culture and 41.9 percent 
were resistant to initial therapy based on BioFire[supreg] 
FilmArray[supreg] Pneumonia Panel results (p=0.029).
    The applicant asserted that White E., et al., and Enne, et al. 
support its claim of increased diagnostic yield because White et al. 
concluded that of patients with a final diagnosis of pneumonia, 
BioFire[supreg] FilmArray[supreg] Pneumonia Panel detected a potential 
pathogen in 90.6 percent compared to 81 percent with standard methods, 
and Enne, et al. reported that routine methods detected a pathogen in 
41.7 percent of specimens compared to the BioFire[supreg] 
FilmArray[supreg] Pneumonia Panel which detected a pathogen in 66.7 
percent of specimens.
    In summary, the applicant explained that lower respiratory tract 
infections are a common and serious health care problem, current 
diagnostic tests are slow and do not identify a causative pathogen in 
over 50 percent of patients, and the BioFire[supreg] FilmArray[supreg] 
Pneumonia Panel is an easy-to-use multiplex panel that has been shown 
to increase diagnostic yield and significantly decrease time to results 
when compared to standard testing both because of improved test 
sensitivity and because it includes assays for typical bacteria, 
viruses and selected antibiotic resistance genes. According to the 
applicant, retrospective review of BioFire[supreg] FilmArray[supreg] 
Pneumonia Panel and patient data indicates a potential to impact 
antibiotic utilization to ensure patients are on appropriate therapy in 
a timely manner. The applicant also noted that molecular testing for 
pneumonia is relatively new and there is a lot to learn about how to 
best use these tests, and that there are currently several prospective 
studies underway to clarify the role that this tool may play in 
improving the outcomes for patients with pneumonia, reducing use of 
unnecessary antibiotics, improving targeted therapy and potentially 
reducing health care costs due to more directed and efficient patient 
management. According to the applicant, early theoretical outcomes 
evaluations provide reason to be optimistic.
    We note that the studies the applicant submitted to support its 
assertions regarding substantial clinical improvement were presented 
only as posters, and that information pertaining to full manuscripts 
with further study details were not provided. It is also unclear if the 
studies described in the posters have been submitted for peer-reviewed 
publication or whether full manuscripts with detailed methods and data 
tables are available.
    We are concerned that the studies do not appear to be designed or 
powered to be able to show conclusive evidence of clinical impact. In 
particular, the studies appear to describe analysis of clinical results 
for patients and state that there is potential for the results to 
impact clinical decisions about antimicrobial therapy. However, it 
appears the applicant did not submit evidence of the BioFire[supreg] 
FilmArray[supreg] Pneumonia Panel product in real world, prospective 
use (randomized or non-randomized) with actual antimicrobial decisions 
or effect on patient management. This may require larger sample sizes. 
We are also concerned that only one study provided by the applicant 
(Enne, V.I., et al.) compared BioFire[supreg] FilmArray[supreg] 
Pneumonia Panel to Curetis UnyveroTM, which is another PCR-
based technology, and that a statistical difference was not reported 
between BioFire and Unyvero for the outcomes reported in the poster. 
While we understand that Curetis UnyveroTM may be somewhat 
slower than BioFire[supreg] FilmArray[supreg] Pneumonia Panel and does 
not include viruses, the clinical impact of the differences between 
these two products is unclear. We are also uncertain how Buchan, et al. 
calculated their estimate that >18,000 antibiotic hours were saved on 
243 patients using the BioFire[supreg] FilmArray[supreg] Pneumonia 
Panel results. The applicant stated that there are currently several 
prospective studies underway to clarify the role that this tool may 
play in improving the outcomes for patients with pneumonia, reducing 
use of unnecessary antibiotics, improving targeted therapy and 
potentially reducing health care costs due to more directed and 
efficient patient management; however, data or results from those 
studies were not included with the application.
    We welcome public comment on whether the BioFire[supreg] 
FilmArray[supreg] Pneumonia Panel meets the substantial clinical 
improvement criterion.
    We did not receive any written public comments in response to the 
New Technology Town Hall meeting notice published in the Federal 
Register regarding the substantial clinical improvement criterion for 
the BioFire[supreg] FilmArray[supreg] Pneumonia Panel or at the New 
Technology Town Hall meeting.
c. ContaCT
    Viz.ai Inc. submitted an application for new technology add-on 
payments for ContaCT for FY 2021. The individual components of ContaCT 
are currently marketed by Viz.ai, Inc. under the tradenames ``Viz LVO'' 
(for the algorithm), ``Viz Hub'' (for the text messaging and calling 
platform), and ``Viz View'' (for the mobile image viewer). According to 
the applicant, ContaCT is a radiological computer-assisted triage and 
notification software system intended for use by hospital networks and 
trained clinicians. The applicant asserted that ContaCT analyzes 
computed tomography angiogram (CTA) images of the brain acquired in the 
acute setting, sends notifications to a neurovascular specialist(s) 
that a suspected large vessel occlusion (LVO) has been identified, and 
recommends review of those images.
    The applicant asserted early notification of the stroke team can 
reduce time to treatment and increase access to effective specialist 
treatments, like mechanical thrombectomy. Specifically, the applicant 
asserted that shortening the time to identification of LVO is critical 
because the efficacy of thrombectomy in patients with acute ischemic 
stroke decreases as the time from symptom onset to treatment increases. 
The applicant also asserted in a condition like stroke, where 1.9 
million neurons die every minute and for which 34 percent of patients 
hospitalized are under the age of 65, reducing time to treatment 
results in reduced disability.\95\ The applicant asserted ContaCT 
streamlines the standard workflow using artificial intelligence to 
substantially shorten the period of time between when a patient 
receives a stroke CT/CTA and when the patient is referred to a stroke 
neurologist and neurointerventional surgeon.
---------------------------------------------------------------------------

    \95\ Hall MJ, Levant S, DeFrances CJ. Hospitalization for stroke 
in U.S. hospitals, 1989-2009. NCHS data brief, no 95. Hyattsville, 
MD: National Center for Health Statistics. 2012. https://www.cdc.gov/nchs/data/databriefs/db95.pdf.
---------------------------------------------------------------------------

    With respect to the newness criterion, according to the applicant, 
FDA granted marketing authorization to ContaCT on February 13, 2018 
under the de novo pathway, which is only available to devices of a new 
type with low-to-

[[Page 32601]]

moderate risk for which there are no legally marketed predicates, and 
classified it as a Class II medical device. We note that FDA issued a 
de novo order memorandum describing ContaCT as ``an artificial 
intelligence algorithm [used] to analyze images for findings suggestive 
of a pre-specified clinical condition and to notify an appropriate 
medical specialist of these findings in parallel to standard of care 
image interpretation.'' The order specified that ``identification of 
suspected findings is not for diagnostic use beyond notification.''
    The applicant asserted ContaCT was not available immediately after 
FDA's marketing authorization due to establishing Quality Management 
Systems and processes for distributing ContaCT as well as staff 
training and installation. Per the applicant, ContaCT was not 
commercially available until October 2018.
    We note the applicant has submitted a request to the ICD-10 
Coordination and Maintenance Committee for approval for a unique ICD-
10-PCS procedure code, effective in FY 2021, to describe procedures 
that use ContaCT. Currently, there are no ICD-10-PCS procedure codes to 
uniquely identify procedures involving the use of ContaCT.
    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, the 
applicant asserted no existing technology is comparable to ContaCT. The 
applicant further asserted, because of the technology's novelty, the 
product was reviewed under FDA's de novo pathway. The applicant first 
outlined the clinical workflow for patients presenting to a hospital 
with signs or symptoms of LVO prior to the availability of ContaCT:

1--Patient presents with stroke/suspected stroke to hospital emergency 
department (ED).
2--Patient receives stroke CT/CTA imaging after brief initial 
evaluation by hospital ED physician.
3--Technologist processes and reconstructs the CT/CTA imaging and 
manually routes to hospital picture archiving and communication system 
(PACS).
4--Radiologist reads CT/CTA imaging.
5--If needed, a neuroradiology consult is sought.
6--A radiological diagnosis of LVO is made.
7--The radiologist informs hospital ED physician of positive LVO either 
verbally or in the radiologist report.
8--ED physician performs comprehensive exam and refers the patient to a 
stroke neurologist.
9--The stroke neurologist reviews the CT/CTA imaging and clinical 
history and determines whether to prescribe or recommend prescription 
of thrombolysis with tissue plasminogen activator (tPA).
10--The stroke neurologist refers the patient to a neurointerventional 
surgeon. Together they decide whether the patient is a candidate for 
mechanical thrombectomy.
11--If appropriate, the patient proceeds to treatment with mechanical 
thrombectomy.

    The applicant asserted that facilities utilizing the ContaCT system 
can substantially shorten the period of time between when the patient 
receives stroke CT/CTA imaging (step 2) and when the patient is 
referred to a stroke neurologist and neurointerventional surgeon (steps 
9 and 10). They further assert that ContaCT streamlines this workflow 
using artificial intelligence to analyze CTA images of the brain 
automatically and notifies the stroke neurologist and 
neurointerventional surgeon that a suspected LVO has been identified, 
and then enables them to review imaging and make a treatment decision 
faster. The applicant concludes that shortening the time to 
identification of LVO is critical because the efficacy of thrombectomy 
in patients with acute ischemic stroke decreases as the time from 
symptom onset to treatment increases.
    With regard to the second criterion, whether the technology is 
assigned to the same or a different MS-DRG, the applicant did not 
specifically address whether the technology meets this criterion. 
However, we believe that cases involving the use of the technology 
would be assigned to the same MS-DRGs as cases without the technology 
where the patient moves through the hospital according to the 
traditional workflow outlined above.
    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 also 
did not specifically address whether the technology meets this 
criterion. However, we believe cases involving the use of the 
technology would treat the same or similar type of disease and the same 
or similar patient population as the traditional workflow outlined 
above.
    We note that the applicant described ContaCT's mechanism of action 
as shortening the time to identification of LVO through artificial 
intelligence (AI). Specifically, the applicant asserted that facilities 
utilizing the ContaCT system can substantially shorten the period of 
time between when the patient receives stroke CT/CTA imaging and when 
the patient is referred to a stroke neurologist and neurointerventional 
surgeon. We are unclear as to whether the streamlining of hospital 
workflow would represent a unique mechanism of action. Rather, it seems 
that the mechanism of action for ContaCT would be the use of AI to 
analyze images and notify physicians rather than streamlining hospital 
workflow. However, we refer the reader to our discussion below 
regarding our concerns with respect to general parameters for 
identifying a unique mechanism of action based on the use of AI, an 
algorithm and/or software.
    To the extent that the applicant asserted that streamlined hospital 
workflow through the use of ContaCT represents a unique mechanism of 
action, it is unclear to us the degree to which ContaCT changes the 
traditional workflow. Per the FDA, ``ContaCT is limited to analysis of 
imaging data and should not be used in-lieu of full patient evaluation 
or relied upon to confirm diagnosis.'' \96\ It is unclear to CMS how 
ContaCT shortens time to treatment via AI if the CT machine still 
performs the scanning and clinicians are still needed to view the 
images to diagnose an LVO and perform a full patient evaluation for the 
best course of treatment. The applicant has also indicated to CMS that 
the use of ContaCT is not automatic, and the E.R. physician must submit 
an order to utilize it specifically when suspecting an LVO. We are 
unclear how ContaCT streamlines the workflow for stroke treatment via 
AI if it is not to be used for diagnostic purposes per the FDA and 
still requires personnel to order the scan and make the diagnosis.
---------------------------------------------------------------------------

    \96\ U.S. Food and Drug Administration, DEN170073. Evaluation of 
Automatic Class III Designation for ContaCT Decision Summary.
---------------------------------------------------------------------------

    We also are generally concerned as to whether the use of AI, an 
algorithm, or software, which are not tangible, may be considered or 
used to identify a unique mechanism of action. In addition, we question 
how updates to AI, an algorithm or software would affect an already 
approved technology or a competing technology, including whether 
software changes for an already approved technology could be

[[Page 32602]]

considered a new mechanism of action. We also question whether, if 
there were competing technologies to an already approved AI new 
technology, an improved algorithm by a competitor would represent a 
unique mechanism of action if the outcome is the same as the technology 
first approved. We welcome comments from the public regarding the 
general parameters for identifying a unique mechanism of action based 
on the use of AI, an algorithm and/or software.
    We also invite public comments on whether the applicant meets the 
newness criterion, including specifically with respect to the mechanism 
of action.
    With respect to the cost criterion, the applicant provided the 
following analysis. First, the applicant extracted claims from the FY 
2018 MedPAR dataset. The applicant explained that many patients present 
to the emergency department with signs or symptoms suggesting a LVO. 
That presentation would be the basis for ordering a CTA with the 
ContaCT added. Of these patients, some will be identified as stroke and 
LVO, some as stroke but not from a LVO, and others will have diagnoses 
completely unrelated to stroke. As a result, according to the 
applicant, there may be a very broad range of principal diagnoses and 
MS-DRGs representing patients who would be eligible for and receive a 
CTA with ContaCT. The applicant noted that it used admitting diagnoses 
codes rather than principal or secondary diagnosis codes to identify 
cases of stroke due to LVO, stroke not due to LVO, and no stroke. The 
applicant utilized a multi-step approach:
     Step 1: The applicant first extracted claims from the 
stroke-related MS-DRGs (023, 024, 061, 062, 063, 064, 065, 066, 067, 
068, and 069).
     Step 2: The applicant analyzed the admitting diagnosis on 
claims extracted in Step 1 to identify the reason for admission. The 
applicant found that the top five admitting diagnoses for patients in 
the stroke-related MS-DRGs included: Cerebral infarction, unspecified 
(I63.9), transient cerebral ischemic attack, unspecified (G45.9), 
slurred speech (R4781), aphasia (R4701), and facial weakness (R29.810).
     Step 3: The applicant identified all MS-DRGs assigned to 
the admitting diagnosis codes identified in step 2 to identify ContaCT 
cases that did not map to one of the stroke MS-DRGs.
     Step 4: The applicant identified a list of unique MS-DRGs 
and admitting diagnosis code combinations to which cases involving 
ContaCT would map. The applicant stated that it reviewed with clinical 
experts the MS-DRG and admitting diagnosis combinations and eliminated 
any that were unlikely to include the use of ContaCT.
    The applicant identified a total of 375,925 cases across 143 MS-
DRGs, with approximately 66% of cases mapping to MS-DRGs 039, 057, 064, 
065, 066, 069 and 312. The average unstandardized case-weighted charge 
per case was $52,001. The applicant noted it did not remove any charges 
for a prior technology, as it asserted that no other technology is 
comparable to ContaCT. Based on the results of a research study,\97\ 
the applicant assumed ContaCT cases resulting in mechanical 
thrombectomy would have charges reduced by 38% as a result of reduced 
specialty care days and therefore removed the related charges, which 
only affected cases mapping to MS-DRGs 023, 024, 025, and 026. The 
applicant standardized the charges and applied an inflation factor of 
11.1%, which is the same inflation factor used by CMS to update the 
outlier threshold in the FY 2020 IPPS/LTCH PPS final rule (84 FR 
42629), to update the charges from FY 2018 to FY 2020.
---------------------------------------------------------------------------

    \97\ Goldstein ED, Schnusenberg L, Mooney L, et al. Reducing 
Door-to-Reperfusion Time for Mechanical Thrombectomy With a 
Multitiered Notification System for Acute Ischemic Stroke. Mayo Clin 
Proc Innov Qual Outcomes. 2018;2(2): 119-128.
---------------------------------------------------------------------------

    The applicant then added the charges for the new technology. The 
applicant explained it calculated the cost per patient by dividing the 
total overall cost of ContaCT per year per hospital by the number of 
total estimated cases for which ContaCT was used at each hospital that 
currently subscribes to ContaCT (based on the estimated number of cases 
receiving CTA), and averaging across all such hospitals. The following 
is the methodology the applicant used to determine the cost per case:
     Step 1: The applicant first determined the estimated total 
cases (both Medicare and non-Medicare) for each current subscriber 
hospital. The applicant explained it used total cases for both Medicare 
and non-Medicare cases since the cost per case is not specific to 
Medicare cases. In order to determine total cases, which include both 
Medicare and non-Medicare cases, the applicant divided the total 
Medicare cases per subscriber hospital from the FY 2018 MedPAR data by 
the percentage of Medicare beneficiaries (71 percent) in the CONTACT 
FDA research study (for example, 1,136 Medicare cases divided by 0.71 
equals 1,600 total Medicare and non-Medicare cases).
     Step 2: To analyze actual rates (percentages) of CTA 
across subscriber hospital cases, the applicant first used the 
beneficiary ID in the FY 2018 SAF data set to find matching physician 
claims in the carrier file for CT and CTA services with a site of 
service of 21 (Inpatient hospital) or 23 (emergency department) and a 
date of service consistent with the inpatient stay. The applicant then 
calculated provider-specific CTA rates (percentages) for each 
subscriber hospital. The applicant dropped five hospitals with a low 
volume of Medicare inpatient stays that had no matching services in the 
carrier file. The applicant calculated an average CTA rate of 21.6 
percent across all hospitals that subscribe to ContaCT.
     Step 3: The applicant determined the estimated total 
number of cases that received CTA for each current subscriber hospital 
by multiplying the total cases (Medicare and non-Medicare) for each 
subscriber hospital in step 1 by the provider-specific CTA rate 
calculated in Step 2. In cases where a provider had fewer than 11 cases 
in the carrier file or where a provider had a CTA rate that was an 
outlier, the applicant multiplied the total cases for the provider by 
the average CTA rate of 21.6 percent.
     Step 4: The applicant then calculated the cost per year 
per hospital. If a hospital had multiple sites under the same CCN, the 
applicant multiplied the total overall cost of ContaCT per hospital by 
the number of sites. For example, if the cost for ContaCT was $25,000 
per year and Hospital A had only one site under its CCN, then the total 
cost for ContaCT for Hospital A would be $25,000. However, if Hospital 
B had three sites under its CCN, then the total cost for ContaCT for 
Hospital B would be $75,000 per year ($25,000 x 3).
     Step 5: The applicant then divided the cost per year per 
hospital by the total cases that received CTA for each customer 
hospital in step 3 to determine the estimated cost per case for each 
customer hospital. If Hospital A from the example in Step 4 had 50 
patients, then the total hospital cost per case would be $500 per 
patient ($25,000/50). If Hospital B (with three sites under its CCN) 
also had 50 patients, then the total hospital cost per case would be 
$1,500 per patient ($75,000/50).
     Step 6: The applicant averaged the cost per case across 
all hospitals to determine the average cost per patient. The average 
cost per case across Hospital A and Hospital B in the previous example 
would be $1,000.
     Step 7: To convert the cost of the technology in Step 6 to 
charges, the applicant divided the average cost per patient by the 
national average cost-to-

[[Page 32603]]

charge (CCR) of 0.14 for the Radiology cost center from the FY 2020 
IPPS/LTCH PPS final rule. (84 FR 42179). Although the applicant 
submitted data related to the cost of the technology, the applicant 
noted that the cost of the technology was proprietary information.
    The applicant calculated a case-weighted threshold amount of 
$51,358 and a final inflated average case-weighted standardized charge 
per case of $62,006. Based on this analysis, the applicant believes 
that ContaCT meets the cost criterion because the final inflated 
average case-weighted standardized charge per case exceeds the case-
weighted threshold amount.
    The applicant submitted three additional cost analyses to 
demonstrate that it meets the cost criterion using the same methodology 
above but with limits on the cases. The first alternative limited the 
analysis to only those cases in the primary stroke-related MS-DRGs 023, 
024, 061, 062, 063, 064, 065, 066, 067, 068, and 069. This first 
alternative method resulted in a case-weighted threshold of $53,885 and 
a final inflated average case weighted standardized charge per case of 
$62,175. The second alternative limited the analysis to cases in MDC 01 
(Diseases and Disorders of the Nervous System) with the following MS-
DRGs:
[GRAPHIC] [TIFF OMITTED] TP29MY20.126

    This second alternative method resulted in a case-weighted 
threshold of $55,053 and a final inflated average case weighted 
standardized charge per case of $63,741. The third alternative limited 
cases to MS-DRGs where the total volume of cases was greater than 100. 
This third alternative method resulted in a case-weighted threshold of 
$49,652 and a final inflated average case weighted standardized charge 
per case of $59,365. Across all cost-analysis methods, the applicant 
maintained that the technology meets the cost criterion because the 
final inflated average case weighted standardized charge per case 
exceeds the average case-weighted threshold amount.
    We note that we believe a case weight would provide more accuracy 
in determining the average cost per case as compared to the average of 
costs per case across all hospitals that was used by the applicant in 
step 6 as summarized previously. We therefore computed a case weighted 
cost per case across all current subscriber hospitals. We then inflated 
the case weighted cost per case to a charge based on step 7 above and 
used this amount in the comparison of the case weighted threshold 
amount to the final inflated average case weighted standardized charge 
per case (rather than the applicant's average cost per case). In all 
the scenarios above, the final inflated average case-weighted 
standardized charge per case exceeded the case-weighted threshold 
amount by an average of $2,961.
    We have the following concerns regarding whether the technology 
meets the cost criterion. The applicant used a single list price of 
ContaCT per hospital with a cost per patient that can vary based on the 
volume of cases. We are concerned that the cost per patient varies 
based on the utilization of the technology by the hospitals. The cost 
per patient could be skewed by the small number of hospitals utilizing 
the technology and their low case volumes. It is possible, if hospitals 
with large patient populations adopt ContaCT, the cost per patient 
would be significantly lower.
    An alternative to the applicant's calculation may be a methodology 
that expands the applicant's sample from total cases (which include 
both Medicare and non-Medicare cases) receiving CTA at subscriber 
hospitals in Step 1 to all inpatient hospitals for the use of ContaCT 
(and then using the same steps after Step 1 for the rest of the 
analysis). In this alternative, the applicant would continue to extract 
cases representing patients that are eligible for the use of ContaCT 
from MedPAR, but the cost per patient would be determined by dividing 
the overall cost per year per hospital by the average number of 
patients eligible for the use of ContaCT across all such hospitals. For 
example, if the cost for ContaCT is $25,000 per year and the average 
hospital has 500 patients who are eligible to receive ContaCT per year, 
then under this alternative methodology, the total cost per patient 
would be $50 ($25,000/500).
    We note, if ContaCT were to be approved for new technology add-on 
payments for FY 2021, we believe the cost per case from the cost 
analysis above may also be used to determine the maximum new technology 
add on payment (that is, 65 percent of the cost determined above). We 
understand there are unique circumstances to determining a cost per 
case for a technology that utilizes a subscription for its cost. We 
welcome comments from the public as to the appropriate method to 
determine a cost per case for such technologies, including comments on 
whether the cost per case should be estimated based on subscriber 
hospital data as described previously, and if so,

[[Page 32604]]

whether the cost analysis should be updated based on the most recent 
subscriber data for each year for which the technology may be eligible 
for the new technology add-on payment.
    We also invite public comments on whether the applicant meets the 
cost criterion.
    With respect to the substantial clinical improvement criterion, 
according to the applicant, ContaCT represents an advance that 
substantially improves the ability to diagnose a large vessel occlusion 
stroke earlier by automatically identifying suspected disease in CTA 
images and notifying the neurovascular specialist in parallel to the 
standard of care. The applicant further asserted a major limitation in 
the traditional acute stroke workflow is the time delay from initial 
image acquisition of a suspected LVO patient (CT, CT angiography, and 
CT perfusion), notification of the interventional team, and execution 
of an endovascular thrombectomy. The time from stroke onset to 
reperfusion (tissue damage caused when blood supply returns to tissue 
after a period of ischemia or lack of oxygen) is negatively correlated 
with the probability of an independent functional status.\98\ The 
applicant states the time from initial presentation to eventual 
reperfusion can be long, resulting in poor outcomes, using the existing 
standard of care. The median onset-to-revascularization time has been 
reported as 202.0 minutes for patients presenting directly to 
interventional centers (or comprehensive stroke centers), and 311.5 
minutes for patients that initially presented to a non-interventional 
center.\99\ The applicant further states that part of that time is the 
time from initial CTA-scan to the time that the neurovascular 
specialist is notified of a possible LVO (the CTA to notification 
time). A retrospective study examined work-flow for stroke patients and 
demonstrated an initial CT to CSC (Comprehensive Stroke Center) 
notification time per standard of care >60 minutes in patients 
transferred for endovascular reperfusion in acute ischemic stroke.\100\
---------------------------------------------------------------------------

    \98\ Khatri P, Abruzzo T, Yeatts SD, et al. Good clinical 
outcome after ischemic stroke with successful revascularization is 
time-dependent. Neurology. 2009;73(13):1066-1072.
    \99\ Froehler MT, Saver JL, Zaidat 00, et al. Interhospital 
transfer before thrombectomy is associated with delayed treatment 
and worse outcome in the STRATIS registry. Circulation. 2017; 
136(24):2311-2321.
    \100\ Sun CH, Nogueira J, Glenn RG, et al. Picture-to-puncture: 
A novel time metric to enhance outcomes in patients transferred for 
endovascular reperfusion in acute ischemic stroke. Circulation. 
2013;127:1139-1148.
---------------------------------------------------------------------------

    The applicant asserted that ContaCT facilitates a workflow parallel 
to the standard of care workflow and results in a notified specialist 
entering the workflow earlier. In a study comparing the performance of 
ContaCT with standard of care workflow, ContaCT resulted in faster 
specialist notification. According to the applicant, the average time 
to specialist notification for ContaCT was 7.32 minutes [95%CI: 5.51, 
9.13] whereas time to notification for standard of care workflow was 
58.72 minutes [95%CI: 46.21, 71.23]. The applicant also asserted that 
ContaCT saved an average of 51.4 minutes, an improvement that could 
markedly improve time to intervention for LVO patients. In addition, 
the applicant noted that the standard deviation was reduced from 41.14 
minutes in the standard of care workflow to 5.95 minutes with ContaCT, 
demonstrating ContaCT's potential to reduce variation in care and 
patient outcome across geographies and time of day.\101\
---------------------------------------------------------------------------

    \101\ U.S. Food and Drug Administration (FDA). Center for 
Devices and Radiological Health. Evaluation of Automatic Class III 
Designation for ContaCT. Decision Memorandum No. 170073 (DEN170073). 
2018. Retrieved from: https://www.accessdata.fda.gov/cdrh_docs/reviews/DEN170073.pdf.
---------------------------------------------------------------------------

    To support the applicant's assertion that ContaCT substantially 
improves the ability to diagnose a large vessel occlusion stroke 
earlier, the applicant presented a multicenter prospective 
observational trial, DISTINCTION, which is ongoing and compares a 
prospective cohort of patients in which ContaCT is used (intervention 
arm) to a retrospective cohort in which ContaCT was not used (control 
arm). Patients are also segmented based on whether they initially 
present to a non-interventional center or an interventional center. Per 
the applicant, early data from one non-interventional hospital in the 
Erlanger Health System indicates that for the control arm the median 
time from CTA to clinician notification was 59.0. For the intervention 
arm, early data indicates that the median time from CTA to clinician 
notification was 5.3 min. The applicant stated that these early data 
indicate time savings of approximately 53 min, which is consistent with 
the 51.4 min. time savings demonstrated in the studies sponsored/
conducted by the De Novo requester.\102\
---------------------------------------------------------------------------

    \102\ U.S. Food and Drug Administration (FDA). Center for 
Devices and Radiological Health. Evaluation of Automatic Class III 
Designation for ContaCT. Decision Memorandum No. 170073 (DEN170073). 
2018. Retrieved from: https://www.accessdata.fda.gov/cdrh_docs/reviews/DEN170073.pdf.
---------------------------------------------------------------------------

    Next, the applicant presented the Automated Large Artery Occlusion 
Detection In Stroke Imaging Study (ALADIN), a multi-center 
retrospective analysis of CTAs randomly picked from a retrospective 
cohort of acute ischemic stroke patients, with and without anterior 
circulation LVOs, admitted at three tertiary stroke centers, from 2014-
2017. Per the applicant, ALADIN evaluated ContaCT's performance 
characteristics including area under the curve, sensitivity, 
specificity, positive predictive value, negative predictive value, and 
processing or running time. The applicant asserted that, through this 
study, researchers concluded that the ContaCT algorithm may permit 
early and accurate identification of LVO stroke patients and timely 
notification to emergency teams, enabling quick decision-making for 
reperfusion therapies or transfer to specialized centers if 
needed.103 104 105
---------------------------------------------------------------------------

    \103\ Barreira C, Bouslama M, Lim J, et al. E-108 ALADIN study: 
Automated large artery occlusion detection in stroke imaging study--
a multicenter analysis. J Neurointerv Surg. 2018;10(Suppl 2):A101-
A102.
    \104\ Barreira C, Bouslama M, Haussen D, et al. Abstract WP61: 
Automated large artery occlusion detection in stroke imaging--ALADIN 
study. Stroke. 2018;49:AWP61.
    \105\ Rodrigues GM, Barreira CM, Bouslama M, et al. Automated 
large artery occlusion detection in stroke imaging study (ALADIN). 
Abstract WP71: Multicenter ALADIN: Automated large artery occlusion 
detection in stroke imaging using artificial intelligence. Stroke. 
30 Jan 2019;50:AWP71.
---------------------------------------------------------------------------

    According to the applicant, the use of ContaCT to facilitate a 
faster diagnosis and treatment decision directly affects management of 
the patient by enabling early notification of the neurovascular 
specialist and faster time to treatment utilizing mechanical 
thrombectomy to remove the large vessel occlusion. The applicant stated 
that mechanical thrombectomy with stent retrievers is one of the 
standards of care for treatment of acute ischemic stroke patients 
caused by LVO and that mechanical thrombectomy therapy is highly time-
critical with each minute saved in onset-to-treatment time resulting in 
a reported average of 4.2 days of extra healthy life.\106\ According to 
the applicant, the use of ContaCT affects the management of the patient 
by facilitating early identification of patients with suspected LVO and 
early notification of the neurovascular specialist. The applicant 
asserted that

[[Page 32605]]

this may affect the management of the patient in two ways. First, it 
may offer improved access to mechanical thrombectomy for patients who 
would otherwise not have access because of factors such as time of day 
and the specialty capabilities of the hospital they are in, and second, 
it may involve the neurovascular team earlier, decreasing the time to 
thrombectomy. The applicant stated that ContaCT saved an average of 
51.4 minutes in time to notification relative to standard of care 
workflow and reduced standard deviation in time to notification from 
41.14 minutes (standard of care workflow) to 5.95 minutes 
(ContaCT).\107\ Furthermore, the applicant stated that ContaCT could 
markedly improve time to intervention for LVO patients and has the 
potential to reduce variation in care and patient outcome across 
geographies and time of day.
---------------------------------------------------------------------------

    \106\ Fransen PS, Berkhemer OA, Lingsma HF, et al. Time to 
reperfusion and treatment effect for acute ischemic stroke: A 
randomized clinical trial. JAMA Neurol. 2016;73:190-196; Meretoja A, 
Keshtkaran M, Tatlisumak T, Donnan GA and Churilov L. Endovascular 
therapy for ischemic stroke: Save a minute--save a week. Neurology. 
2017;88(22):2123-2127.
    \107\ U.S. Food and Drug Administration (FDA). Center for 
Devices and Radiological Health. Evaluation of Automatic Class III 
Designation for ContaCT. Decision Memorandum No. 170073 (DEN170073). 
2018. Retrieved from: https://www.accessdata.fda.gov/cdrh_docs/reviews/DEN170073.pdf.
---------------------------------------------------------------------------

    The applicant stated that according to five clinical trials, the 
clinical efficacy of endovascular mechanical thrombectomy has been 
demonstrated for patients with LVO strokes up to 6 hours after onset of 
stroke.\108\ The applicant also stated that two meta-analyses of these 
randomized trials have been completed.\109\ Campbell et al., performed 
a patient-level pre-specified pooled meta-analysis of four randomized 
clinical trials which concluded that thrombectomy for large vessel 
ischemic stroke is safe and highly effective at reducing disability. 
Goyal et al., pooled and analyzed patient-level data from all five 
trials. Per the applicant, the results indicated that mechanical 
thrombectomy leads to significantly reduced disability. According to 
the applicant, together, these five randomized trials and two meta-
analyses, have demonstrated that treatment for intracranial large 
vessel occlusion with mechanical thrombectomy with stent retrievers is 
the standard of care.
---------------------------------------------------------------------------

    \108\ Berkhemer OA, Fransen PS, Beumer D, et al. MR CLEAN 
Investigators. A randomized trial of intraarterial treatment for 
acute ischemic stroke. N Engl J Med. 2015;372:11-20.doi: 10.1056/
NEJMoa1411587; Campbell BCV, Mitchell PJ, Kleinig TJ, et al. 
Endovascular therapy for ischemic stroke with perfusion-imaging 
selection. N Engl J Med. 2015;372(11):1009-1018; Jovin TG, Chamorro 
A, Cobo E, de Miquel MA, Molina CA, Rovira A, et al.; REVASCAT Trial 
Investigators. Thrombectomy within 8 hours after symptom onset in 
ischemic stroke. N Engl J Med. 2015;372(24):2296-2306.
    \109\ Campbell BC, Hill MD, Rubiera M et al. Safety and efficacy 
of solitaire stent thrombectomy: Individual patient data meta-
analysis of randomized trials. Stroke. 2016;47(3):798-806; Goyal M, 
Menon BK, van Zwam WH, et al. Endovascular thrombectomy after large-
vessel ischaemic stroke: A meta-analysis of individual patient data 
from five randomised trials. Lancet N Am Ed. 2016;387(10029):1723-
1731.
---------------------------------------------------------------------------

    The applicant also asserted that real world evidence further 
supports the efficacy of mechanical thrombectomy. Data from the STRATIS 
registry (Systematic Evaluation of Patients Treated With 
Neurothrombectomy Devices for Acute Ischemic Stroke), which 
prospectively enrolled patients treated in the United States with a 
Solitaire Revascularization Device and Mindframe Capture Low Profile 
Revascularization Device within 8 hours from symptom onset, was 
compared with the interventional cohort from the patient-level meta-
analysis from Campbell et al., to assess whether similar process 
timelines and technical and functional outcomes could be achieved in a 
large real world cohort as in the randomized trials. The conclusion of 
the article was that the results indicate that randomized trials can be 
reproduced in the real-world (Mueller-Kronast et al., 2017).\110\
---------------------------------------------------------------------------

    \110\ Mueller-Kronast NH, Zaidat OO, Froehler MT, et al. 
Systematic evaluation of patients treated with neurothrombectomy 
devices for acute ischemic stroke: Primary results of the STRATIS 
registry. Stroke. 2017;48(10):2760-2768.
---------------------------------------------------------------------------

    The applicant stated that based on these data, U.S. clinical 
guidelines now recommend mechanical thrombectomy for the treatment of 
large vessel occlusion strokes when performed <=6 hours from symptom 
onset. The American Stroke Association/American Heart Association (ASA/
AHA) ``2018 Guidelines for the Early Management of Patients With Acute 
Ischemic Stroke'' recommends mechanical thrombectomy with a stent 
retriever in patients that meet the following criteria: (1) Prestroke 
modified Rankin Scale (mRS) 0-1, (2) causative occlusion of the 
internal carotid artery (ICA) or middle cerebral artery (MCA) segment 1 
(M1), (3) age >=18, (4) National Institute of Health Stroke Scale 
(NIHSS) >=6, (5) Alberta Stroke Program Early CT Score (ASPECTS) >=6, 
and (6) treatment can be initiated within 6 h of symptom onset (Powers 
et al., 2018). The ASA/AHA notes the need for expeditious treatment 
with both intravenous thrombolysis and mechanical thrombectomy.\111\
---------------------------------------------------------------------------

    \111\ Powers WJ, Rabinstein AA, Ackerson T et al. On behalf of 
the American Heart Association Stroke Council. 2018 Guidelines for 
the early management of patients with acute ischemic stroke: A 
guideline for healthcare professionals from the American Heart 
Association/American Stroke Association. Stroke. 2018;49:e46-e110.
---------------------------------------------------------------------------

    The applicant also stated that recently, randomized trials have 
demonstrated the clinical efficacy of mechanical thrombectomy for large 
vessel occlusion strokes for select patients from 6 to 24 hours after 
symptom onset.\112\ Among patients with acute stroke who were last 
known well 6 to 24 hours earlier and who had a mismatch between 
clinical deficit and infarct, outcomes for disability at 90 days were 
better with thrombectomy plus standard care compared with standard care 
alone.
---------------------------------------------------------------------------

    \112\ Albers GW, Marks MP, Kemp S, et al. Thrombectomy for 
stroke at 6 to 16 hours with selection by perfusion imaging. N Engl 
J Med. 2018;378(8):708-718; Nogueira RG, Jadhav AP, Haussen DC, et 
al. Thrombectomy 6 to 24 hours after stroke with a mismatch between 
deficit and infarct. N Engl J Med. 2018;378(1):11-21.
---------------------------------------------------------------------------

    The applicant asserted that the use of ContaCT reduces time to 
treatment, by notifying the stroke team faster than the standard of 
care and enabling the team to diagnose and treat the patient earlier, 
which is known to improve clinical outcomes in stroke, and that 
mechanical thrombectomy has been shown to reduce disability, reduce 
length of stay and recovery time (Campbell, BCV et al. 2017).\113\
---------------------------------------------------------------------------

    \113\ Campbell BCV, Mitchell PJ, Churilov L, et al. Endovascular 
Thrombectomy for Ischemic Stroke Increases Disability-Free Survival, 
Quality of Life, and Life Expectancy and Reduces Cost. Front Neurol. 
2017;8:657.
---------------------------------------------------------------------------

    According to the applicant, other studies have also demonstrated 
that time to reperfusion is a predictor of patient outcomes. The 
applicant asserted that several major randomized controlled trials for 
mechanical thrombectomy have demonstrated improvements in functionality 
with faster time to reperfusion. The primary outcome of some of these 
trials was the modified Rankin scale (mRs) score, a categorical scale 
measure of functional outcome, with scores ranging from 0 (no symptoms) 
to 6 (death) at 90 days.\114\ Pooled patient-level data from these five 
trials demonstrated that in the mechanical thrombectomy group the odds 
of better disability outcomes at 90

[[Page 32606]]

days (mRS scale distribution) declined with longer time from symptom 
onset to expected arterial puncture. Among the mechanical thrombectomy 
plus medical therapy group patients in whom substantial reperfusion was 
achieved, delays in reperfusion times were associated with increased 
levels of 3-month disability.\115\
---------------------------------------------------------------------------

    \114\ Berkhemer OA, Fransen PS, Beumer D, et al. MR CLEAN 
Investigators. A randomized trial of intraarterial treatment for 
acute ischemic stroke. N Engl J Med. 2015;372:11-20.doi: 10.1056/
NEJMoa1411587; Campbell BCV, Mitchell PJ, Kleinig TJ, et al. 
Endovascular therapy for ischemic stroke with perfusion-imaging 
selection. N Engl J Med. 2015;372(11):1009-1018; Goyal M, Demchuk 
AM, Menon BK, Eesa M, Rempel JL, Thornton J, et al.; ESCAPE Trial 
Investigators. Randomized assessment of rapid endovascular treatment 
of ischemic stroke. N Engl J Med. 2015;372(11):1019-1030; Jovin TG, 
Chamorro A, Cobo E, de Miquel MA, Molina CA, Rovira A, et al.; 
REVASCAT Trial Investigators. Thrombectomy within 8 hours after 
symptom onset in ischemic stroke. N Engl J Med. 2015;372(24):2296-
2306; Saver JL, Goyal M, Bonafe A, Diener HC, Levy EI, Pereira VM, 
et al.; SWIFT PRIME Investigators. Stent-retriever thrombectomy 
after intravenous t-PA vs. t-PA alone in stroke. N Engl J Med. 2015 
Jun 11;372(24):2285-95.
    \115\ Saver JL, Goyal M, van der Lugt A, et al.; HERMES 
Collaborators. Time to treatment with endovascular thrombectomy and 
outcomes from ischemic stroke: A meta-analysis. JAMA. 2016;316:1279-
1288.
---------------------------------------------------------------------------

    The applicant referred to the American Stroke Association/American 
Heart Association (ASA/AHA) ``2018 Guidelines for the Early Management 
of Patients With Acute Ischemic Stroke,'' which recognize that the 
benefit of mechanical thrombectomy is time dependent, with earlier 
treatment within the therapeutic window leading to bigger proportional 
benefits. The guidelines also state that any cause for delay to 
mechanical thrombectomy, including observing for a clinical response 
after IV alteplase, should be avoided.\116\
---------------------------------------------------------------------------

    \116\ Powers WJ, Rabinstein AA, Ackerson T et al. On behalf of 
the American Heart Association Stroke Council. 2018 Guidelines for 
the early management of patients with acute ischemic stroke: A 
guideline for healthcare professionals from the American Heart 
Association/American Stroke Association. Stroke. 2018;49:e46-e110.
---------------------------------------------------------------------------

    The applicant asserted that the phrase ``time is brain'' emphasizes 
that human nervous tissue is rapidly lost as stroke progresses. Per the 
applicant, recent advances in quantitative neurostereology and stroke 
neuroimaging permit calculation of just how much brain is lost per unit 
time in acute ischemic stroke. To illustrate this point, the applicant 
stated that in the event of a large vessel acute ischemic stroke, the 
typical patient loses 1.9 million neurons, 13.8 billion synapses, and 
12 km (7 miles) or axonal fibers each minute in which stroke is 
untreated. Furthermore, for each hour in which treatment fails to 
occur, the brain loses as many neurons as it does in almost 3.6 years 
of normal aging.\117\ The applicant asserted that given the time-
dependent nature of treatment in acute ischemic stroke patients, 
ContaCT could play a critical role in preserving human nervous tissue, 
as the application results in faster detection in more than 95% of 
cases and saves an average of 51.4 minutes in time to 
notification.\118\
---------------------------------------------------------------------------

    \117\ Saver JL. Time is brain--quantified. Stroke. 2006 
Jan;37(1):263-6.
    \118\ U.S. Food and Drug Administration (FDA). Center for 
Devices and Radiological Health. Evaluation of Automatic Class III 
Designation for ContaCT. Decision Memorandum No. 170073 (DEN170073). 
2018. Retrieved from: https://www.accessdata.fda.gov/cdrh_docs/reviews/DEN170073.pdf.
---------------------------------------------------------------------------

    We have the following concerns regarding whether the technology 
meets the substantial clinical improvement criterion. The applicant 
provided a total of 19 articles specifically for the purposes of 
addressing the substantial clinical improvement criterion: Four 
retrospective studies/analyses, nine randomized clinical trials (RCTs), 
three meta-analyses, one registry, one guideline, and one systematic 
review.
    The four retrospective studies/analyses included the FDA decision 
memorandum, a single site of a RCT, and two abstracts related to the 
Automated Large Artery Occlusion Detection in Stroke Imaging (ALADIN) 
study. The applicant stated that the studies sponsored/conducted by the 
De Novo requester indicated that ContaCT substantially shortens the 
time to notifying the specialist for LVO cases as compared with the 
standard of care. However, the sample size was limited to only 85 out 
of 300 patients having sufficient data of CTA to notification time 
available. To calculate the sensitivity and specificity of ContaCT, 
neuro-radiologists reviewed images and established the empirical 
evidence. Specifically, the sensitivity and specificity was 87.8% (95% 
CI 81.2-92.5%) and 89.6% (83.7-93.9%) respectively. We have concerns 
regarding whether this represents a substantial clinical improvement, 
as ContaCT missed approximately 12% of images with a true LVO and 
incorrectly identified approximately 10% as having a LVO. Additionally, 
the small sample size of less than 100 raises concerns for 
generalizability. Additionally, we agree with FDA that ContaCT is 
limited to analysis of imaging data and should not be used in-lieu of 
full patient evaluation or relied upon to make or confirm 
diagnosis.\119\
---------------------------------------------------------------------------

    \119\ U.S. Food and Drug Administration (FDA). Center for 
Devices and Radiological Health. Evaluation of Automatic Class III 
Designation for ContaCT. Decision Memorandum No. 170073 (DEN170073). 
2018. Retrieved from: https://www.accessdata.fda.gov/cdrh_docs/reviews/DEN170073.pdf.
---------------------------------------------------------------------------

    With respect to the study that was a single site of a RCT \120\ 
presented by the applicant, the study conducted a retrospective review 
of the time between an initial CT at an outside hospital and the 
notification to the comprehensive stroke center. This retrospective 
analysis was conducted at one site, enrolled in one of the RCTs 
(unspecified). The authors noted there was substantial difference in 
the time between initial CT at the outside hospital to comprehensive 
stroke center notification, due to multiple factors, including delays 
in neurological assessments, interpretation of imaging, utilization of 
advance modality imaging, and determination of tPA effectiveness. 
Specifically, the authors noted in their study that obtainment of 
advanced imaging contributed to a 57-minute delay in decision making 
without substantial benefits in patient outcome. It is unclear whether 
and how this time delay and the utilization of faster notification 
would affect the clinical outcome of patients.
---------------------------------------------------------------------------

    \120\ Sun CH, Nogueira J, Glenn RG, et al. Picture-to-puncture: 
A novel time metric to enhance outcomes in patients transferred for 
endovascular reperfusion in acute ischemic stroke. Circulation. 
2013;127:1139-1148.
---------------------------------------------------------------------------

    The applicant also submitted two separate abstracts for a 
retrospective analysis of the ALADIN study, which only provide interim 
results. The applicant noted for the primary analysis, the algorithm 
obtained sensitivity of 0.97 and specificity of 0.52, with a positive 
predictive value (PPV) of 0.74 and negative predictive NPV of 0.91, and 
overall accuracy of 0.78. For the secondary analysis (M2 and proximal 
ICA included), the algorithm obtained sensitivity of 0.92 and 
specificity of 0.75, with a PPV of 0.92 and NPV of 0.75, and overall 
accuracy of 0.88. We are concerned both that these are only partial 
results as it is not clear what the full outcome of the ALADIN study 
will indicate, and also that the initial overall accuracy of ContaCT 
varied by 10% between the types of strokes.
    The RCTs included the following: (1) Multicenter Randomized 
Clinical Trial of Endovascular Treatment of Acute Ischemic Stroke in 
the Netherlands (MR CLEAN), (2) Thrombolysis in Emergency Neurological 
Deficits--Intra-Arterial (EXTEND-IA) Trial, (3) The Endovascular 
Treatment for Small Core and Anterior Circulation Proximal Occlusion 
with Emphasis on Minimizing CT to Recanalization Times (ESCAPE) trial, 
(4) Randomized Trial of Revascularization with Solitaire FR Device 
versus Best Medical Therapy in the Treatment of Acute Stroke Due to 
Anterior Circulation Large Vessel Occlusion Presenting within Eight 
Hours of Symptom Onset (REVASCAT), (5) Solitaire with the Intention for 
Thrombectomy as Primary Endocascular Treatment (SWIFT PRIME) trial, (6) 
Endovascular Therapy Following Imaging Evaluation for Ischemic Stroke, 
(7) DWI or CTP Assessment with Clinical Mismatch in the Triage of Wake-
Up and Late Presenting Strokes Undergoing Neurointervention with Trevo 
(DAWN) trial, and (8) Interventional Manage of Stroke (IMS) Phase I and 
II trials. The MR CLEAN trial, EXTEND-IA trial, ESCAPE trial,

[[Page 32607]]

REVASCAT trial, SWIFT PRIME trial, Endovascular Therapy Following 
Imaging Evaluation for Ischemic Stroke trial, and DAWN were all multi-
center prospective RCTs evaluating a treatment group of either a 
microcatheter with a thrombolytic agent or mechanical thrombectomy 
versus a control group of the standard care. These RCTs were evaluating 
the outcomes from specific treatment for patients who suffered from 
various strokes and not the time of imaging to treatment. While each 
study may have included a time-element as an experimental analysis or 
additional end-point, we are unsure how they support the use of ContaCT 
as a substantial clinical improvement over existing technologies. Also, 
while the IMS trials provided evidence to support a positive clinical 
outcome following technically successful angiographic reperfusion using 
time from stroke onset to procedure termination, they did not specify 
which part of the overall standard of care treatment affected an 
increase or decrease of time. The three meta-analyses utilized data 
from the RCTs. The Safety and Efficacy of Solitaire Stent Thrombectomy 
examined four trials, ESCAPE, REVASCAT, SWIFT PRIME, and EXTEND-IA. The 
Highly Effective Reperfusion evaluated in Multiple Endovascular Stroke 
Trials (HERMES) collaboration authored two of the three meta-analysis. 
The HERMES collaboration examined data and results from five RCTs, MR 
CLEAN, ESCAPE, REVASCAT, SWIFT PRIME, and EXTEND-IA. These meta-
analysis studies confirmed the results of each of the individual RCTs 
of the benefits of thrombectomy versus the standard of care. However, 
we have concerns as to whether these meta-analyses, along with the 
RCTs, indicate a substantial clinical improvement with shorter 
notification times of a LVO.
    Two articles submitted by the applicant evaluated data using the 
STRATIS registry. One article \121\ evaluated the use of mechanical 
thrombectomy in consecutive patients with acute ischemic stroke because 
of LVO in the anterior circulation. The two groups consisted of (1) 
patients who presented directly to a comprehensive stroke center and 
(2) patients who were transferred to a comprehensive stroke center. 
This study identified a difference of 124 minutes between groups, which 
was primarily related to longer door-to-tPA times at nonenrolling 
hospitals, delay between IV-tPA and departure from the initial 
hospital, and length of transport time. The author's primary outcome 
was functional status at 90 days, which found those with shorter time 
to treatment achieved better functional independence at 90 days. There 
was no difference in mortality in the two groups. While this article 
supports that shorter time to treatment may increase positive clinical 
outcomes for functional status, the study indicated time to departure 
from the nonenrolling hospital and transfer time as primary reasons in 
delayed thrombectomy treatment. These two time lapses include multiple 
covariates; for example, the distance between the facilities and the 
response of available transport (for example, ambulance). These 
potential confounders raise questions as to the use of ContaCT 
shortening time to treatment.
---------------------------------------------------------------------------

    \121\ Froehler MT, Saver JL, Zaidat 00, et al. Interhospital 
transfer before thrombectomy is associated with delayed treatment 
and worse outcome in the STRATIS registry. Circulation. 2017; 
136(24):2311-2321.
---------------------------------------------------------------------------

    Lastly, the applicant submitted the AHA/ASA guidelines and a 
systematic literature review as support for clinical improvement. We 
are concerned the guidelines do not support a finding of substantial 
clinical improvement for ContaCT because the guidelines are for current 
standard of care. The systematic literature review identified the 
quantitative estimates of the pace of neural circuity loss in human 
ischemic stroke. While this supports the urgency of stroke care, we are 
unsure how it demonstrates a substantial clinical improvement in how 
ContaCT supports the urgency of stroke care.
    We invite public comment as to whether ContaCT meets the 
substantial clinical improvement criterion.
    In this section, we summarize and respond to written public 
comments received in response to the New Technology Town Hall meeting 
notice published in the Federal Register regarding the substantial 
clinical improvement criterion for ContaCT.
    Comment: Several commenters asserted that the studies conducted to 
date specifically demonstrate the important relationship between time 
to treatment and improved clinical outcomes in ischemic stroke. The 
commenters emphasized the concept of ``time is brain,'' that human 
nervous tissue is rapidly lost as stroke progresses and emergent 
evaluation and therapy are required. They stated that in patients 
experiencing a typical large vessel acute ischemic stroke, 120 million 
neurons, 830 billion synapses, and 714 km (447 miles) of myelinated 
fibers are lost each hour, and that 1.9 million neurons, 14 billion 
synapses, and 12 km (7.5 miles) of myelinated fibers are destroyed 
every minute. The commenters noted that, compared with the normal rate 
of neuron loss in brain aging, the ischemic brain ages 3.6 years each 
hour without treatment. They also re-emphasized the time dependency of 
stroke interventions, stating that the sooner the reperfusion therapy 
is commenced, the better the outcome. A commenter stated that, 
following implementation of ContaCT in May 2019, CTA time at stroke 
center (PSC) to time of arrival at comprehensive stroke center (CSC) 
was significantly reduced by an average of 66 min. (mean CTA to time of 
arrival, 171.29  110.58 min. vs 105.27  62.09 
min; p = 0.0163). Another commenter stated that, following 
implementation of ContaCT in January 2019, the spoke door-in to groin 
puncture at CSC was reduced by 26.0 min (14%) while also reducing the 
standard deviation by 25.0 min (38%). (Median CTA to time of groin 
puncture, 188.5  65.5 min. vs 162.5  40.5 min). 
Commenters stated that although sample sizes are currently too small to 
identify meaningful differences in clinical outcomes, the incorporation 
of ContaCT was associated with a significant improvement in transfer 
times for LVO patients and that given what is known about the 
importance of decreasing time to treatment, time savings achieved 
should result in better outcomes.
    Response: We thank the commenters for their input and will take 
this information into consideration when deciding whether to approve 
new technology add-on payments for ContaCT.
    Comment: The applicant responded to the questions received at the 
New Technology Town Hall Meeting held in December 2019.
    First, the applicant was asked how the time prior to emergency 
department (ED) arrival affects the benefit of reduced time-to-
notification from ContaCT and whether the benefit from the algorithm 
would reach a limit such that there would still be loss of brain 
function due to delays prior to ED arrival. The applicant responded 
that there is a large body of clinical evidence showing that delay in 
treatment (thrombectomy) in patients with stroke with large vessel 
occlusion leads to poorer outcomes and that time from symptoms to 
treatment may be broken down into 3 discrete windows: (1) Initiation of 
symptoms to arrival of emergency medical services (EMS), (2) EMS 
arrival at the patient's location to transport to an emergency 
department, and (3) arrival at an emergency department to start of 
treatment (``door to puncture''). They further stated that 
interventions to reduce the times in each of these windows 
independently can help improve patient outcomes. The

[[Page 32608]]

applicant stated that the ContaCT system is designed to optimize 
processes inside the hospital but acknowledged that process changes 
that reduce the time interval between EMS arrival and enrolling 
hospital arrival may further benefit patients with acute ischemic 
stroke, but the opportunity to improve processes outside the hospital 
does not reduce or limit the benefit of reducing time to treatment by 
improving processes inside the hospital through use of the ContaCT 
system.
    Second, the applicant was asked how the algorithm driving ContaCT 
is maintained. The applicant responded that changes to the algorithm 
code are controlled via a software development life-cycle procedure 
(SDLC) that is designed to comply with FDA requirements and IEC62304 
(Medical device software--Software life cycle processes). The applicant 
stated that the procedure includes a regulatory evaluation, performed 
according to relevant FDA guidance and that the manufacturer maintains 
the performance of the ContaCT device using user feedback where issues 
and complaints are logged, tracked and investigated according to the 
manufacturer's quality management system (QMS), designed in compliance 
with relevant FDA regulations (21 CFR part 820) and inspected on a 
quarterly basis during management review. Also, medical annotators 
routinely review scans, and an analysis of sensitivity and specificity 
(overall and per institution) is reviewed by management during the 
quarterly management review. Criteria for acceptance of said 
performance are predefined in the QMS.
    Third, the applicant was asked if the results for ContaCT are only 
generalizable to those centers where mechanical thrombectomy is 
performed or whether ContaCT works only in specialized stroke centers. 
The applicant stated that the benefits of this parallel workflow are 
not limited to tertiary stroke centers and that conclusions from the 
STRATIS Registry suggest there is an opportunity to optimize processes 
both inside and outside the hospital.
    Lastly, the applicant was asked if there is clinical evidence 
demonstrating that ContaCT directly improves clinical outcomes. The 
applicant acknowledged that there is no data directly evaluating 
patient outcomes from ContaCT but stated that there is evidence from 
randomized controlled trials and real world studies of reduction in 
time from ED presentation to notification for treatment of LVO. The 
applicant also noted that there is a large and well-established body of 
evidence that reduced time to notification and treatment of LVO 
improves patient outcomes in patients with ischemic stroke. Per the 
applicant, this body of evidence supports the conclusion that ContaCT 
provides substantial clinical improvement over current standard of care 
in Medicare beneficiaries with acute ischemic stroke.
    Response: We appreciate the applicant's responses to questions 
asked at the New Technology Town Hall Meeting. We will take the 
responses to our questions into consideration when deciding whether to 
approve new technology add-on payments for ContaCT.
d. Supersaturated Oxygen (SSO2) Therapy (DownStream[supreg] 
System)
    TherOx, Inc. submitted an application for new technology add-on 
payments for Supersaturated Oxygen (SSO2) Therapy (the 
TherOx DownStream[supreg] System) for FY 2021. We note that the 
applicant previously submitted an application for new technology add-on 
payments for FY 2019, which was withdrawn prior to the issuance of the 
FY 2019 IPPS/LTCH PPS final rule. We also note that the applicant again 
submitted an application for new technology add-on payments for FY 
2020, but CMS was unable to determine that SSO2 Therapy 
represents a substantial clinical improvement over the currently 
available therapies used to treat STEMI patients.
    Per the applicant, The DownStream[supreg] System is an adjunctive 
therapy that creates and delivers superoxygenated arterial blood 
directly to reperfused areas of myocardial tissue which may be at risk 
after an acute myocardial infarction (AMI), or heart attack. Per FDA, 
SSO2 Therapy is indicated for the preparation and delivery 
of SuperSaturated Oxygen Therapy (SSO2 Therapy) to targeted 
ischemic regions perfused by the patient's left anterior descending 
coronary artery immediately following revascularization by means of 
percutaneous coronary intervention (PCI) with stenting that has been 
completed within 6 hours after the onset of anterior acute myocardial 
infarction (AMI) symptoms caused by a left anterior descending artery 
infarct lesion. The applicant stated that the net effect of the 
SSO2 Therapy is to reduce the size of the infarction and, 
therefore, lower the risk of heart failure and mortality, as well as 
improve quality of life for STEMI patients.
    SSO2 Therapy consists of three main components: the 
DownStream[supreg] System; the DownStream cartridge; and the 
SSO2 delivery catheter. The DownStream[supreg] System and 
cartridge function together to create an oxygen-enriched saline 
solution called SSO2 solution from hospital-supplied oxygen 
and physiologic saline. A small amount of the patient's blood is then 
mixed with the SSO2 solution, producing oxygen-enriched 
hyperoxemic blood, which is delivered to the left main coronary artery 
(LMCA) via the delivery catheter at a flow rate of 100 ml/min. The 
duration of the SSO2 Therapy is 60 minutes and the infusion 
is performed in the catheterization laboratory. The oxygen partial 
pressure (pO2) of the infusion is elevated to ~1,000 mmHg, 
therefore providing oxygen locally to the myocardium at a hyperbaric 
level for 1 hour. After the 60-minute SSO2 infusion is 
complete, the cartridge is unhooked from the patient and discarded per 
standard practice. Coronary angiography is performed as a final step 
before removing the delivery catheter and transferring the patient to 
the intensive care unit (ICU).
    The applicant for the SSO2 Therapy received conditional 
premarket approval from FDA on April 2, 2019. FDA noted the applicant 
must conduct ``a post-approval study to confirm the safety and 
effectiveness of the TherOx DownStream System for use of delivery of 
SuperSaturated Oxygen Therapy (SSO2 Therapy) to targeted 
ischemic regions of the patient's coronary vasculature in qualifying 
anterior acute myocardial infarction (AMI) patients who have undergone 
successful percutaneous coronary intervention (PCI) with stenting 
within 6 hours of experiencing AMI symptoms.'' \122\ The applicant 
stated that use of the SSO2 Therapy can be identified by the 
ICD-10-PCS procedure codes 5A0512C (Extracorporeal supersaturated 
oxygenation, intermittent) and 5A0522C (Extracorporeal supersaturated 
oxygenation, continuous).
---------------------------------------------------------------------------

    \122\ https://www.accessdata.fda.gov/cdrh_docs/pdf17/P170027A.pdf.
---------------------------------------------------------------------------

    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 therefore not be considered 
``new'' for purposes of new technology add-on payments. We note that in 
the FY 2020 IPPS/LTCH PPS final rule (84 FR 42275), we stated that 
based on the information submitted by the applicant as part of its FY 
2020 new technology add-on payment application for SSO2 
Therapy, as discussed in the FY 2020 IPPS/LTCH PPS proposed rule (84 FR 
19353), and as summarized in the FY 2020 IPPS/LTCH PPS final rule, we 
believe that SSO2 Therapy has a unique mechanism

[[Page 32609]]

of action as it delivers a localized hyperbaric oxygen equivalent to 
the coronary arteries immediately after administering the standard-of-
care, PCI with stenting, in order to restart metabolic processes within 
the stunned myocardium and reduce infarct size. Therefore, we stated 
that we believe SSO2 Therapy is not substantially similar to 
existing technologies and meets the newness criterion. We also stated 
that we would consider the beginning of the newness period to commence 
when SSO2 Therapy was approved by the FDA on April 2, 2019. 
We refer the reader to the FY 2020 final rule for the complete 
discussion of how SSO2 Therapy meets the newness criterion. 
We welcome any additional information or comments in response to this 
proposed rule regarding whether SSO2 Therapy is 
substantially similar to an existing technology and whether it meets 
the newness criterion for purposes of its application for new 
technology add-on payments for FY 2021.
    With regard to the cost criterion, the applicant conducted the 
following analysis to demonstrate that SSO2 Therapy meets 
the cost criterion. The applicant searched the FY 2018 MedPAR file for 
claims reporting diagnoses of anterior STEMI by ICD-10-CM diagnosis 
codes I21.01 (ST elevation (STEMI) myocardial infarction involving left 
main coronary artery), I21.02 (ST elevation (STEMI) myocardial 
infarction involving left anterior descending coronary artery), or 
I21.09 (ST elevation (STEMI) myocardial infarction involving other 
coronary artery of anterior wall) as a principal diagnosis, which the 
applicant believed would describe potential cases representing 
potential patients who may be eligible for treatment involving the 
SSO2 Therapy. The applicant identified 9,111 cases mapping 
to 4 MS-DRGs, with approximately 95 percent of all potential cases 
mapping to MS-DRG 246 (Percutaneous Cardiovascular Procedures with 
Drug-Eluting Stent with MCC or 4+ Arteries/Stents) and MS-DRG 247 
(Percutaneous Cardiovascular Procedures with Drug-Eluting Stent without 
MCC). The remaining 5 percent of potential cases mapped to MS-DRG 248 
(Percutaneous Cardiovascular Procedures with Non-Drug-Eluting Stent 
with MCC or 4+ Arteries/Stents) and MS-DRG 249 (Percutaneous 
Cardiovascular Procedures with Non-Drug-Eluting Stent without MCC).
    The applicant determined that the average case-weighted 
unstandardized charge per case was $97,049. The applicant then 
standardized the charges. The applicant did not remove charges for the 
current treatment because, as previously discussed, SSO2 
Therapy would be used as an adjunctive treatment option following 
successful PCI with stent placement. The applicant then added charges 
for the technology, which accounts for the use of 1 cartridge per 
patient, to the average charges per case. The applicant did not apply 
an inflation factor to the charges for the technology. The applicant 
also added charges related to the technology, to account for the 
additional supplies used in the administration of SSO2 
Therapy, as well as 70 minutes of procedure room time, including 
technician labor and additional blood tests. The applicant inflated the 
charges related to the technology. In the applicant's analysis, the 
inflated average case-weighted standardized charge per case was 
$150,115 and the average case-weighted threshold amount was $98,332. 
Because the inflated average case-weighted standardized charge per case 
exceeds the average case-weighted threshold amount, the applicant 
maintained that the technology meets the cost criterion.
    We invite public comments on whether the SSO2 Therapy 
meets the cost criterion.
    With regard to the substantial clinical improvement criterion, the 
applicant asserted that SSO2 Therapy represents a 
substantial clinical improvement over existing technologies because it 
improves clinical outcomes for STEMI patients as compared to the 
currently available standard-of-care treatment, PCI with stenting 
alone. Specifically, the applicant asserted that: (1) Infarct size 
reduction improves mortality outcomes; (2) infarct size reduction 
improves heart failure outcomes; (3) SSO2 Therapy 
significantly reduces infarct size; (4) SSO2 Therapy 
prevents left ventricular dilation; and (5) SSO2 Therapy 
reduces death and heart failure at 1 year. The applicant highlighted 
the importance of the SSO2 Therapy's mechanism of action, 
which treats hypoxemic damage at the microvascular or microcirculatory 
level. Specifically, the applicant noted that microvascular impairment 
in the myocardium is irreversible and leads to a greater extent of 
infarction. According to the applicant, the totality of the data on 
myocardial infarct size, ventricular remodeling, and clinical outcomes 
strongly supports the substantial clinical benefit of SSO2 
Therapy administration over the standard-of-care.
    As stated above, TherOx, Inc. submitted an application for new 
technology add-on payments for FY 2020 that was denied on the basis of 
substantial clinical improvement. In the FY 2020 IPPS/LTCH PPS final 
rule (84 FR 42278), we stated that we were not approving new technology 
add-on payments for SSO2 Therapy for FY 2020 because, after 
consideration of the comments received, we remained concerned that the 
current data did not adequately support a sufficient association 
between the outcome measures of heart failure, rehospitalization, and 
mortality with the use of SSO2 Therapy specifically to 
determine that the technology represents a substantial clinical 
improvement over existing available options. The applicant resubmitted 
its application for new technology add-on payments for FY 2021 with new 
information that, per the applicant, demonstrates that there is an 
unmet medical need for STEMI, and that SSO2 Therapy provides 
a treatment option for a patient population unresponsive to currently 
available treatments. Below we summarize the studies the applicant 
submitted with both its FY 2020 and FY 2021 applications, followed by 
the new information the applicant submitted with its FY 2021 
application to support that the technology is represents a substantial 
clinical improvement.
    In the FY 2020 application, as summarized in the FY 2020 IPPS/LTCH 
PPS final rule (84 FR 42275), and the FY 2021 application, the 
applicant cited an analysis of the Collaborative Organization for 
RheothRx Evaluation (CORE) trial and a pooled patient-level analysis to 
support the claims that infarct size reduction improves mortality and 
heart failure outcomes.
     The CORE trial was a prospective, randomized, double-
blinded, placebo-controlled trial of Poloxamer 188, a novel therapy 
adjunctive to thrombolysis at the time the study was conducted.\123\ 
The applicant sought to relate left ventricular ejection fraction (EF), 
end-systolic volume index (ESVI) and infarct size (IS), as measured in 
a single, randomized trial, to 6-month mortality after myocardial 
infarction treated with thrombolysis. According to the applicant, 
subsets of clinical centers participating in CORE also participated in 
one or two radionuclide sub-studies: (1) Angiography for measurement of 
EF and absolute, count-based LV volumes; and (2) single-photon emission 
computed tomographic sestamibi measurements of IS. These sub-studies 
were performed in 1,194 and 1,181 patients, respectively, of the 2,948

[[Page 32610]]

patients enrolled in the trial. Furthermore, ejection fraction, ESVI, 
and IS, as measured by central laboratories in these sub-studies, were 
tested for their association with 6-month mortality. According to the 
applicant, the results of the study showed that ejection fraction 
(n=1,137; p=0.0001), ESVI (n=945; p=0.055) and IS (n=1,164; p=0.03) 
were all associated with 6-month mortality, therefore, demonstrating 
the relationship between these endpoints and mortality.\124\
---------------------------------------------------------------------------

    \123\ Burns, R.J., Gibbons, R.J., Yi, Q., et al., ``The 
relationships of left ventricular ejection fraction, end-systolic 
volume index and infarct size to six-month mortality after hospital 
discharge following myocardial infarction treated by thrombolysis,'' 
J Am Coll Cardiol, 2002, vol. 39, pp. 30-6.
    \124\ Ibid.
---------------------------------------------------------------------------

     The pooled patient-level analysis was performed from 10 
randomized, controlled trials (with a total of 2,632 patients) that 
used primary PCI with stenting.\125\ The analysis assessed infarct size 
within 1 month after randomization by either cardiac magnetic resonance 
(CMR) imaging or technetium-99m sestamibi single-photon emission 
computed tomography (SPECT), with clinical follow-up for 6 months. 
Infarct size was assessed by CMR in 1,889 patients (71.8 percent of 
patients) and by SPECT in 743 patients (28.2 percent of patients) 
including both inferior wall and more severe anterior wall STEMI 
patients. According to the applicant, median infarct size (or percent 
of left ventricular myocardial mass) was 17.9 percent and median 
duration of clinical follow-up was 352 days. The Kaplan-Meier estimated 
1-year rates of all-cause mortality, re-infarction, and HF 
hospitalization were 2.2 percent, 2.5 percent, and 2.6 percent, 
respectively. The applicant noted that a strong graded response was 
present between infarct size (per 5 percent increase) and the 2 outcome 
measures of subsequent mortality (Cox-adjusted hazard ratio: 1.19 [95 
percent confidence interval: 1.18 to 1.20]; p<0.0001) and 
hospitalization for heart failure (adjusted hazard ratio: 1.20 [95 
percent confidence interval: 1.19 to 1.21]; p<0.0001), independent of 
other baseline factors.\126\ The applicant concluded from this study 
that infarct size, as measured by CMR or technetium-99m sestamibi SPECT 
within 1 month after primary PCI, is strongly associated with all-cause 
mortality and hospitalization for heart failure within 1 year.
---------------------------------------------------------------------------

    \125\ Stone, G.W., Selker, H.P., Thiele, H., et al., 
``Relationship between infarct size and outcomes following primary 
PCI,'' J Am Coll Cardiol, 2016, vol. 67(14), pp. 1674-83.
    \126\ Ibid.
---------------------------------------------------------------------------

    In the FY 2020 application, the applicant also cited the AMIHOT I 
and II studies to support the claim that SSO2 Therapy 
significantly reduces infarct size.
     The AMIHOT I clinical trial was designed as a prospective, 
randomized evaluation of patients who had been diagnosed with AMI, 
including both anterior and inferior patients, and received treatment 
with either PCI with stenting alone or with SSO2 Therapy as 
an adjunct to successful PCI within 24 hours of symptom onset.\127\ The 
study included 269 randomized patients and 3 co-primary endpoints: 
Infarction size reduction, regional wall motion score improvement at 3 
months, and reduction in ST segment elevation. The study was designed 
to demonstrate superiority of the SSO2 Therapy group as 
compared to the control group for each of these endpoints, as well as 
to demonstrate non-inferiority of the SSO2 Therapy group 
with respect to 30-day Major Adverse Cardiac Event (MACE). The 
applicant stated that results for the control versus SSO2 
Therapy group comparisons for the three co-primary effectiveness 
endpoints demonstrated a nominal improvement in the test group, 
although this nominal improvement did not achieve clinical and 
statistical significance in the entire population. The applicant 
further stated that a pre-specified analysis of the SSO2 
Therapy patients who were revascularized within 6 hours of AMI symptom 
onset and who had anterior wall infarction showed a marked improvement 
in all 3 co-primary endpoints as compared to the control group.\128\ 
Key safety data revealed no statistically significant differences in 
the composite primary endpoint of 1-month (30 days) MACE rates between 
the SSO2 Therapy and control groups. MACE includes the 
combined incidence of death, re-infarction, target vessel 
revascularization, and stroke. In total, 9/134 (6.7 percent) of the 
patients in the SSO2 Therapy group and 7/135 (5.2 percent) 
of the patients in the control group experienced 30-day MACE 
(p=0.62).\129\
---------------------------------------------------------------------------

    \127\ O'Neill, W.W., Martin, J.L., Dixon, S.R., et al., ``Acute 
Myocardial Infarction with Hyperoxemic Therapy (AMIHOT), J Am Coll 
Cardiol, 2007, vol. 50(5), pp. 397-405.
    \128\ Ibid.
    \129\ Ibid.
---------------------------------------------------------------------------

     The AMIHOT II trial randomized 301 patients who had been 
diagnosed with and receiving treatment for anterior AMI with either PCI 
plus the SSO2 Therapy or PCI alone.\130\ The AMIHOT II trial 
had a Bayesian statistical design that allows for the informed 
borrowing of data from the previously completed AMIHOT I trial. The 
primary efficacy endpoint of the study required proving superiority of 
the infarct size reduction, as assessed by Tc-99m Sestamibi SPECT 
imaging at 14 days post PCI/stenting, with the use of SSO2 
Therapy as compared to patients who were receiving treatment involving 
PCI with stenting alone. The primary safety endpoint for the AMIHOT II 
trial required a determination of non-inferiority in the 30-day MACE 
rate, comparing the SSO2 Therapy group with the control 
group, within a safety delta of 6.0 percent.\131\ Endpoint evaluation 
was performed using a Bayesian hierarchical model that evaluated the 
AMIHOT II result conditionally in consideration of the AMIHOT I 30-day 
MACE data. According to the applicant, the results of the AMIHOT II 
trial showed that the use of SSO2 therapy, together with PCI 
and stenting, demonstrated a relative reduction of 26 percent in the 
left ventricular infarct size and absolute reduction of 6.5 percent 
compared to PCI and stenting alone.\132\
---------------------------------------------------------------------------

    \130\ Stone, G.W., Martin, J.L., de Boer, M.J., et al., ``Effect 
of Supersaturated Oxygen Delivery on Infarct Size after Percutaneous 
Coronary Intervention in Acute Myocardial Infarction,'' Circ 
Cardiovasc Intervent, 2009, vol. 2, pp. 366-75.
    \131\ Ibid.
    \132\ Ibid.
---------------------------------------------------------------------------

    Next, to support the claim that SSO2 Therapy prevents 
left ventricular dilation, the applicant cited the Leiden study, which 
represents a single-center, sub-study of AMIHOT I patients treated at 
Leiden University in the Netherlands. The study describes outcomes of 
randomized selective treatment with intracoronary aqueous oxygen (AO), 
the therapy delivered by SSO2 Therapy, versus standard care 
in patients who had acute anterior wall myocardial infarction within 6 
hours of onset. Of the 50 patients in the sub-study, 24 received 
treatment using adjunctive AO and 26 were treated according to standard 
care after PCI, with no significant differences in baseline 
characteristics between groups. LV volumes and function were assessed 
by contrast echocardiography at baseline and 1 month. According to the 
applicant, the results demonstrated that treatment with aqueous oxygen 
prevents LV remodeling, showing a reduction in LV volumes (3 percent 
decrease in LV end-diastolic volume and 11 percent decrease in LV end-
systolic volume) at 1 month as compared to baseline in AO-treated 
patients, as compared to increasing LV volumes (14 percent increase in 
LV end diastolic volume and 18 percent increase in LV end-systolic 
volume) at 1 month in control patients.\133\ The results also show that

[[Page 32611]]

treatment using AO preserves LV ejection fraction at 1 month, with AO-
treated patients experiencing a 10 percent increase in LV ejection 
fraction as compared to a 2 percent decrease in LV ejection fraction 
among patients in the control group.\134\
---------------------------------------------------------------------------

    \133\ Warda, H.M., Bax, J.J., Bosch, J.G., et al., ``Effect of 
intracoronary aqueous oxygen on left ventricular remodeling after 
anterior wall ST-elevation acute myocardial infarction,'' Am J 
Cardiol, 2005, vol. 96(1), pp. 22-4.
    \134\ Ibid.
---------------------------------------------------------------------------

    Finally, to support the claim that SSO2 Therapy reduces 
death and heart failure at 1 year, the applicant submitted the results 
from the IC- HOT clinical trial, which was designed to confirm the 
safety and efficacy of the use of the SSO2 Therapy in those 
individuals presenting with a diagnosis of anterior AMI, who have 
undergone successful PCI with stenting of the proximal and/or mid left 
anterior descending artery within 6 hours of experiencing AMI symptoms. 
It is an IDE, nonrandomized, single arm study. The study primarily 
focused on safety, utilizing a composite endpoint of 30-day Net Adverse 
Clinical Events (NACE). A maximum observed event rate of 10.7 percent 
was established based on a contemporary PCI trial of comparable 
patients who had been diagnosed with anterior wall STEMI. The results 
of the IC-HOT trial exhibited a 7.1 percent observed NACE rate, meeting 
the study endpoint. Notably, no 30-day mortalities were observed, and 
the type and frequency of 30-day adverse events occurred at similar or 
lower rates than in contemporary STEMI studies of PCI-treated patients 
who had been diagnosed with anterior AMI.\135\ Furthermore, according 
to the applicant, the results of the IC-HOT study supported the 
conclusions of effectiveness established in AMIHOT II with a measured 
30-day median infarct size = 19.4 percent (as compared to the AMIHOT II 
SSO2 Therapy group infarct size = 20.0 percent).\136\ The 
applicant stated that notable measures include 4-day microvascular 
obstruction (MVO), which has been shown to be an independent predictor 
of outcomes, 4-day and 30-day left ventricular end diastolic and end 
systolic volumes, and 30-day infarct size.\137\ The applicant also 
stated that the IC-HOT study results exhibited a favorable MVO as 
compared to contemporary trial data, and decreasing left ventricular 
volumes at 30 days, compared to contemporary PCI populations that 
exhibit increasing left ventricular size.\138\ The applicant asserted 
that the IC-HOT clinical trial data continue to demonstrate the 
substantial clinical benefit of the use of SSO2 Therapy as 
compared to the standard-of-care, PCI with stenting alone.
---------------------------------------------------------------------------

    \135\ David, SW, Khan, Z.A., Patel, N.C., et al., ``Evaluation 
of intracoronary hyperoxemic oxygen therapy in acute anterior 
myocardial infarction: The IC-HOT study,'' Catheter Cardiovasc 
Interv, 2018, pp. 1-9.
    \136\ Ibid.
    \137\ Ibid.
    \138\ Ibid.
---------------------------------------------------------------------------

    The applicant also performed controlled studies in both porcine and 
canine AMI models to determine the safety, effectiveness, and mechanism 
of action of the SSO2 Therapy.139 140 According 
to the applicant, the key summary points from these animal studies are:
---------------------------------------------------------------------------

    \139\ Spears, J.R., Henney, C., Prcevski, P., et al., ``Aqueous 
Oxygen Hyperbaric Reperfusion in a Porcine Model of Myocardial 
Infarction,'' J Invasive Cardiol, 2002, vol. 14(4), pp. 160-6.
    \140\ Spears, J.R., Prcevski, P., Xu, R., et al., ``Aqueous 
Oxygen Attenuation of Reperfusion Microvascular Ischemia in a Canine 
Model of Myocardial Infarction,'' ASAIO J, 2003, vol. 49(6), pp. 
716-20.
---------------------------------------------------------------------------

     SSO2 Therapy administration post-AMI acutely 
improves heart function as measured by left ventricular ejection 
fraction (LVEF) and regional wall motion as compared with non-treated 
control subjects.
     SSO2 Therapy administration post-AMI results in 
tissue salvage, as determined by post-sacrifice histological 
measurements of the infarct size. Control animals exhibit larger 
infarcts than the SSO2-treated animals.
     SSO2 Therapy has been shown to be non-toxic to 
the coronary arteries, myocardium, and end organs in randomized, 
controlled swine studies with or without induced acute myocardial 
infarction.
     SSO2 Therapy administration post-AMI has 
exhibited regional myocardial blood flow improvement in treated animals 
as compared to controls.
     A significant reduction in myeloperoxidase (MPO) levels in 
the SSO2-treated animals versus controls, which indicate 
improvement in underlying myocardial hypoxia.
     Transmission electron microscopy (TEM) photographs showing 
amelioration of endothelial cell edema and restoration of capillary 
patency in ischemic zone cross-sectional histological examination of 
the SSO2- treated animals, while non-treated controls 
exhibit significant edema and vessel constriction at the microvascular 
level.
    In the FY 2020 final rule (84 FR 42278), after consideration of all 
the information from the applicant, as well as the public comments we 
received, we stated that we were unable to determine that 
SSO2 Therapy represented a substantial clinical improvement 
over the currently available therapies used to treat STEMI patients. We 
stated that we remained concerned that the current data does not 
adequately support a sufficient association between the outcome 
measures of heart failure, rehospitalization, and mortality with the 
use of SSO2 Therapy specifically to determine that the 
technology represented a substantial clinical improvement over existing 
available options. Therefore, we did not approve new technology add-on 
payments for SSO2 Therapy for FY 2020.
    For FY 2021, the applicant submitted new information that, 
according to the applicant, demonstrates that there is an unmet medical 
need for STEMI, and that SSO2 Therapy provides a treatment 
option for a patient population unresponsive to currently available 
treatments. The applicant presented this information in the context of 
CMS's concerns as identified in the FY 2020 IPPS/LTCH PPS proposed and 
final rules, specifically that (1) it is unclear whether use of the 
SSO2 Therapy would demonstrate the same clinical improvement 
as compared to the current standard of care; (2) that the current data 
does not adequately support a sufficient association between the 
outcome measures of heart failure, rehospitalization, and mortality 
with the use of SSO2 Therapy, and (3) that SSO2 
may not provide long-term clinical benefits in patients with AMI. Below 
we summarize this information, which the applicant believes addresses 
these concerns.
    With regard to CMS's concern that it is unclear whether use of 
SSO2 Therapy would demonstrate the same clinical improvement 
as compared to the current standard-of care, the applicant restated our 
concern as whether ``these data [AMIHOT I and AMIHOT II are] adequate 
to show the relevant outcomes in the control (standard of care 
percutaneous coronary intervention (PCI)''. In response to this 
concern, the applicant asserted that patient outcomes post-PCI have 
remained relatively stable over the past 10 years and there is a strong 
clinical need for new therapies like SSO2 in addition to PCI 
in the management of patients with anterior STEMI to reduce the risk 
and severity of heart failure and death. To support its assertion of an 
unmet clinical need for anterior wall STEMI treatment, the applicant 
presented data from multiple references to illustrate the following:
     A plateauing in STEMI 1-year mortality rates at 10 percent 
with the advent of drug-eluting stents, according to reports from the 
SWEDEHEART registry. This statistic is in agreement with the 9% 1year 
STEMI mortality rate

[[Page 32612]]

following PCI reported in a 2015 paper by Bullock et al.\141\
---------------------------------------------------------------------------

    \141\ Bulluck H, Yellon DM, and Hausenloy DJ. Reducing 
myocardial infarct size: Challenges and future opportunities. Heart 
2016;102:341-48.
---------------------------------------------------------------------------

     No improvement in U.S. in-hospital post-PCI STEMI 
mortality rates between 2001 and 2011 based on work done by Sugiyama et 
al.\142\
---------------------------------------------------------------------------

    \142\ Sugiyama T, Hasegawa K, Kobayashi Y, Takahashi O, Fukui T, 
Tsugawa Y. Differential time trends of outcomes and costs of care 
for acute myocardial infarction hospitalizations by ST elevation and 
type of intervention in the United States, 2001-2011. J AmHeart 
Assoc. 2015;4:e001445. doi:10.1161/JAHA.114.001445
---------------------------------------------------------------------------

     No decrease in one-year mortality risk as illustrated by 
Kalesan et al.,\143\ a meta-analysis of 15 clinical trials totaling 
7,867 patients that compared outcomes data for STEMI patients treated 
with bare metal stents versus drug eluting stents.\144\
---------------------------------------------------------------------------

    \143\ Kalesan B, Pilgrim T, Heinimann K, et al. Comparison of 
drug-eluting stents with bare metal stents in patients with ST-
segment elevation myocardial infarction. Eur Heart J 2012;33:977-87.
    \144\ Id.
---------------------------------------------------------------------------

     A markedly higher one-year mortality rate at 19.4% for the 
Medicare population as compared to the total population of PCI-treated 
anterior wall STEMI patients, according to the most recent Medicare 
Standard Analytic File (SAF) data (2017).
     No improvement in congestive heart failure (CHF) rates 
after STEMI treated pPCI; the applicant referenced Szummer et al.'s 
\145\ work which indicated 1 year post primary PCI CHF rates of 10 
percent as well as a statistical analysis of CHF readmission outcomes 
that showed heart failure rates for this patient population have 
remained stable at 9 to 10 percent from 2012 to 2017.
---------------------------------------------------------------------------

    \145\ Szummer K, Wallentin L, Lindhagen L, et al. Improved 
outcomes in patients with ST-elevation myocardial infarction during 
the last 20 years are related to implementation of evidence-based 
treatments: Experiences from the SWEDEHEART registry 1995-2014. Eur 
Heart J 2017;38:3056-65.
---------------------------------------------------------------------------

     A decrease in 30-day STEMI re-hospitalizations due to the 
evolution of PCI therapy; the applicant cited the work of Kim et 
al.,\146\ noting the readmission rates trended slightly downward from 
approximately 12 percent in 2010 to 10 percent in 2014. According to 
the applicant, these data illustrate that PCI treats macrovascular 
aspects of STEMI events, but does not address the underlying infarct 
damage, which is highly correlated with worse long-term outcomes.
---------------------------------------------------------------------------

    \146\ Kim LK, Yeo I, Cheung, JW, et al. Thirty-Day Readmission 
Rates, Timing, Causes, and Costs after ST-Segment Myocardial 
Infarction in the United States: A National Readmission Database 
Analysis 2010-2014. J Am Heart Assoc 2018;7(18):1-34.
---------------------------------------------------------------------------

    The applicant reiterated statements from its prior application 
that, in order to reduce outcomes like mortality and heart failure in 
the STEMI population, therapies must be available above and beyond PCI 
to reduce the size of the infarct that results from a STEMI event. Per 
the applicant, the benefits shown in the AMIHOT I 6-hour sub-study, 
AMIHOT II and IC-HOT studies show statistically significant and 
clinically meaningful improvements in infarct size, left ventricular 
size and function, and long term outcomes that support the claim that 
SSO2 offers a substantial clinical improvement over PCI by 
filling an important gap in therapy with PCI, and specifically the need 
to reduce infarct size beyond simply opening occluded large vessels 
alone.
    With regard to CMS's second concern that the current data does not 
adequately support a sufficient association between the outcome 
measures of heart failure, rehospitalization, and mortality with the 
use of SSO2 Therapy, the applicant restated our concern as 
``the importance of the reduction of infarct size as an outcome for 
patients with anterior STEMI.'' The applicant provided multiple animal 
and human studies to illustrate how TherOx SSO2 potentially 
impacts outcome measures of heart failure, rehospitalization and 
mortality. Regarding animal studies, the applicant cited the porcine 
and canine study by Spears et al. and summarized above to illustrate 
how aqueous oxygen hyperoxemic perfusion attenuates microvascular 
ischemia.147 148 Regarding human studies, the applicant 
cited a 2004 review by Gibbons et al. to support its assertion that the 
best physical measure of the consequences of AMI in post-intervention 
patients is the quantification of the extent of necrosis or infarction 
in the muscle. In this 2004 review article, Gibbons et al. sought to 
summarize published evidence for quantification of infarct size using 
data from studies that assessed biomarkers, cardiac SPECT sestamibi and 
magnetic resonance imaging.\149\ Regarding the use of cardiac SPECT 
sestamibi imaging, Gibbons et al. found five separate lines of clinical 
evidence that validated the use of SPECT sestamibi imaging for 
determining infarct size.\150\ The applicant also referenced the CORE 
trial that it submitted with its original application and which we 
summarize above. Per the applicant, a substudy of CORE trial data by 
Burns et al. demonstrated that an absolute infarct size reduction of 3 
percent was associated with a mortality benefit.\151\ Specifically, the 
trial showed that six-month mortality was significantly related to 
infarct size. Per the applicant, among the 753 patients who underwent 
ejection fraction measurements, the odds ratio for infarct size for 
six-month mortality was 1.033--that is, for each 1 percent increase in 
infarct size, mortality in the next 6 months was 1.033 times more 
likely. A 5 percent increase in infarct size would therefore mean that 
6-month mortality was 1.176 times more likely. A patient with an 
infarct size that was greater by 5 percent of the left ventricle would 
therefore have a 17.6 percent greater chance of dying within the next 6 
months.\152\
---------------------------------------------------------------------------

    \147\ Spears JR, Henney C, Prcevski P, et al. Aqueous Oxygen 
Hyperbaric Reperfusion in a Porcine Model of Myocardial Infarction. 
J Invasive Cardiol 2002; 14(4):160-6.
    \148\ Spears JR, Prcevski P, Xu R, et al. Aqueous Oxygen 
Attenuation of Reperfusion Microvascular Ischemia in a Canine Model 
of Myocardial Infarction. ASAIO J 2003; 49(6):716-20.
    \149\ Gibbons RJ, Valeti US, Araoz PA, et al. The quantification 
of infarct size. J Am Coll Cardiol 2004; 44:1533-42.
    \150\ Id.
    \151\ Burns RJ, Gibbons RJ, Yi Q, et al. The relationships of 
left ventricular ejection fraction, end-systolic volume index and 
infarct size to six-month mortality after hospital discharge 
following myocardial infarction treated by thrombolysis. J Am Coll 
Cardiol 2002; 39:30-6.
    \152\ Id.
---------------------------------------------------------------------------

    The applicant further noted the CORE trial and associated studies 
were conducted when thrombolytic therapy was the standard of care for 
coronary artery reperfusion. The transition to PCI led directly to a 
measured absolute infarct size reduction of 5.1 percent in STEMI 
patients treated with PCI as compared to thrombolytic therapy, which 
correlated to a significant decrease in cardiovascular events. The 
applicant asserted that the infarct size reduction demonstrated with 
PCI compared to thrombolytic therapy helped establish PCI as the 
preferred standard of care, and that the results demonstrating the 
importance of infarct size reduction hold true in randomized PCI trials 
of STEMI patients, with infarct size evaluated by either Tc-99 
sestabmibi SPECT imaging or cardiac MRI. The applicant referred to the 
substudy of CORE trial data by Burns et al., which found that, among 
the three clinical prognostic outcomes studied, ejection fraction (EF) 
was superior to infarct size (IS) and end-systolic volume index (ESVI) 
in predicting 6-month mortality.\153\ The authors also noted that all 
three radionuclide measures were significantly associated with each 
other, and that the strongest correlation was between ESVI and EF. The 
study noted that infarct size was significantly correlated with both EF 
and ESVI despite being determined from a different radionuclide 
measurement,

[[Page 32613]]

and that infarct location was not found to be significant.\154\
---------------------------------------------------------------------------

    \153\ Id.
    \154\ Id.
---------------------------------------------------------------------------

    The applicant also provided a study by Stone et al.\155\ to address 
our concern that the current data does not adequately support a 
sufficient association between the outcome measures of heart failure, 
rehospitalization, and mortality with the use of SSO2 
Therapy. The applicant provided Stone et al.'s recent analysis of 10 
pooled randomized trials involving 2,632 subjects, including some 
subjects from the AMIHOT II trial. Stone et al. set out to determine 
the strength of the relationship between infarct size assessed within 1 
month after pPCI in STEMI and subsequent all-cause mortality, 
reinfarction and hospitalization for heart failure.\156\ Infarct size 
was assessed using cardiac SPECT sestamibi or cardiac magnetic 
resonance and clinical follow-up data greater than or equal to 6 
months. The authors found infarct size reduction measured by either 
imaging method within 1 month correlated strongly with reduced 
mortality and heart failure hospitalization at 1 year. The applicant 
asserted that the results demonstrated that every 5 percent absolute 
increase in left ventricular infarct size was associated with a 19 
percent increase in 1-year mortality, correlating well with the 17.6 
percent estimate established from earlier data and underscoring the 
important, independent relationship between infarct size and mortality 
regardless of the treatment modality. The applicant asserted that the 
published analysis also demonstrated that infarct size measured within 
1 month after pPCI for STEMI using either imaging method is a powerful 
independent predictor of hospitalization for heart failure at 1 year. 
The applicant reiterated that overall, a 5 percent absolute infarct 
size increase was associated with a 20 percent increase in either death 
or heart failure at 1 year. The applicant explained that because 
infarct size is the quantification of the extent of scarring of the 
left ventricle post-AMI, it is a direct measure of the health of the 
myocardium and indirectly of the heart's structure and function. A 
large infarct means the muscle cannot contract normally, leading to 
left ventricular enlargement, reduced ejection fraction, clinical heart 
failure, and death. Per the applicant, the Kaplan-Meier curves for the 
rates of heart failure at 12 months as a function of infarct size also 
show that a 5 percent increase in left ventricle infarct size 
corresponded to a 50-100 percent increase in the risk of heart failure 
at 12 months for the most severe infarcts. The applicant concluded that 
reducing infarct size 5 or more percentage points provides a clear and 
dramatic clinical benefit for patients as demonstrated by a wealth of 
trial data. Significantly, the applicant noted that even as treatment 
of the primary occlusion improved, the relationship between infarct 
size and mortality and heart failure persisted and remained present 
throughout the study data.
---------------------------------------------------------------------------

    \155\ Stone GW, Selker, HP, Thiele H, et al. Relationship 
between infarct size and outcomes following primary PCI. JACC 
2016;67(14):1674-83.
    \156\ Id.
---------------------------------------------------------------------------

    Finally, with regard to CMS's third concern that SSO2 
may not provide long-term clinical benefits in patients with AMI, the 
applicant again referred to the 1-year outcomes data collected from 
patients in the IC-HOT trial and which were compared to a control 
population from the INFUSE AMI study after propensity-matching. The 
applicant asserted that STEMI patients treated with SSO2 
Therapy showed statistically significant and clinically meaningful 
improvements in several critically important outcomes for patients with 
anterior STEMI at 1 year, such as--
     Death;
     New onset of heart failure and readmission for heart 
failure;
     Composite rate of death and new onset of heart failure;
     Composite rate of death, new onset of heart failure or 
readmission for heart failure, or clinically-driven target vessel 
revascularization;
     Composite of death, reinfarction/spontaneous MI, 
clinically driven target vessel revascularization or new onset heart 
failure or readmission for heart failure.
    The applicant concluded that, taken together, there is abundant 
evidence to support the claim that SSO2 Therapy represents a 
substantial clinical improvement over PCI alone in the management of 
patients with anterior STEMI. Per the applicant, there remains a strong 
unmet need for new therapies like SSO2 in addition to PCI in 
the management of patients with anterior STEMI to reduce the risk and 
severity of heart failure and death. The applicant maintained that the 
timely delivery of supersaturated oxygen therapy improves microvascular 
and tissue level flow, reduces infarct size, facilitates recovery of 
left ventricular function and preserves left ventricular stability, and 
improves patient outcomes, most notably lowering mortality and heart 
failure rates at 1 year post-procedure.
    We thank the applicant for the additional information to address 
the concerns discussed in the FY 2020 IPPS/LTCH PPS final rule. We 
appreciate how this information, and specifically the seven studies 
referenced in response to the applicant's restatement of our first 
concern, illustrates a potential unmet medical need. However, we are 
concerned that the AMIHOT I and AMIHOT II data may not adequately 
demonstrate the relevant outcomes in the control (standard of care PCI) 
because the standard of care has evolved since the two trials were 
performed. Additionally, we are concerned that the results presented in 
these seven studies may be based on patients with all types of STEMI 
and are not specific to the FDA-approved indicated use of 
SSO2 Therapy for the treatment of anterior STEMI. 
Ultimately, we remain concerned that the current data does not support 
a sufficient association between the outcome measures of heart failure, 
rehospitalization, and mortality with the use of SSO2 
Therapy specifically to determine that the technology represents a 
substantial clinical improvement over existing available options. 
Therefore, we are inviting public comment on whether SSO2 
meets the substantial clinical improvement criterion.
    We are inviting public comments on whether the SSO2 
Therapy meets the substantial clinical improvement criterion.
    In this section we summarize and respond to written public comments 
we received in response to the New Technology Town Hall meeting notice 
published in the Federal Register regarding the substantial clinical 
improvement criterion for SSO2 Therapy.
    Comment: Several commenters were supportive of the new technology 
add-on payment application for SSO2 Therapy. These comments 
were primarily in response to CMS's previous concerns about whether 
SSO2 Therapy satisfied the substantial clinical improvement 
criterion. The commenters noted that there is still an unmet need for 
additional therapies for large anterior STEMIs in patients over the age 
of 65 years. A commenter emphasized that the evolution in STEMI care 
since the advent of stenting was in the improvement of stent materials 
and the organization of medical care, including reducing time from 
symptom onset to first medical contact, door to balloon time, total 
ischemic time, and improving antithrombotic therapy, but that these 
efforts all occur before the therapeutic intervention, which has 
remained unchanged since the advent of drug-eluting stents. Another 
commenter

[[Page 32614]]

noted that improvements in short-term mortality in STEMI are largely 
due to the adoption of reperfusion therapy, and in particular 
percutaneous coronary angioplasty (PCI) with stenting. The commenter 
asserted that while more widespread adoption of this standard of care 
has been vital in reducing hospital readmission rates, the mortality 
and incidence of heart failure for STEMI patients treated with PCI have 
not improved since the AMIHOT II study was conducted. The commenter 
concluded that there remains a significant unmet need for additional 
therapies to address reperfusion injury, microvascular damage, and 
infarct size, especially in the case of large anterior STEMIs in 
patients over the age of 65 years, where current data show that 
patients treated with PCI demonstrate a 1-year mortality of nearly 20 
percent and an incidence of heart failure over 10 percent.
    Another commenter asserted that SSO2 was shown to be 
safe and effective and did not increase the already known early 
complications associated with an acute myocardial infarction combined 
with acute coronary intervention. The commenters supported the 
applicant's assertion that SSO2 Therapy reduced infarct 
size, which is a surrogate for improved clinical outcomes. A commenter 
noted that the 6.5 percent reduction in infarct size achieved with 
SSO2 Therapy in AMIHOT trials has major clinical relevance 
and is further confirmed by the results of the IC-HOT study, where 
SSO2 therapy was associated with superior one-year clinical 
outcomes compared with the current standard of care with PCI alone. 
This commenter noted that IC-HOT patients also demonstrated favorable 
effects on ventricular remodeling consistent with findings in the 
AMIHOT trials, and also demonstrated favorable effects for 
microvascular obstruction, which the commenter asserted is an 
additional independent predictor of outcomes. This commenter referenced 
the meta-analysis by Stone et al. that showed reducing infarction size 
led to reduced mortality, improved long-term clinical outcomes, 
improved quality of life, and reduced heart failure and related medical 
expenses.\157\
---------------------------------------------------------------------------

    \157\ Stone GW, Selker, HP, Thiele H, et al. Relationship 
between infarct size and outcomes following primary PCI. JACC 
2016;67(14):1674-83.
---------------------------------------------------------------------------

    Response: We appreciate the information provided by the commenters. 
We will take these comments into consideration when deciding whether to 
approve new technology add-on payments for SSO2 Therapy for 
FY 2021.
e. EluviaTM Drug-Eluting Vascular Stent System (Eluvia)
    Boston Scientific submitted an application for new technology add-
on payments for the EluviaTM Drug-Eluting Vascular Stent 
System for FY 2021. EluviaTM, a drug-eluting stent for the 
treatment of lesions in the femoropopliteal arteries, received FDA 
premarket approval (PMA) September 18, 2018. The applicant asserts that 
EluviaTM was first commercially available on the market on 
October 4, 2018 and the first procedure with EluviaTM 
following FDA approval in the U.S. occurred on October 5, 2018. We note 
that the applicant submitted an application for new technology add-on 
payments for FY 2020. In the FY 2020 IPPS/LTCH PPS final rule (84 FR 
42231), we stated that we remain concerned that we do not have enough 
information to determine that the EluviaTM device represents 
a substantial clinical improvement over existing technologies. 
Therefore, we did not approve the EluviaTM device for FY 
2020 new technology add-on payments. We refer the reader to the FY 2020 
IPPS/LTCH PPS final rule (84 FR 42220 through 42231) for a complete 
discussion regarding the EluviaTM device's FY 2020 new 
technology application.
    According to the applicant, the EluviaTM system is a 
sustained release drug-eluting stent indicated for the treatment of 
lesions in the femoropopliteal arteries and is designed to restore 
blood flow in the peripheral arteries above the knee--specifically the 
superficial femoral artery (SFA) and proximal popliteal artery (PPA). 
The applicant asserts that this device/drug combination product for 
endovascular treatment of peripheral artery disease (PAD) utilizes a 
polymer that carries and protects the drug before and during the 
procedure and ensures that the drug is released into the tissue in a 
controlled, sustained manner to prevent the restenosis of the vessel. 
The applicant further asserts that EluviaTM system's stent 
platform is purpose-built to address the mechanical challenges of the 
SFA with an optimal amount of strength, flexibility and fracture 
resistance. According to the applicant, EluviaTM's polymer-
based drug delivery system is uniquely designed to sustain the release 
of paclitaxel beyond 1year to match the restenotic process in the SFA. 
The EluviaTM system is indicated for improving luminal 
diameter in the treatment of symptomatic de-novo or restenotic lesions 
in the native SFA and/or PPA with reference vessel diameters (RVD) 
ranging from 4.0 to 6.0 mm and total lesion lengths up to 190mm, 
according to the applicant.
    The applicant asserts that the EluviaTM system is 
comprised of the implantable endoprosthesis and the stent delivery 
system. The stent is a laser cut self-expanding stent composed of a 
nickel titanium alloy (nitinol). On both the proximal and distal ends 
of the stent, radiopaque markers made of tantalum increase visibility 
of the stent to aid in placement. The triaxial designed delivery system 
consists of an outer shaft to stabilize the stent delivery system, a 
middle shaft to protect and constrain the stent, and an inner shaft to 
provide a guidewire lumen. The delivery system is compatible with 0.035 
in (0.89 mm) guidewires. The EluviaTM stent is available in 
a variety of diameters and lengths. The delivery system is offered in 
two working lengths including 75 and 130 cm.
    Peripheral artery disease (PAD) is a circulatory problem in which 
narrowed arteries reduce blood flow to the limbs, usually in the legs. 
Symptoms of PAD may include lower extremity pain due to varying degrees 
of ischemia and claudication, which is characterized by pain induced by 
exercise and relieved with rest. Risk factors for PAD include age >=70 
years; age 50 to 69 years with a history of smoking or diabetes; age 40 
to 49 with diabetes and at least one other risk factor for 
atherosclerosis; leg symptoms suggestive of claudication with exertion, 
or ischemic pain at rest; abnormal lower extremity pulse examination; 
known atherosclerosis at other sites (for example, coronary, carotid, 
renal artery disease); smoking; hypertension, hyperlipidemia, and 
homocysteinemia.\158\ PAD is primarily caused by atherosclerosis--the 
buildup of fatty plaque in the arteries. PAD can occur in any blood 
vessel, but it is more common in the legs than the arms. Approximately 
8.5 million people in the United States have PAD, including 12-20% of 
individuals older than age 60.\159\
---------------------------------------------------------------------------

    \158\ Neschis, David G. & MD, Golden, M. (2018). Clinical 
features and diagnosis of lower extremity peripheral artery disease. 
Retrieved October 29, 2018, from https://www.uptodate.com/contents/clinical-features-and-diagnosis-of-lower-extremity-peripheral-artery-disease.
    \159\ Centers for Disease Control and Prevention. (2018). 
Peripheral Arterial Disease (PAD) Fact Sheet. Retrieved from https://www.cdc.gov/DHDSP/data_statistics/fact_sheets/fs_PAD.htm.
---------------------------------------------------------------------------

    A diagnosis of PAD is established with the measurement of an ankle-
brachial index (ABI) <=0.9. The ABI is a comparison of the resting 
systolic blood pressure at the ankle to the higher systolic brachial 
pressure. Duplex ultrasonography is commonly used in conjunction with 
the ABI to identify the

[[Page 32615]]

location and severity of arterial obstruction.\160\
---------------------------------------------------------------------------

    \160\ Berger, J. & Davies, M. (2018). Overview of lower 
extremity peripheral artery disease. Retrieved October 29, 2018 from 
https://www.uptodate.com/contents/overview-of-lower-extremity-peripheral-artery-disease.
---------------------------------------------------------------------------

    Management of disease is aimed at improving symptoms, improving 
functional capacity, and preventing amputations and death. Management 
of patients with lower extremity PAD may include medical therapies to 
reduce the risk for future cardiovascular events related to 
atherosclerosis, such as myocardial infarction, stroke, and peripheral 
arterial thrombosis. Such therapies may include antiplatelet therapy, 
smoking cessation, lipid-lowering therapy, and treatment of diabetes 
and hypertension. For patients with significant or disabling symptoms 
unresponsive to lifestyle adjustment and pharmacologic therapy, 
intervention (percutaneous, surgical) may be needed. Surgical 
intervention includes angioplasty, a procedure in which a balloon-tip 
catheter is inserted into the artery and inflated to dilate the 
narrowed artery lumen. The balloon is then deflated and removed with 
the catheter. For patients with limb-threatening ischemia (for example 
pain while at rest and or ulceration), revascularization is a priority 
to reestablish arterial blood flow. According to the applicant, 
treatment of the SFA is problematic due to multiple issues, including 
high rate of restenosis and significant forces of compression.
    The applicant asserts that the EluviaTM Drug-Eluting 
Vascular Stent System is a sustained-release drug-eluting self-
expanding, nickel titanium alloy (nitinol) mesh stent used to 
reestablish blood flow to stenotic arteries. According to the 
applicant, the EluviaTM system is the first stent 
specifically designed for deployment in the SFA and/or PPA that 
utilizes the anti-restenotic drug paclitaxel in conjunction with a 
polymer. EluviaTM is built on the InnovaTM Stent 
System platform, consisting of a self-expanding nitinol stent and an 
advanced, 6F low-profile triaxial delivery system for added support and 
placement accuracy. The EluviaTM stent is coated with the 
drug paclitaxel, which helps prevent the artery from restenosis. The 
EluviaTM Stent System is comprised of the implantable 
endoprosthesis and the stent delivery system (SDS).
    According to the applicant, there are four principal treatment 
options for PAD, including two endovascular approaches (angioplasty and 
stenting):
     Medical therapy, typically for those with mild to medium 
symptoms. This may include pharmacotherapy (for example, cilostazil) 
and exercise therapy.
     Angioplasty, a procedure in which a catheter with a 
balloon on the tip is inserted into an artery and inflated to expand 
the artery and reduce the blockage. The balloon is then deflated and 
removed with the catheter. Some procedures use drug coated balloons, in 
which a drug is applied to the lesion at the time of balloon inflation.
     Stenting via a procedure in which a stent is placed in the 
artery to keep the artery open and prevent it from re-narrowing. This 
can be done with a bare metal stent or with a drug-eluting stent, which 
also releases a drug that helps slow the re-narrowing of the vessel.
     For patients with severe narrowing that is blocking blood 
flow, bypass surgery may be warranted. In the procedure, a healthy vein 
is used to make a new path around the narrowed or blocked artery.
    The applicant further asserts that aside from EluviaTM, 
the alternative existing endovascular approaches (angioplasty and 
stenting) do not provide a sustained release application of a drug and 
that EluviaTM is the first polymer-based, drug-eluting stent 
designed to treat and restore blood flow in the peripheral arteries 
above the knee, and the eluted medication helps to prevent tissue 
regrowth during the entire period most commonly associated with 
restenosis. According to the applicant, the sustained release of the 
anti-restenotic drug is intentionally designed to elute over a 12-15-
month period delivering the drug when restenosis is most likely to 
occur, which the applicant states is a significantly longer period than 
the two-month duration of drug eluted from drug-coated balloons and the 
paclitaxel-coated Zilver PTX drug eluting stent.
    The EluviaTM stent system was granted approval for the 
following ICD-10-PCS procedure codes effective October 1, 2019:

[[Page 32616]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.127

    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 therefore not be considered 
``new'' for purposes of new technology add-on payments. We note that in 
the FY 2020 IPPS/LTCH PPS final rule (84 FR 42227), we stated that 
after consideration of the applicant's comments, we believe that the 
EluviaTM device uses a unique mechanism of action to achieve 
a therapeutic outcome when compared to existing technologies such as 
the paclitaxel-coated stent. Therefore, we stated that the 
EluviaTM device meets the newness criterion. We refer the 
reader to the FY 2020 final rule for the complete discussion of how the 
EluviaTM device meets the newness criterion. The applicant 
noted in its FY 2021 application that for FY 2020, CMS concluded that 
the EluviaTM device met the newness criterion. The applicant 
stated that it believes there is no basis for CMS to reach a contrary 
conclusion with regard to whether the EluviaTM system meets 
the newness criterion for FY 2021. The applicant also reiterated that 
the EluviaTM device uses a unique mechanism of action 
because it utilizes a sustained-release of a low-dose of paclitaxel. We 
welcome any additional information or comments in response to this 
proposed rule regarding whether the EluviaTM device is 
substantially similar to an existing technology and whether it meets 
the newness criterion for purposes of its application for new 
technology add-on payments for FY 2021.
    With regard to the cost criterion, the applicant conducted two 
analyses based on 100 percent of identified claims and 76 percent of 
identified claims. To identify potential cases where 
EluviaTM could be utilized, the applicant searched the FY 
2018 MedPAR file for ICD-10-PCS codes from the Peripheral Drug Eluting 
Stent and Peripheral Bare Metal Stent categories. For the analysis 
using 100 percent of cases, the applicant identified a total of 11,051 
cases spanning 150 MS-DRGs. The applicant then removed charges for the 
technology being replaced. The applicant stated that because it was 
unable to determine a more specific percentage reduction, it chose the 
most conservative approach for calculation purposes and removed 100% of 
charges associated with service category Medical/Surgical Supply Charge 
Amount, which included revenue center 027x. The applicant then 
standardized the charges and applied an inflation factor of 11.1%, 
which is the same inflation factor used by CMS to update the outlier 
threshold in the FY 2020 IPPS/LTCH PPS final rule, to update the 
charges from FY 2018 to FY 2020 (84 FR 42629). The applicant added 
charges for the new technology by multiplying the cost of the 
technology by the national CCR for implantable devices (0.299) from the 
FY 2020 IPPS final rule. Under the analysis based on 100% of identified 
claims, the applicant determined an average case-

[[Page 32617]]

weighted threshold amount of $100,851 and a final average inflated 
standardized charge per case of $157,343.
    Under the analysis based on 76 percent of identified claims, the 
applicant used the same methodology, which identified 8,335 cases 
across 8 MS-DRGs. The applicant determined the average case-weighted 
threshold amount of $98,196 and a final inflated average standardized 
charge per case of $147,343. Because the final inflated average 
standardized charge per case exceeded the case-weighted threshold 
amount under both analyses, the applicant asserted that the technology 
meets the cost criterion. We invite public comments on whether 
EluviaTM meets the cost criterion.
    With regard to the substantial clinical improvement criterion, the 
applicant asserts that EluviaTM represents a substantial 
clinical improvement over existing technologies because it achieves 
superior primary patency; reduces the rate of subsequent therapeutic 
interventions; decreases the number of future hospitalizations or 
physician visits; reduces hospital readmission rates; reduces the rate 
of device related complications; and achieves similar functional 
outcomes and EQ-5D index values while associated with half the rate of 
TLRs.
    As stated above, Boston Scientific submitted an application for new 
technology add-on payments for the EluviaTM device for FY 
2020 that was not approved. In the FY 2020 IPPS/LTCH PPS final rule (84 
FR 42231), we noted the FDA's preliminary review of data that 
identified a potentially concerning signal of increased long-term 
mortality in study subjects treated with paclitaxel-coated products 
compared to patients treated with uncoated devices, and stated that we 
remained concerned that we did not have enough information to determine 
that the EluviaTM device represents a substantial clinical 
improvement over existing technologies. The applicant resubmitted its 
application for new technology add-on payments for FY 2021 with updated 
two-year primary patency results to demonstrate that the 
EluviaTM device represents a substantial clinical 
improvement over existing technologies. Below we summarize the studies 
the applicant submitted with both its FY 2020 and FY 2021 applications, 
followed by the new information the applicant submitted with its FY 
2021 application to support that the technology represents a 
substantial clinical improvement.
    The applicant submitted the results of the MAJESTIC study, a 
single-arm first-in-human study of EluviaTM. The MAJESTIC 
\161\ study is a prospective, multicenter single-arm, open label study. 
Per the applicant, the MAJESTIC study demonstrated long-term treatment 
durability among patients whose femoropopliteal arteries were treated 
with the EluviaTM stent. The MAJESTIC study enrolled 57 
patients with symptomatic lower limb ischemia and lesions in the 
superficial femoral artery or proximal popliteal artery. Efficacy 
measures at 2 years included primary patency, defined as duplex 
ultrasound peak systolic velocity ratio of <2.5 and the absence of 
target lesion revascularization (TLR) or bypass. Safety monitoring 
through 3 years included adverse events and TLR. The 24-month clinic 
visit was completed by 53 patients; 52 had Doppler ultrasound evaluable 
by the core laboratory, and 48 patients had radiographs taken for stent 
fracture analysis. The 3-year follow-up was completed by 54 patients. 
At 2 years, 90.6% (48/53) of patients had improved by one or more 
Rutherford categories as compared with the pre-procedure level without 
the need for TLR (when those with TLR were included, 96.2% sustained 
improvement); only one patient exhibited a worsening in level, 66.0% 
(35/53) of patients exhibited no symptoms (category 0) and 24.5% (13/
53) had mild claudication (category 1) at the 24-month visit. Mean ABI 
improved from 0.73  0.22 at baseline to 1.02  
0.20 at 12 months and 0.93  0.26 at 24 months. At 24 
months, 79.2% (38/48) of patients had an ABI increase of at least 0.1 
compared with baseline or had reached an ABI of at least 0.9. According 
to the applicant, the primary patency rate at 12 months was 96.4%. With 
regard to the EluviaTM stent achieving superior primary 
patency, the applicant submitted the results of the IMPERIAL \162\ 
trial in which the EluviaTM stent is compared, head-to-head, 
to the Zilver[supreg] PTX[supreg] drug-eluting stent. The IMPERIAL 
study is a global, multi-center, randomized controlled trial consisting 
of 465 subjects. Eligible patients were aged 18 years or older and had 
symptomatic lower-limb ischaemia, defined as Rutherford category 2, 3, 
or 4 and stenotic, restenotic (treated with a drug-coated balloon >12 
months before the study or standard percutaneous transluminal 
angioplasty only), or occlusive lesions in the native superficial 
femoral artery or proximal popliteal artery, with at least one 
infrapopliteal vessel patent to the ankle or foot. Patients had to have 
stenosis of 70% or more (via angiographic assessment), vessel diameter 
between 4 mm and 6 mm, and total lesion length between 30 mm and 140 
mm.
---------------------------------------------------------------------------

    \161\ M[uuml]ller-H[uuml]lsbeck S et al. Long-Term Results from 
the MAJESTIC Trial of the Eluvia Paclitaxel-Eluting Stent for 
Femoropopliteal Treatment: 3-Year Follow-up. Cardiovasc Intervent 
Radiol. 2017 Dec;40(12):1832-1838.
    \162\ Gray WA et al. A polymer-coated, paclitaxel-eluting stent 
(Eluvia) versus a polymer-free, paclitaxel-coated stent (Zilver PTX) 
for endovascular femoropopliteal intervention (IMPERIAL): A 
randomised, non-inferiority trial. Lancet. 2018 Sep 24.
---------------------------------------------------------------------------

    Subjects who had previously stented target lesion/vessels treated 
with drug-coated balloon <12 months prior to randomization/enrollment 
and subjects who had undergone prior surgery of the SFA/PPA in the 
target limb to treat atherosclerotic disease were excluded from the 
study. Two concurrent single-group (EluviaTM only) sub 
studies were done: A non-blinded, non-randomized pharmacokinetic sub 
study and a non-blinded, non-randomized study of patients with long 
lesions (>140 mm). The IMPERIAL study is a prospective, multicenter, 
single-blinded randomized, controlled (RCT) non-inferiority trial. 
Patients were randomized (2:1) to implantation of either a paclitaxel-
eluting polymer stent (EluviaTM) or a paclitaxel-coated 
stent (Zilver[supreg] PTX[supreg]) after the treating physician had 
successfully crossed the target lesion with a guide wire. The primary 
endpoints of the study are Major Adverse Events defined as all causes 
of death through 1 month, Target Limb Major Amputation through 12 
months and/or Target Lesion Revascularization (TLR) through 12 months, 
and primary vessel patency at 12 months post-procedure. Secondary 
endpoints included the Rutherford categorization, Walking Impairment 
Questionnaire, and EQ- 5D assessments at 1 month and 6 months post-
procedure. Patient demographic and characteristics were balanced 
between EluviaTM stent and Zilver[supreg] PTX[supreg] stent 
groups.
    The applicant noted that lesion characteristics for the 
EluviaTM stent vs Zilver[supreg] PTX[supreg] stent arms were 
comparable. Clinical follow-up visits related to the study were 
scheduled for 1 month, 6 months, and 12 months after the procedure, 
with follow-up planned to continue through 5 years, including clinical 
visits at 24 months and 5 years and clinical or telephone follow-up at 
3 and 4 years.
    The applicant asserts that in the IMPERIAL study, the 
EluviaTM stent demonstrated superior primary patency over 
the Zilver[supreg] PTX[supreg] stent, with 86.8% vs. 77.5% respectively 
(p=0.0144). The non-inferiority primary efficacy endpoint was also met. 
The applicant asserts that the SFA presents unique challenges with 
respect to maintaining long-term patency. There are distinct

[[Page 32618]]

pathological differences between the SFA and coronary arteries. The SFA 
tends to have higher levels of calcification and chronic total 
occlusions when compared to coronary arteries. Following an 
intervention within the SFA, the SFA produces a healing response which 
often results in restenosis or re-narrowing of the arterial lumen. This 
cascade of events leading to restenosis starts with inflammation, 
followed by smooth muscle cell proliferation and matrix formation.\163\ 
Because of the unique mechanical forces in the SFA, this restenotic 
process of the SFA can continue well beyond 300 days from the initial 
intervention. Primary patency at 12 months, by Kaplan-Meier estimate, 
was significantly greater for EluviaTM than for 
Zilver[supreg] PTX[supreg], with 88.5% and 79.5% respectively 
(p=0.0119). According to the applicant, these results are consistent 
with the 96.4% primary patency rate at 12 months in the MAJESTIC study, 
the single-arm first-in-human study of EluviaTM.
---------------------------------------------------------------------------

    \163\ Forrester JS, Fishbein M, Helfant R, Fagin J. A paradigm 
for restenosis based on cell biology: Clues for the development of 
new preventive therapies. J Am Coll Cardiol. 1991 Mar 1;17(3):758-
69.
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    The IMPERIAL study included two concurrent single-group 
(EluviaTM only) sub studies: A non-blinded, non-randomized 
pharmacokinetic sub study and a non-blinded, non-randomized study of 
patients with long lesions (>140 mm). For the pharmacokinetic sub 
study, patients had venous blood drawn before stent implantation, at 
intervals ranging from 10 minutes to 24 hours post implantation, and 
then at either 48 hours or 72 hours post implantation. The 
pharmacokinetics sub study confirmed that plasma paclitaxel 
concentrations after EluviaTM implantation were well below 
thresholds associated with toxic effects in studies in patients with 
cancer (0[middot]05 [mu]M or ~43 ng/mL).
    The IMPERIAL sub study long lesion subgroup consisted of 50 
patients with average lesion length of 162.8 mm that were each treated 
with two EluviaTM stents. Twelve-month outcomes for the long 
lesion subgroup are 87% primary patency and 6.5% Target Lesion 
Revascularization (TLR). In a subgroup analysis of patients 65 years 
and older (Medicare population), the primary patency rate in the 
EluviaTM stent group is 92.6%, compared to 75.0% for the 
Zilver[supreg] PTX[supreg] stent group (p=0.0386).
    With regard to reducing the rate of subsequent therapeutic 
interventions, secondary outcomes in the IMPERIAL study included repeat 
re-intervention on the same lesion, target lesion revascularization 
(TLR). The rate of subsequent interventions, or TLRs, in the 
EluviaTM stent group was 4.5% compared to 9.0% in the 
Zilver[supreg] PTX[supreg] stent group. The applicant asserts that TLR 
rate in the EluviaTM group represents a substantial 
reduction in re-intervention on the target lesion compared to that of 
the Zilver[supreg] PTX[supreg] stent group.
    With regard to decreasing the number of future hospitalizations or 
physician visits, the applicant asserts that the substantial reduction 
in the lesion revascularization rate led to a reduced need to provide 
additional intensive care, distinguishing the EluviaTM group 
from the Zilver[supreg] PTX[supreg] group. In the IMPERIAL study, 
EluviaTM-treated patients required fewer days of re-
hospitalization. There were 13.9 post procedure in-hospital days in the 
EluviaTM group for all adverse events compared to 17.7 post 
procedure in-hospital days in the Zilver[supreg] PTX[supreg] group. 
There were 2.8 post procedure in-hospital days in the 
EluviaTM group for TLR/Total Vessel Revascularization (TVR) 
compared to 7.1 post procedure in-hospital days in the Zilver[supreg] 
PTX[supreg] group. And lastly, there were 2.7 post-procedure in-
hospital days from the EluviaTM group for procedure/device 
related adverse events compared to 4.5 post procedure in-hospital days 
for the Zilver[supreg] PTX[supreg] group.
    With regard to reducing hospital readmission rates, the applicant 
asserts that patients treated in the EluviaTM group 
experienced reduced rates of hospital readmission following the index 
procedure compared to those in the Zilver[supreg] PTX[supreg] group. 
Hospital readmission rates at 12 months were 3.9% for the 
EluviaTM group compared to 7.1% for the Zilver[supreg] 
PTX[supreg] group. Similar results were noted at 1 and 6 months; 1.0% 
vs 2.6% and 2.4% vs 3.8% respectively.
    With regard to reducing the rate of device related complications, 
the applicant asserts that while the rates of adverse events were 
similar in total between treatment arms in the IMPERIAL study, there 
were measurable differences in device-related complications. Device-
related adverse-events were reported in 8% of patients in the 
EluviaTM group compared to 14% of patients in the 
Zilver[supreg] PTX[supreg] group.
    Lastly, with regard to achieving similar functional outcomes and 
EQ-5D index values, while associated with half the rate of TLRs, the 
applicant asserts that narrowed or blocked arteries within the SFA can 
limit the supply of oxygen-rich blood throughout the lower extremities, 
causing pain or discomfort when walking. The applicant further asserts 
that performing physical activities is often challenging because of 
decreased blood supply to the legs, typically causing symptoms to 
become more challenging overtime unless treated. The applicant asserts 
that while functional outcomes appear similar between the 
EluviaTM and Zilver[supreg] PTX[supreg] groups at 12 months, 
these improvements for the Zilver[supreg] PTX[supreg] group are 
associated with twice as many TLRs to achieve similar EQ-5D index 
values.\164\ At 12 months, of the patients with complete Rutherford 
assessment data, 241 (86 percent) of 281 patients in the 
EluviaTM group and 120 (85 percent) of 142 patients in the 
Zilver[supreg] PTX[supreg] group had symptoms reported as Rutherford 
Category 0 or 1 (none to mild claudication). The mean ankle-brachial 
index was 1[middot]0 (SD 0[middot]2) in both groups at 12 months 
(baseline mean ankle-brachial index 0[middot]7 [SD 0[middot]2] for 
EluviaTM 0[middot]8 [0[middot]2] for Zilver[supreg] 
PTX[supreg]), with sustained hemodynamic improvement for approximately 
80 percent of the patients in both groups. Walking function improved 
significantly from baseline to 12 months in both groups, as measured 
with the Walking Impairment Questionnaire and the 6-minute walk test. 
In both groups, the majority of patients had sustained improvement in 
the mobility dimension of the EQ-5D and roughly half had sustained 
improvement in the pain or discomfort dimension. No significant 
between-group differences were observed in the Walking Impairment 
Questionnaire, 6-minute walk test, or EQ-5D. Secondary endpoint results 
for the EluviaTM stent and Zilver[supreg] PTX[supreg] stent 
groups are as follows:
---------------------------------------------------------------------------

    \164\ Gray WA, Keirse K, Soga Y, et al. A polymer-coated, 
paclitaxel-eluting stent (Eluvia) versus a polymer-free, paclitaxel-
coated stent (Zilver PTX) for endovascular femoropopliteal 
intervention (IMPERIAL): A randomized, non-inferiority trial. Lancet 
2018; published online Sept 22. http://dx.doi.org/10.1016/S0140-6736(18)32262-1.
---------------------------------------------------------------------------

     Hemodynamic improvement in walking--80.8 percent versus 
78.7 percent;
     Walking impairment questionnaire scores (change from 
baseline)--40.8 (36.5) versus 35.8 (39.5);
     Distance (change from baseline)--33.2 (38.3) versus 29.5 
(38.2);
     Speed (change from baseline)--18.3 (29.5) versus 18.1 
(28.7);
     Stair climbing (change from baseline)--19.4 (36.7) versus 
21.1 (34.6); and
     6-Minute walk test distance (m) (change from baseline)--
44.5 (119.5) versus 51.8 (130.5).
    As summarized in the FY 2020 IPPS/LTCH PPS final rule (84 FR 
42230), in our discussion of the comments

[[Page 32619]]

received regarding substantial clinical improvement with respect to the 
new technology add-on payment application for EluviaTM for 
FY 2020, we received a comment expressing safety concerns with 
paclitaxel-coated devices used to treat PAD. The commenter stated they 
were aware of an FDA alert concerning paclitaxel-coated devices. The 
commenter stated the applicant and other manufacturers of devices using 
paclitaxel should consider an alternative to paclitaxel.
    We stated in response that we are aware of FDA's March 15, 2019 
letter to healthcare providers regarding the ``Treatment of Peripheral 
Arterial Disease with Paclitaxel-Coated Balloons and Paclitaxel-Eluting 
Stents Potentially Associated with Increased Mortality.'' We noted that 
in March 2019, FDA conducted a preliminary analysis of long-term 
follow-up data (up to 5 years in some studies) of the pivotal premarket 
randomized trials for paclitaxel-coated products indicated for PAD. We 
stated that while the analyses are ongoing, according to FDA, the 
preliminary review of the data had identified a potentially concerning 
signal of increased long-term mortality in study subjects treated with 
paclitaxel-coated products compared to patients treated with uncoated 
devices.\165\ Of the three trials with 5-year follow-up data, each 
showed higher mortality in subjects treated with paclitaxel-coated 
products than subjects treated with uncoated devices. In total, among 
the 975 subjects in these 3 trials, there was an approximately 50 
percent increased risk of mortality in subjects treated with 
paclitaxel-coated devices versus those treated with control devices 
(20.1 percent versus 13.4 percent crude risk of death at 5 years).
---------------------------------------------------------------------------

    \165\ https://www.fda.gov/medical-devices/letters-health-care-providers/update-treatment-peripheral-arterial-disease-paclitaxel-coated-balloons-and-paclitaxel-eluting.
---------------------------------------------------------------------------

    We also noted that FDA stated that the data should be interpreted 
with caution for several reasons. First, there is large variability in 
the risk estimate of mortality due to the limited amount of long-term 
data. Second, the studies were not originally designed to be pooled, 
introducing greater uncertainty in the results. Third, the specific 
cause and mechanism of the increased mortality is unknown.
    We further stated that based on the preliminary review of available 
data, FDA made the following recommendations regarding the use of 
paclitaxel-coated balloons and paclitaxel-eluting stents: That health 
care providers consider the following until further information is 
available; continue diligent monitoring of patients who have been 
treated with paclitaxel-coated balloons and paclitaxel-eluting stents; 
when making treatment recommendations and as part of the informed 
consent process, consider that there may be an increased rate of long-
term mortality in patients treated with paclitaxel-coated balloons and 
paclitaxel-eluting stents; discuss the risks and benefits of all 
available PAD treatment options with your patients; for most patients, 
alternative treatment options to paclitaxel-coated balloons and 
paclitaxel-eluting stents should generally be used until additional 
analysis of the safety signal has been performed; for some individual 
patients at particularly high risk for restenosis, clinicians may 
determine that the benefits of using a paclitaxel-coated product may 
outweigh the risks; ensure patients receive optimal medical therapy for 
PAD and other cardiovascular risk factors as well as guidance on 
healthy lifestyles including weight control, smoking cessation, and 
exercise.
    We also noted that FDA further stated that paclitaxel-coated 
balloons and stents are known to improve blood flow to the legs and 
decrease the likelihood of repeat procedures to reopen blocked blood 
vessels. However, because of this concerning safety signal, FDA stated 
that it believes alternative treatment options should generally be used 
for most patients while FDA continues to further evaluate the increased 
long-term mortality signal and its impact on the overall benefit-risk 
profile of these devices. FDA stated it intends to conduct additional 
analyses to determine whether the benefits continue to outweigh the 
risks for approved paclitaxel-coated balloons and paclitaxel-eluting 
stents when used in accordance with their indications for use. FDA 
stated it will also evaluate whether these analyses impact the safety 
of patients treated with these devices for other indications, such as 
treatment of arteriovenous access stenosis or critical limb ischemia.
    Furthermore, we stated that because of concerns regarding this 
issue, FDA convened an Advisory Committee meeting of the Circulatory 
System Devices Panel on June 19 and 20, 2019 to: Facilitate a public, 
transparent, and unbiased discussion on the presence and magnitude of a 
long-term mortality signal; discuss plausible reasons, including any 
potential biological mechanisms, for a long-term mortality signal; re-
examine the benefit-risk profile of this group of devices; consider 
modifications to ongoing and future US clinical trials evaluating 
devices containing paclitaxel, including added surveillance, updated 
informed consent, and enhanced adjudication for drug-related adverse 
events and deaths; and guide other regulatory actions, as needed. The 
June 19 and 20, 2019 Advisory Committee meeting of the Circulatory 
System Devices Panel concluded that analyses of available data from 
FDA-approved devices show an increase in late mortality (between 2 and 
5 years) associated with paclitaxel-coated devices intended to treat 
femoropopliteal disease.\166\ However, causality for the late mortality 
rate increase could not be determined. Additional data may be needed to 
further assess the magnitude of the late mortality signal, determine 
any potential causes, identify patient sub-groups that may be at 
greater risk, and to update benefit-risk considerations of this device 
class.\167\
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    \166\ https://www.fda.gov/advisory-committees/advisory-committee-calendar/june-19-20-2019-circulatory-system-devices-panel-medical-devices-advisory-committee-meeting#event-materials.
    \167\ https://www.fda.gov/advisory-committees/advisory-committee-calendar/june-19-20-2019-circulatory-system-devices-panel-medical-devices-advisory-committee-meeting#event-materials.
---------------------------------------------------------------------------

    We stated that FDA continues to recommend that health care 
providers report any adverse events or suspected adverse events 
experienced with the use of paclitaxel-coated balloons and paclitaxel-
eluting stents. FDA stated that it will keep the public informed as any 
new information or recommendations become available.
    In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42231), after 
consideration of the public comments we received and the latest 
available information from the FDA advisory panel, we noted the FDA 
panel's preliminary review of the data had identified a potentially 
concerning signal of increased long-term mortality in study subjects 
treated with paclitaxel-coated products compared to patients treated 
with uncoated devices. We stated that additionally, since FDA has 
stated that it believes alternative treatment options should generally 
be used for most patients while it continues to further evaluate the 
increased long-term mortality signal and its impact on the overall 
benefit-risk profile of these devices, we remained concerned that we 
did not have enough information to determine that the 
EluviaTM device represents a substantial clinical 
improvement over existing technologies. Therefore, we stated that we 
were not approving the EluviaTM device for FY 2020 new 
technology add-on payments. We also stated that we would monitor any 
new information or

[[Page 32620]]

recommendations as they become available.
    Since the FY 2020 IPPS/LTCH PPS final rule, the FDA issued an 
August 7, 2019 update: ``Treatment of Peripheral Arterial Disease with 
Paclitaxel-Coated Balloons and Paclitaxel-Eluting Stents Potentially 
Associated with Increased Mortality.'' \168\ In its update, the FDA 
included recommendations to healthcare providers for assessing and 
treating patients with PAD using paclitaxel-coated devices. Based on 
the FDA's review of available data and the Advisory Panel conclusions, 
the FDA recommends that healthcare providers consider the following:
---------------------------------------------------------------------------

    \168\ https://www.fda.gov/medical-devices/letters-health-care-providers/august-7-2019-update-treatment-peripheral-arterial-disease-paclitaxel-coated-balloons-and-paclitaxel.
---------------------------------------------------------------------------

     Continue diligent monitoring of patients who have been 
treated with paclitaxel-coated balloons and paclitaxel-eluting stents.
     When making treatment recommendations, and as part of the 
informed consent process, consider that there may be an increased rate 
of long-term mortality in patients treated with paclitaxel-coated 
balloons and paclitaxel-eluting stents.
     Discuss the risks and benefits of all available PAD 
treatment options with your patients. For many patients, alternative 
treatment options to paclitaxel-coated balloons and paclitaxel-eluting 
stents provide a more favorable benefit-risk profile based on currently 
available information.
     For individual patients judged to be at particularly high 
risk for restenosis and repeat femoropopliteal interventions, 
clinicians may determine that the benefits of using a paclitaxel-coated 
device outweigh the risk of late mortality.
     In discussing treatment options, physicians should explore 
their patients' expectations, concerns and treatment preferences.
     Ensure patients receive optimal medical therapy for PAD 
and other cardiovascular risk factors as well as guidance on healthy 
lifestyles including weight control, smoking cessation, and exercise.
     Report any adverse events or suspected adverse events 
experienced with the use of paclitaxel-coated balloons and paclitaxel-
eluting stents.
    In addition, the August 7, 2019 update noted the following. Based 
on the conclusions of its analysis and recommendations of the advisory 
panel, FDA stated that it is taking additional steps to address this 
signal, including working with manufacturers on updates to device 
labeling and clinical trial informed consent documents to incorporate 
information about the late mortality signal. FDA also stated that it is 
continuing to actively work with the manufacturers and investigators on 
additional clinical evidence development for assessment of the long-
term safety of paclitaxel-coated devices. FDA noted that paclitaxel-
coated balloons and stents improve blood flow to the legs and decrease 
the likelihood of repeat procedures to reopen blocked blood vessels 
compared to uncoated devices. The update stated that the panel 
concluded that the benefits of paclitaxel-coated devices (for example, 
reduced reinterventions) should be considered in individual patients 
along with potential risks (for example, late mortality).
    The applicant stated in its FY 2021 application that while CMS 
denied the application for new technology add-on payments for 
EluviaTM for FY 2020 because of its concerns about 
paclitaxel, the available evidence and policymaking from the FDA would 
suggest that this device is safe, effective and a substantial clinical 
improvement. To address the substantial clinical improvement concerns 
stated in the FY 2020 final rule, the applicant stated that 
EluviaTM is not associated with increased all-cause 
mortality and that two-year all-cause mortality data are consistent 
with FDA-published rates for uncoated angioplasty devices. The 
applicant further asserted that most recent publications on peripheral 
paclitaxel-coated devices do not replicate the strong mortality signal 
identified in the meta-analysis. The applicant stated that it submitted 
information on EluviaTM to the FDA for the June 19-20 
Circulatory System Devices Panel of the Medical Devices Advisory 
Committee meeting. The applicant further asserted that the FDA 
continues to find that paclitaxel devices are effective, specifically 
that ``Paclitaxel-coated balloons and stents improve blood flow to the 
legs and decrease the likelihood of repeat procedures to reopen blocked 
blood vessels compared to uncoated devices.'' \169\ The applicant 
stated that the FDA, following months of investigation, multiple 
letters to health care providers and an advisory panel meeting, has not 
changed the marketed status of peripheral paclitaxel devices. 
Therefore, the applicant respectfully requested that CMS consider that 
EluviaTM satisfies the substantial clinical improvement 
criterion in light of this information. The applicant referred to the 
FDA's meta-analysis of long-term follow-up data from the pivotal 
premarket randomized trials for paclitaxel-coated devices used to treat 
PAD. The FDA's meta-analysis of these trials \170\ identified a late 
mortality signal in study subjects treated with paclitaxel-coated 
devices compared to patients treated with uncoated devices. 
Specifically, in three randomized trials which enrolled a total of 1090 
patients, the crude mortality rate at 5 years was 19.8% (range 15.9%-
23.4%) in patients treated with paclitaxel-coated devices compared to 
12.7% (range 11.2%-14.0%) in subjects treated with uncoated devices. 
The relative risk for increased mortality at 5 years was 1.57 (95% 
confidence interval 1.16--2.13), which corresponds to a 57% relative 
increase in mortality in patients treated with paclitaxel-coated 
devices.
---------------------------------------------------------------------------

    \169\ FDA Letter to Health Care Providers, August 7, 2019. Last 
accessed at https://www.fda.gov/medical-devices/letters-health-care-providers/august-7-2019-update-treatment-peripheral-arterial-disease-paclitaxel-coated-balloons-and-paclitaxel on September 10, 
2019.
    \170\ https://www.fda.gov/medical-devices/letters-health-care-providers/update-treatment-peripheral-arterial-disease-paclitaxel-coated-balloons-and-paclitaxel-eluting.
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    In its application for FY 2021, the applicant stated that they 
respectfully disagree with CMS's conclusion that EluviaTM 
did not satisfy the substantial clinical improvement criterion as the 
IMPERIAL randomized controlled trial demonstrates superiority over the 
closest comparative device. In its application for FY 2021, in response 
to these concerns related to peripheral paclitaxel devices, the 
applicant referred to the updated bulletin FDA issued in August 2019 to 
provide the latest information on its analysis of long-term follow-up 
data from premarket trials and to provide summary information from its 
June 2019 advisory panel meeting. Specifically, the applicant noted 
that FDA stated that paclitaxel-coated balloons and stents improve 
blood flow to the legs and decrease the likelihood of repeat procedures 
to reopen blocked blood vessels compared to uncoated devices. The June 
2019 advisory panel concluded that the benefits of paclitaxel-coated 
devices (for example, reduced reinterventions) should be considered in 
individual patients along with potential risks (for example, late 
mortality).
    The applicant also noted that it has worked closely with FDA to 
address questions about the late mortality signal associated with some 
peripheral paclitaxel-coated devices, as identified in the meta-
analysis. The applicant

[[Page 32621]]

noted that EluviaTM was not included in the meta-analysis.
    Additionally, the applicant stated that it has demonstrated (a) the 
absence of a mortality signal with EluviaTM and (b) the 
absence of a mortality signal with sustained-release drug eluting 
paclitaxel stent technology in the large long-term data for the TAXUS 
coronary stent.\171\
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    \171\ Stone GW, Ellis SG, Colombo A, et al. Long-term safety and 
efficacy of paclitaxel-eluting stents final 5-year analysis from the 
TAXUS Clinical Trial Program. JACC Cardiovasc Interv. 2011;4(5):530-
542.
---------------------------------------------------------------------------

    With regard to the absence of a mortality signal with 
EluviaTM, the applicant further stated that 
EluviaTM is not associated with increased all-cause 
mortality. The applicant explained that EluviaTM shows no 
mortality signal at 2 years in over 300 patients. Additionally, the 
applicant noted that its parent company Boston Scientific has extensive 
experience with sustained-release paclitaxel-eluting stent technology 
and noted that TAXUS has over 10 years of clinical data, with long-term 
mortality in clinical trials following approximately 2,800 patients, 
without an observed mortality signal.
    As it relates to EluviaTM, the applicant stated that 
findings of the FDA analysis should be interpreted with caution for 
several reasons. First, EluviaTM was not included in the FDA 
meta-analysis. Second, the applicant stated the analysis failed to find 
any plausible mechanism that could explain the observed mortality 
signal. Third, the applicant asserted that the analysis contained 
structural flaws that may have contributed to its findings, including 
small sample size, presence of ascertainment bias and lack of patient 
level data.
    The applicant added that additional analyses have been conducted 
since the publication of the meta-analysis. In a Medicare claims 
analysis of over 150,000 patients who underwent femoropopliteal artery 
revascularization, the applicant noted that no mortality signal was 
seen in the group treated with paclitaxel-coated devices.\172\ 
According to the applicant, this finding was echoed by other studies.
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    \172\ Secemsky EA at al. Drug-Eluting Stent Implantation and 
Long-Term Survival Following Peripheral Artery Revascularization. J 
Am Coll Cardiol. 2019 May 28;73(20):2636-2638.
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    Finally, the applicant stated that it believes the FDA recognized 
the value of allowing physicians to treat their PAD patients with 
paclitaxel devices in its letter published on August 7, 2019, 
acknowledging the signal in the meta-analysis and recognizing the 
benefits that paclitaxel devices offer for these patients.
    In summary, the applicant stated that EluviaTM should be 
approved for new technology add-on payments based on the following:
     Updated August 2019 FDA letter to providers issued after 
the FY 2020 IPPS/LTCH PPS final rule, maintaining peripheral paclitaxel 
devices on the market;
     Multiple recently published studies 173 174 
demonstrating the absence of increased mortality associated with 
peripheral paclitaxel devices;
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    \173\ 18Spreen MI, Martens JM, Knippenberg B, et al. Long-Term 
Follow-up of the PADI Trial: Percutaneous Transluminal Angioplasty 
Versus Drug-Eluting Stents for Infrapopliteal Lesions in Critical 
Limb Ischemia. J Am Heart Assoc. 2017;6(4).
    \174\ UPDATE: Treatment of Peripheral Arterial Disease with 
Paclitaxel-Coated Balloons and Paclitaxel-Eluting Stents Potentially 
Associated with Increased Mortality--Letter to Health Care 
Providers. 2019; Last accessed at https://www.fda.gov/MedicalDevices/Safety/LetterstoHealthCareProviders/ucm633614.htm on 
October 9, 2019.
---------------------------------------------------------------------------

     An analysis of over 150,000 Medicare beneficiaries, 
designed with FDA input, demonstrating no difference in mortality 
between patients treated with peripheral paclitaxel devices compared to 
those treated without paclitaxel devices;
     Confounding factors in the 2018 JAHA Katsanos et al. meta-
analysis (meta-analysis) \175\ and ascertainment bias, as highlighted 
at the 2019 Vascular Leaders Forum,\176\ and no plausible mechanism has 
been identified for increased mortality;
---------------------------------------------------------------------------

    \175\ https://www.ahajournals.org/doi/full/10.1161/JAHA.118.011245.
    \176\ Varcoe R. Unintended Consequences of Various trial 
Designs, Potential Effect on Mortality and Other Outcomes. Vascular 
Leaders Forum, March 2019.
---------------------------------------------------------------------------

     The rate of mortality for patients treated with 
EluviaTM at 2 years is consistent with the rate of non-
paclitaxel-based peripheral devices.\177\
---------------------------------------------------------------------------

    \177\ Pooled all-cause mortality rate includes IMPERIAL and 
MAJESTIC Trials. 2-year all-cause mortality rate for IMPERIAL 
(includes IMPERIAL RCT, Long Lesion, and PK sub-studies) is 7.0%. 
MAJESTIC follow-up is final at 3 years. IMPERIAL follow-up is 
complete through 2 years and ongoing through 5 years. As-treated 
ELUVIA patients. FDA PTA reference based on FDA Executive Summary. 
Two-year mortality rate within the PTA arm of ILLUMENATE was 7.4% 
and within the PTA arm of IN.PACT SFA was 1.0%.
---------------------------------------------------------------------------

    Although the EluviaTM system was not included in the 
meta-analysis, we remain concerned with the conclusion of the meta-
analysis results. Specifically, we are concerned with the conclusion 
that there is an increased risk of death following application of 
paclitaxel[hyphen]coated balloons and stents in the femoropopliteal 
artery of the lower limb and how it impacts substantial clinical 
improvement for the EluviaTM system.
    We also note the FDA's statement in the August 2019 letter that 
because of the demonstrated short-term benefits of the devices, the 
limitations of the available data, and uncertainty regarding the long-
term benefit-risk profile of paclitaxel-coated devices, the FDA 
believes clinical studies of these devices may continue and should 
collect long-term safety (including mortality) and effectiveness data. 
Per the FDA, these studies require appropriate informed consent and 
close safety monitoring to protect enrolled patients.
    Below, we summarize and respond to a written public comment we 
received during the open comment period regarding whether 
EluviaTM meets the substantial clinical improvement 
criterion in response to the New Technology Town Hall meeting.
    Comment: With regard to the applicant's claim that the 
EluviaTM stent achieves statistically superior primary 
patency over Zilver[supreg] PTX[supreg], the applicant provided the 
two-year results from the IMPERIAL global randomized controlled 
clinical trial, comparing EluviaTM to Zilver[supreg] 
PTX[supreg]. The applicant asserts that EluviaTM maintains 
higher primary patency than Zilver[supreg] PTX[supreg] at 2 years, 
83.0% compared to 77.1%. The applicant contends that guidelines 
recognize the importance of primary patency in assessing the efficacy 
of peripheral endovascular therapies.\178\ The applicant further 
asserts that Eluvia'sTM two-year primary patency is the 
highest reported in a superficial femoral artery U.S. pivotal trial for 
a drug-eluting stent or drug-coated balloon.\179\ The applicant stated 
that 2-year primary patency results are consistent with the 2-year 
target lesion revascularization (TLR) results released earlier in 
2019.\180\ According to the applicant, EluviaTM sustained a 
statistically significant reduction in TLR at 2 years compared to

[[Page 32622]]

Zilver PTX, 12.9% vs. 20.5% (p=0.0472).\181\
---------------------------------------------------------------------------

    \178\ Writing Committee Members, Gerhard-Herman MD, Gornik HL et 
al. 2016 AHA/ACC Guideline on the Management of Patients with Lower 
Extremity Peripheral Artery Disease: Executive Summary. Vasc Med. 
2017 Jun;22(3):NP1-NP43.
    \179\ Highest two-year primary patency based on 24-month Kaplan-
Meier estimates reported for IMPERIAL, IN.PACT SFA, ILLUMENATE, 
LEVANT II and Primary Randomization for Zilver PTX RCT.
    \180\ BSC Data on File. As-treated ELUVIA and PTxControl data 
from IMPERIAL RCT.FDA PTA reference based on FDA Executive Summary 
(median of PTA arms). Abbreviations: DES, drug-eluting stent; TLR, 
target lesion revascularization; PTx, paclitaxel.
    \181\ Boston Scientific Presentation to the Circulatory System 
Devices Panel of the Medical Devices Advisory Committee Meeting, 
June 19, 2019.
---------------------------------------------------------------------------

    Response: We appreciate the applicant's input. We will take these 
comments into consideration when deciding whether to approve new 
technology add-on payments for EluviaTM for FY 2021.
f. GammaTile
    GT Medical Technologies, Inc. submitted an application for new 
technology add-on payments for FY 2021 for the GammaTileTM. 
We note that Isoray Medical, Inc. and GammaTile, LLC previously 
submitted an application for new technology add-on payments for 
GammaTileTM for FY 2018, which was withdrawn, and also for 
FY 2019, however the technology did not receive FDA approval or 
clearance by July 1, 2018 and, therefore, was not eligible for 
consideration for new technology add-on payments for FY 2019. GT 
Medical Technologies, Inc. submitted an application for FY 2020, which 
was not approved as CMS was unable to make a determination that 
GammaTileTM technology represents a substantial clinical 
improvement over existing therapies.
    The GammaTileTM is a brachytherapy device for use in the 
treatment of patients who have been diagnosed with recurrent 
intracranial neoplasms, which uses cesium-131 radioactive sources 
embedded in a collagen matrix. GammaTileTM is designed to 
provide adjuvant radiation therapy to eliminate remaining tumor cells 
in patients who required surgical resection of recurrent brain tumors. 
According to the applicant, the GammaTileTM constitutes a 
new form of internal radiation, with collagen tile structural offsets 
acting as an internal compensator for the delivery of cesium-131 
brachytherapy sources embedded within the product. The applicant stated 
that the technology has been manufactured for use in the setting of a 
craniotomy resection site where there is a high chance of local 
recurrence of a Central Nervous System (CNS) or dual-based tumor. The 
applicant asserted that the use of the GammaTileTM 
technology provides a new, unique modality for treating patients who 
require radiation therapy to augment surgical resection of malignancies 
of the brain. By offsetting the radiation sources with a 3 mm gap of a 
collagen matrix, the applicant asserted that the use of the 
GammaTileTM technology resolves issues with ``hot'' and 
``cold'' spots associated with brachytherapy, improves safety, and 
potentially offers a treatment option for patients with limited or no 
other available options. The GammaTileTM is biocompatible 
and bioabsorbable, and is left in the body permanently without need for 
future surgical removal. The applicant asserted that the commercial 
manufacturing of the product will significantly improve on the process 
of constructing customized implants with greater speed, efficiency, and 
accuracy than is currently available, and requires less surgical 
expertise in placement of the radioactive sources, allowing a greater 
number of surgeons to utilize brachytherapy techniques in a wider 
variety of hospital settings.
    The GammaTileTM technology received FDA Section 510(k) 
clearance as a medical device on July 6, 2018. According to the 
applicant, due to finalization of design and manufacturing activities, 
the technology was not commercially available until January of 2019. 
Subsequently, the FDA cleared GammaTileTM as a Class II 
medical device under the corporate name of GT Medical Technologies, 
Inc. on March 13, 2019. The cleared indications for use state that 
GammaTileTM is intended to deliver radiation therapy 
(brachytherapy) in patients who have been diagnosed with recurrent 
intercranial neoplasms. The applicant submitted a request for approval 
for a unique ICD-10-PCS code for the use of the GammaTileTM 
technology, which was approved effective October 1, 2017 (FY 2018). The 
ICD-10-PCS procedure code used to identify procedures involving the use 
of the GammaTileTM technology is 00H004Z (Insertion of 
radioactive element, cesium-131 collagen implant into brain, open 
approach).
    As discussed previously, if a technology meets all three of the 
substantial similarity criteria, it would be considered substantially 
similar to an existing technology and would therefore not be considered 
``new'' for purposes of new technology add-on payments. We note that in 
the FY 2020 IPPS/LTCH PPS final rule (84 FR 42261), we stated that 
after consideration of comments, we believe that the 
GammaTileTM mechanism of action is different from current 
forms of radiation therapy and brachytherapy as it is the first FDA 
cleared device to use a manufactured collagen matrix which offsets 
radiation sources for use for the treatment of recurrent intracranial 
neoplasms. Therefore, we stated that the GammaTileTM is not 
substantially similar to existing brachytherapy technology and meets 
the newness criterion. We refer the reader to the FY 2020 final rule 
for the complete discussion of how the GammaTileTM meets the 
newness criterion. We welcome any additional information or comments in 
response to this proposed rule regarding whether the 
GammaTileTM is substantially similar to an existing 
technology and whether it meets the newness criterion for purposes of 
its application for new technology add-on payments for FY 2021.
    With regard to the cost criterion, the applicant conducted the 
following analysis. The applicant worked with the Barrow Neurological 
Institute at St. Joseph's Hospital and Medical Center (St. Joseph's) to 
obtain actual claims from mid-2015 through mid-2016 for craniotomies 
that did not involve placement of the GammaTileTM 
technology. The cases were assigned to MS-DRGs 025, 026, and 027 
(Craniotomy and Endovascular Intracranial Procedures with MCC, with CC, 
and without CC/MCC, respectively). For the 460 claims, the average 
case-weighted unstandardized charge per case was $143,831. The 
applicant standardized the charges for each case and inflated each 
case's charges by applying the outlier charge inflation factor of 1.054 
included in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42629) by the 
age of each case (that is, the factor was applied to 2015 claims 4 
times and 2016 claims 3 times). The applicant then calculated an 
estimate for ancillary charges associated with placement of the 
GammaTileTM device, as well as standardized charges for the 
GammaTileTM device itself. The applicant determined it meets 
the cost criterion because the final inflated average case-weighted 
standardized charge per case (including the charges associated with the 
GammaTileTM device) of $270,445 exceeds the average case-
weighted threshold amount of $151,193 for MS-DRG 023 (Craniotomy with 
Major Device Implant or Acute Complex CNS PDX with MCC or Chemotherapy 
Implant or Epilepsy with Neurostimulator), the MS-DRG that would be 
assigned for cases involving the GammaTileTM device.
    The applicant stated that its analysis does not include a reduction 
in costs due to reduced operating room times. According to the 
applicant, the cost analysis reflects the time associated with a 
craniotomy and device placement. The applicant does not anticipate any 
reduction in operating room time relative to prior operative methods. 
We invite public comments on

[[Page 32623]]

whether the GammaTileTM technology meets the cost criterion.
    With regard to substantial clinical improvement, the applicant 
stated that the GammaTileTM technology offers a treatment 
option for a patient population unresponsive to, or ineligible for, 
currently available treatments for recurrent CNS malignancies and 
significantly improves clinical outcomes when compared to currently 
available treatment options. The applicant explained that therapeutic 
options for patients who have been diagnosed with large or recurrent 
brain metastases are limited (for example, stereotactic radiotherapy, 
additional EBRT, or systemic immunochemotherapy). However, according to 
the applicant, the GammaTileTM technology provides a 
treatment option for patients who have been diagnosed with 
radiosensitive recurrent brain tumors that are not eligible for 
treatment with any other currently available treatment options. 
Specifically, the applicant stated that the GammaTileTM 
device may provide the only radiation treatment option for patients who 
have been diagnosed with tumors located close to sensitive vital brain 
sites (for example, brain stem) and patients who have been diagnosed 
with recurrent brain tumors who may not be eligible for additional 
treatment involving the use of external beam radiation therapy. There 
is a lifetime limit for the amount of radiation therapy a specific area 
of the body can receive. Patients whose previous treatment includes 
external beam radiation therapy may be precluded from receiving high 
doses of radiation associated with subsequent external beam radiation 
therapy, and the GammaTileTM technology can also be used to 
treat tumors that are too large for treatment with external beam 
radiation therapy. According to the applicant, patients who have been 
diagnosed with these large tumors are not eligible for treatment with 
external beam radiation therapy because the radiation dose to healthy 
brain tissue would be too high.
    The applicant summarized how the GammaTileTM technology 
improves clinical outcomes compared to existing treatment options, 
including external beam radiation therapy and other forms of brain 
brachytherapy as: (1) Providing a treatment option for patients with no 
other available treatment options; (2) reducing the rate of mortality 
compared to alternative treatment options; (3) reducing the rate of 
radiation necrosis; (4) reducing the need for re-operation; (5) 
reducing the need for additional hospital visits and procedures; and 
(6) providing more rapid beneficial resolution of the disease process 
treatment.
    The applicant cited several sources of data to support these 
assertions. The applicant referenced a paper by Brachman, Dardis et 
al., which was published in the Journal of Neurosurgery on December 21, 
2018.\182\ This study, a follow-up on the progress of 20 patients with 
recurrent previously irradiated meningiomasis, is a feasibility or 
superior progression-free survival study comparing the patient's own 
historical control rate against subsequent treatment with 
GammaTileTM.
---------------------------------------------------------------------------

    \182\ Brachman, D., et al., ``Resection and permanent 
intracranial brachytherpay using modular, biocompatible cesium-131 
implants: Results in 20 recurrent previously irradiated 
meningiomas,'' J Neurosurgery, December 21, 2018.
---------------------------------------------------------------------------

    An additional source of clinical data is from Gamma Tech's internal 
review of data from two centers treating brain tumors with 
GammaTileTM; The two centers are the Barrow Neurological 
Institute (BNI) at St. Joseph's Hospital and St. Joseph's Medical 
Center, Phoenix, AZ, and this internal review is referred to here as 
the ``BNI'' study.\183\ The BNI study summarized Gamma Tech's 
experience with the GammaTileTM technology. The applicant 
also included a reference to its updated study, described on 
ClinicalTrials.gov under NCT03088579, which includes 79 recurrent, 
previously irradiated intracranial neoplasms.
---------------------------------------------------------------------------

    \183\ Brachman, D., et al., ``Surgery and Permanent 
Intraoperative Brachytherapy Improves Time to Progress of Recurrent 
Intracranial Neoplasms,'' Society for Neuro-Oncology Conference on 
Meningioma, June 2016.
---------------------------------------------------------------------------

    Another source of data that the applicant cited to support its 
assertions regarding substantial clinical improvement is an abstract by 
Pinnaduwage, D., et al. Also submitted in the application were 
abstracts from 2014 through 2018 in which updates from the progression-
free survival study and the BNI study were presented at specialty 
society clinical conferences. The following summarizes the findings 
cited by the applicant to support its assertions regarding substantial 
clinical improvement.
    Regarding the assertion of local control, the 2018 article which 
was published in the Journal of Neurosurgery found that, with a median 
follow-up of 15.4 months (range 0.03-47.5 months), there were 2 
reported cases of recurrence out of 20 meningiomas, with median 
treatment site progression time after surgery and brachytherapy with 
the GammaTileTM precursor and prototype devices not yet 
being reached, compared to 18.3 months in prior instances. Median 
overall survival after resection and brachytherapy was 26 months, with 
9 patient deaths. In a presentation at the Society for Neuro-Oncology 
in November 2014,\184\ the outcomes of 20 patients who were diagnosed 
with 27 tumors covering a variety of histological types treated with 
the GammaTileTM prototype were presented. The applicant 
noted the following with regard to the patients: (1) All tumors were 
intracranial, supratentorial masses and included low- and high-grade 
meningiomas, metastases from various primary cancers, high-grade 
gliomas, and others; (2) all treated masses were recurrent following 
treatment with surgery and/or radiation and the group averaged two 
prior craniotomies and two prior courses of external beam radiation 
treatment; and (3) following surgical excision, the prototype 
GammaTileTM were placed in the resection cavity to deliver a 
dose of 60 Gray to a depth of 5 mm of tissue; and (4) all patients had 
previously experienced regrowth of their tumors at the site of 
treatment and the local control rate of patients entering the study was 
0 percent.
---------------------------------------------------------------------------

    \184\ Dardis, C., ``Surgery and Permanent Intraoperative 
Brachytherapy Improves Times to Progression of Recurrent 
Intracranial Neoplasms,'' Society for Neuro-Oncology, November 2014.
---------------------------------------------------------------------------

    With regard to outcomes, the applicant stated that, after their 
initial treatment, patients had a median progression-free survival time 
of 5.8 months; post treatment with the prototype 
GammaTileTM, at the time of this analysis, only 1 patient 
had progressed at the treatment site, for a local control rate of 96 
percent; and median progression-free survival time, a measure of how 
long a patient lives without recurrence of the treated tumor, had not 
been reached (as this value can only be calculated when more than 50 
percent of treated patients have failed the prescribed treatment).
    The applicant stated that it received two peer-reviewed awards for 
comprehensive clinical trial reporting on the treatment of 79 recurrent 
brain tumors treated with GammaTile. The applicant provided a recent 
summary presentation titled: ``Surgically Targeted Radiation Therapy: A 
Prospective Trial in 79 Recurrent, Previously Irradiated Intracranial 
Neoplasms.'' at The American Brachytherapy Society.\185\ The clinical 
endpoints included time to

[[Page 32624]]

tumor progression and survival, which the applicant stated provided 
objective, clinically important measures. The median local control 
after GammaTile therapy versus prior treatment was 12.0 versus 9.5 
months for high-grade glioma patients (p=0.13) and 48.8 months versus 
23.3 months for menigioma patients (p=0.01). For the metastasis 
patients, the median local control had not been reached versus 5.1 
months with prior treatment (p=0.02). The median overall survival was 
12.0 months for high grade glioma patients, 12.0 months for brain 
metastasis patients, and 49.2 months for the meningioma patients. 
According to the applicant, these data demonstrate dramatic, clinically 
meaningful difference in Kaplan-Meier curves comparing time to local 
recurrence at same site in the same patients. The applicant stated that 
GammaTileTM is significantly outperforming the initial 
therapies attempted in this patient population.
---------------------------------------------------------------------------

    \185\ Brachman D, Youssef E, Dardis C, et al.: Surgically 
Targeted Radiation Therapy: Safety Profile of Collagen Tile 
Brachytherapy in 79 Recurrent, Previously Irradiated Intracranial 
Neoplasms on a Prospective Clinical Trial. Brachytherapy 18 (2019) 
S35-36.
---------------------------------------------------------------------------

    The applicant also cited the findings from Brachman, et al. to 
support local control of recurrent brain tumors. At the Society for 
Neuro-Oncology Conference on Meningioma in June 2016,\186\ a second set 
of outcomes on the prototype GammaTileTM was presented. This 
study enrolled 16 patients with 20 recurrent Grade II or III 
meningiomas, who had undergone prior surgical excision external beam 
radiation therapy. These patients underwent surgical excision of the 
tumor, followed by adjuvant radiation therapy with the prototype 
GammaTileTM. The applicant noted the following outcomes (1) 
of the 20 treated tumors, 19 showed no evidence of radiographic 
progression at last follow-up, yielding a local control rate of 95 
percent; 2 of the 20 patients exhibited radiation necrosis (1 
symptomatic, 1 asymptomatic); and (2) the median time to failure from 
the prior treatment with external beam radiation therapy was 10.3 
months and after treatment with the prototype GammaTileTM 
only 1 patient failed at 18.2 months. Therefore, according to the 
applicant, the median treatment site progression-free survival time 
after the prototype GammaTileTM treatment had not yet been 
reached (average follow-up of 16.7 months, range 1 to 37 months).
---------------------------------------------------------------------------

    \186\ Brachman, D., et al., ``Surgery and Permanent 
Intraoperative Brachytherapy Improves Time to Progress of Recurrent 
Intracranial Neoplasms,'' Society for Neuro-Oncology Conference on 
Meningioma, June 2016.
---------------------------------------------------------------------------

    A third prospective study was accepted for presentation at the 
November 2016 Society for Neuro-Oncology annual meeting.\187\ In this 
study, 13 patients who were diagnosed with recurrent high-grade gliomas 
(9 with glioblastoma and 4 with Grade III astrocytoma) were treated in 
an identical manner to the cases previously described. Previously, all 
patients had failed the international standard treatment for high-grade 
glioma, a combination of surgery, radiation therapy, and chemotherapy 
referred to as the ``Stupp regimen.'' For the prior therapy, the median 
time to failure was 9.2 months (range 1 to 40 months). After therapy 
with a prototype GammaTileTM, the applicant noted the 
following: (1) The median time to same site local failure had not been 
reached and 1 failure was seen at 18 months (local control 92 percent); 
and (2) with a median follow-up time of 8.1 months (range 1 to 23 
months) 1 symptomatic patient (8 percent) and 2 asymptomatic patients 
(15 percent) had radiation-related MRI changes. However, no patients 
required re-operation for radiation necrosis or wound breakdown. Dr. 
Youssef was accepted to present at the 2017 Society for Neuro-Oncology 
annual meeting, where he provided an update of 58 tumors treated with 
the GammaTileTM technology. At a median whole group follow-
up of 10.8 months, 12 patients (20 percent) had a local recurrence at 
an average of 11.33 months after implant. Six- and 18-month recurrence-
free survival was 90 percent and 65 percent, respectively. Five 
patients had complications, at a rate that was equal to or lower than 
rates previously published for patients without access to the 
GammaTileTM technology.
---------------------------------------------------------------------------

    \187\ Youssef, E., ``C-131 Implants for Salvage Therapy of 
Recurrent High Grade Gliomas,'' Society for Neuro-Oncology Annual 
Meeting, November 2016.
---------------------------------------------------------------------------

    In support of its assertion of a reduction in radiation necrosis, 
the applicant also included discussion of a presentation by D.S. 
Pinnaduwage, Ph.D., at the August 2017 annual meeting of the American 
Association of Physicists in Medicine. Dr. Pinnaduwage compared the 
brain radiation dose of the GammaTileTM technology with 
other radioactive seed sources. Iodine-125 and palladium-103 were 
substituted in place of the cesium-131 seeds. The study reported 
findings that other radioactive sources reported higher rates of 
radiation necrosis and that ``hot spots'' increased with larger tumor 
size, further limiting the use of these isotopes. The study concluded 
that the larger high-dose volume with palladium-103 and iodine-125 
potentially increases the risk for radiation necrosis, and the 
inhomogeneity becomes more pronounced with increasing target volume. 
The applicant also cited a presentation by Dr. Pinnaduwage at the 
August 2018 annual meeting of the American Association of Physicists in 
Medicine, in which research findings demonstrated that seed migration 
in collagen tile implantations was relatively small for all tested 
isotopes, with Cesium-13 showing the least amount of seed migration.
    The applicant asserted that, when considered in total, the data 
reported in these presentations and studies and the intermittent data 
presented in their abstracts support the conclusion that a significant 
therapeutic effect results from the addition of GammaTileTM 
radiation therapy to the site of surgical removal. According to the 
applicant, the fact that these patients had failed prior best available 
treatments (aggressive surgical and adjuvant radiation management) 
presents the unusual scenario of a salvage therapy outperforming the 
current standard of care. The applicant noted that follow-up data 
continues to accrue on these patients.
    Regarding the assertion that GammaTileTM reduces 
mortality, the applicant stated that the use of the 
GammaTileTM technology reduces rates of mortality compared 
to alternative treatment options. The applicant explained that studies 
on the GammaTileTM technology have shown improved local 
control of tumor recurrence. According to the applicant, the results of 
these studies showed local control rates of 92 percent to 96 percent 
for tumor sites that had local control rates of 0 percent from previous 
treatment. The applicant noted that these studies also have not reached 
median progression-free survival time with follow-up times ranging from 
1 to 37 months. Previous treatment at these same sites resulted in 
median progression-free survival times of 5.8 to 10.3 months.
    The applicant further stated that the use of the 
GammaTileTM technology reduces rates of radiation necrosis 
compared to alternative treatment options. The applicant explained that 
the rate of symptomatic radiation necrosis in the 
GammaTileTM clinical studies of 5 to 8 percent is 
substantially lower than the 26 percent to 57 percent rate of 
symptomatic radiation necrosis requiring re-operation historically 
associated with brain brachytherapy, and lower than the rates reported 
for initial treatment of similar tumors with modern external beam and 
stereotactic radiation techniques. The applicant

[[Page 32625]]

indicated that this is consistent with the customized and ideal 
distribution of radiation therapy provided by the 
GammaTileTM technology.
    The applicant also asserted that the use of the 
GammaTileTM technology reduces the need for re-operation 
compared to alternative treatment options. The applicant explained that 
patients receiving a craniotomy, followed by external beam radiation 
therapy or brachytherapy, could require re-operation in the following 
three scenarios:
     Tumor recurrence at the excision site could require 
additional surgical removal;
     Symptomatic radiation necrosis could require excision of 
the affected tissue; and
     Certain forms of brain brachytherapy require the removal 
of brachytherapy sources after a given period of time.
    However, according to the applicant, because of the high local 
control rates, low rates of symptomatic radiation necrosis, and short 
half-life of cesium-131, the GammaTileTM technology will 
reduce the need for re-operation compared to external beam radiation 
therapy and other forms of brain brachytherapy.
    Additionally, the applicant stated that the use of the 
GammaTileTM technology reduces the need for additional 
hospital visits and procedures compared to alternative treatment 
options. The applicant noted that the GammaTileTM technology 
is placed during surgery, and does not require any additional visits or 
procedures. The applicant contrasted this improvement with external 
beam radiation therapy, which is often delivered in multiple fractions 
that must be administered over multiple days. The applicant provided an 
example where whole brain radiotherapy (WBRT) is delivered over 2 to 3 
weeks, while the placement of the GammaTileTM technology 
occurs during the craniotomy and does not add any time to a patient's 
recovery.
    Based on consideration of all of the previously presented data, the 
applicant believed that the use of the GammaTileTM 
technology represents a substantial clinical improvement over existing 
technologies. We note that the clinical data submitted to date in 
connection with its application for new technology add-on payments for 
FY 2021 is essentially identical to what was submitted in connection 
with its application for new technology add-on payments for FY 2020. As 
we indicated in previous rulemaking (84 FR 42260 through 42265), the 
findings presented appear to be derived from relatively small case-
studies and not data from clinical trials conducted under an FDA-
approved investigational device exemption application. We note that the 
study performed on 74 patients with 79 tumors was a single-arm and 
single-institution study, where each patient functioned as their own 
control and the study goal was to compare the time to local recurrence 
after GammaTileTM treatment to the time of local recurrence 
after initial treatment of intracranial tumors. That is, the control 
arm were patients treated for initial intracranial brain tumors, and 
the treatment arm or the GammaTileTM treatment arm were the 
same control patients now experiencing local recurrent intracranial 
brain tumors in the same site with the same brain tumor type. In this 
clinical trial, the applicant compared the time from initial treatment 
to first local recurrence (control arm) vs. time from 
GammaTileTM treatment of first local recurrence to second 
local recurrence of the same brain tumor site and tumor type. There was 
a statistically significant difference between the control arm 
treatment and GammaTileTM treatment for patients with 
recurrent meningioma and brain metastases and no statistically 
significant difference between the control arm treatment and 
GammaTileTM treatment for patients with recurrent high-grade 
glioma.
    We continue to have concerns that, while the applicant described 
increases in median time to disease recurrence for certain intra-
cranial tumors (in a small number of patients with different 
histologies) in support of clinical improvement, the lack of analysis, 
meta-analysis, or statistical tests indicates that the clinical 
efficacy and safety data for seeded brachytherapy is limited. While we 
acknowledge the difficulty in establishing randomized control groups in 
studies involving recurrent brain tumors, we are concerned that 
GammaTileTM technology does not represent a substantial 
clinical improvement over existing therapies and requires additional 
clinical data to demonstrate substantial clinical improvement. We note 
that the applicant has stated its intention to provide additional 
clinical data and information in connection with its application for 
new technology add-on payments for FY 2021, potentially including an 
update on patient outcomes from the completed clinical trial 
(ClinicalTrials.gov, NCT03088579), additional clinical data from early 
adopting locations, and additional meta-analysis to address the 
concerns previously raised by CMS.
    We invite public comments on whether the GammaTileTM 
technology meets the substantial clinical improvement criterion. We did 
not receive any written comments in response to the New Technology Town 
Hall meeting notice published in the Federal Register regarding the 
substantial clinical improvement criterion for GammaTileTM 
or at the New Technology Town Hall meeting.
g. Hemospray[supreg] Endoscopic Hemostat
    Cook Medical submitted an application for new technology add-on 
payments for the Hemospray[supreg] Endoscopic Hemostat (Hemospray) for 
FY 2021. According to the applicant, Hemospray is indicated by the FDA 
for hemostasis of nonvariceal gastrointestinal bleeding. Using an 
endoscope to access the gastrointestinal tract, the Hemospray delivery 
system is passed through the accessory channel of the endoscope and 
positioned just above the bleeding site without making contact with the 
GI tract wall. The Hemospray powder, Bentonite, is propelled through 
the application catheter, either a 7 or 10 French polyethylene 
catheter, by release of CO2 from the cartridge located in 
the device handle and sprayed onto the bleeding site. Bentonite can 
absorb 5 to 10 times its weight in water and swell up to 15 times its 
dry volume. Bentonite rapidly absorbs water and becomes cohesive to 
itself and adhesive to tissue forming a physical barrier to aqueous 
fluid (for example, blood). Hemospray is not absorbed by the body and 
does not require removal as it passes through the GI tract within 72 
hours. Hemospray is single use and disposable.
    According to the applicant, current standard of care hemostatic 
modalities used for the management of nonvariceal gastrointestinal 
bleeding have a failure rate of 8 to 15 percent and a rebleeding rate 
of 10 to 25 percent, or worse, depending on patient etiology and 
morbidity.\188\ The applicant asserted that the risk of morbidity, 
mortality, and rebleeding can be predicted using validated scoring 
methods such as the Rockall Score (RS).\189\ Cancerous lesions, which 
are more frequently identified as a result of advances in locating and 
determining the cause of

[[Page 32626]]

bleeding,\190\ have lower rates of hemostasis (as low as 40 percent), 
with higher recurrent bleeding rates (over 50 percent within 1 month), 
with high 3 month mortality.191 192 Continued bleeding that 
is not controlled by conventional techniques, or recurrent bleeding 
from the same lesion may be treated by repeated attempts at endoscopic 
hemostasis, interventional radiology hemostasis (IRH) with guided 
transarterial embolization (TAE), or surgery.\193\ According to the 
applicant, a recent systematic review found minimally invasive options 
like TAE had re-bleeding rates that were higher than those from surgery 
with no significant difference in mortality.\194\ According to the 
applicant, patients who are not surgical candidates have very few 
options for ``rescue'' when conventional hemostasis techniques fail.
---------------------------------------------------------------------------

    \188\ Lau J, Barkun A, Fan D, Kuipers E, Yang Y, Chan F. 
Challenges in the management of acute peptic ulcer bleeding. Lancet 
2013; 381: 2033-43.
    \189\ Mokhtare M, Bozorgi V, Agah S et al. Comparison of 
Glasgow-Blatchford score and full Rockall score systems to predict 
clinical outcomes in patients with upper gastrointestinal bleeding. 
Clin. Exp. Gastroenterol. 2016; 9: 337-43.
    \190\ Heller SJ, Tokar JL, Nguyen MT, et al. Management of 
bleeding GI tumors. Gastrointest Endosc 2010;72:817-24.
    \191\ Kim YI, Choi IJ, Cho SJ, et al. Outcome of endoscopic 
therapy for cancer bleeding in patients with unresectable gastric 
cancer. J Gastroenterol Hepatol 2013;28:1489-95.
    \192\ Roberts SE, Button LA, Williams JG. Prognosis following 
upper gastrointestinal bleeding. PLoS One 2012;7:e49507.
    \193\ Lau JY, Sung JJ, Lam YH, et al. Endoscopic retreatment 
compared with surgery in patients with recurrent bleeding after 
initial endoscopic control of bleeding ulcers. N Engl J Med 1999; 
340: 751-756.
    \194\ Beggs AD, Dilworth MP, Powell SL, et al. A systematic 
review of transarterial embolization versus emergency surgery in 
treatment of major nonvariceal upper gastrointestinal bleeding. Clin 
Exp Gastroenterol 2014; 7: 93-104.
---------------------------------------------------------------------------

    The applicant asserted that, in addition to increased morbidity and 
mortality, the financial impact of failure to achieve hemostasis is 
considerable. Based on a retrospective claims analysis by the applicant 
of the 2012 MedPAR file and the Provider of Services file, 13,501 cases 
were identified which showed all-cause mortality for patients requiring 
more than 1 endoscopy (6%), IRH (9%), or surgery (14%) was 
significantly higher than for patients requiring only 1 endoscopy 
(3%).\195\ The median hospital costs for these patients were 
considerable, with costs for patients requiring over 1 endoscopy of 
$20,055, for patients requiring IRH of $34,730, and for patients 
requiring surgery of $47,589. According to the applicant, Hemospray is 
an alternative to IRH and surgery and the applicant asserts it would 
avoid the costs associated with these procedures.
---------------------------------------------------------------------------

    \195\ Roy A, Kim M, Hawes R, Varadarajulu S. The clinical and 
cost implications of failed endoscopic hemostasis in gastroduodenal 
ulcer bleeding. UEG Journal 2017; 5(3): 359-364.
---------------------------------------------------------------------------

    With respect to the newness criterion, the applicant for Hemospray 
received FDA de novo approval on May 7, 2018. The applicant stated 
revisions to the instructions for use were required by the FDA and 
therefore the device was not commercially available until July 1, 2018. 
The FDA has classified Hemospray as a Class II device for intraluminal 
gastrointestinal use. The applicant stated that currently, there is no 
ICD-10-PCS code to uniquely identify procedures involving the 
administration of Hemospray. We note the applicant submitted a request 
for approval for a unique ICD-10-PCS code for the administration of 
Hemospray beginning in FY 2021. The applicant stated this technology 
does not have a HCPCS code.
    According to information submitted by the applicant, Cook Medical 
is voluntarily recalling Hemospray[supreg] Endoscopic Hemostat due to 
complaints received that the handle and/or activation knob on the 
device in some cases has cracked or broken when the device is activated 
and in some cases has caused the carbon dioxide cartridge to exit the 
handle. The applicant stated that Cook Medical has received 1 report of 
a superficial laceration to the user's hand that required basic first 
aid; however, there have been no reports of laceration, infection, or 
permanent impairment of a body structure to users or to patients due to 
the carbon dioxide cartridge exiting the handle. The applicant stated 
that Cook Medical has initiated an investigation and will determine the 
appropriate corrective action(s) to prevent recurrence of this issue. 
According to the applicant, although the recall does restrict 
availability of the device, they wish to continue their application for 
new technology add-on payment as they believe the use of Hemospray 
significantly improves clinical outcomes for certain patient 
populations compared to currently available treatments.
    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 purposed of new technology add-on payments. The applicant 
identified three treatment options currently available for the 
treatment of bleeding of the gastrointestinal system, which were 
thermal modalities, injection needles, and mechanical modalities. The 
applicant stated that thermal modalities are those endoscopic methods 
that treat gastrointestinal hemorrhage by means of bipolar 
electrocautery, hemostatic graspers, and argon plasma coagulation. 
These devices generate heat resulting in edema, coagulation of tissue 
protein, and contraction of vessels and indirect activation of the 
coagulation cascade. The applicant stated that injection needles treat 
gastrointestinal hemorrhage through the injection of various materials 
including epinephrine, saline, histocryl, ethanolamine, and ethanol. 
This method achieves hemostasis by both mechanical tamponade and 
cytochemical mechanisms.\196\ The applicant stated that mechanical 
modalities including hemostatic endoclips, detachable loop ligators and 
multi-band ligators control gastrointestinal hemorrhage by applying 
mechanical pressure to the bleeding site. The applicant claimed these 
treatment options (thermal modalities, injection needles, and 
mechanical modalities) are insufficient in achieving hemostasis as 
evidenced by rates of failed hemostasis of 8 to 15 percent.\197\ The 
applicant stated that all the current treatments result in injury to 
the tissue, which in some cases can result in a worsening of the 
severity of the bleeding or perforation. Furthermore, it stated that 
with the exception of argon plasma coagulation, the current hemostatic 
modalities require precise targeting of the source of the bleed, which 
may limit their utility when diffuse or non-precise bleeding occurs. 
According to the applicant, the primary benefit of all endoscopic 
hemostasis procedures, including Hemospray, is the achievement of 
hemostasis without conversion to interventional radiology or surgery, 
both of which carry higher risk of mortality and morbidity.\198\
---------------------------------------------------------------------------

    \196\ ASGE, The role of endoscopy in the management of acute 
non-variceal upper GI bleeding, Gastrointestinal Endoscopy. 2012; 
75(6): 1132-1138.
    \197\ Lau J, Barkun A, Fan D, Kuipers E, Yang Y, Chan F. 
Challenges in the management of acute peptic ulcer bleeding. Lancet 
2013; 381: 2033-43.
    \198\ Beggs AD, Dilworth MP, Powell SL, et al. A systematic 
review of transarterial embolization versus emergency surgery in 
treatment of major nonvariceal upper gastrointestinal bleeding. Clin 
Exp Gastroenterol 2014; 7: 93-104.
---------------------------------------------------------------------------

    With regard to the first criterion, whether a product uses the same 
or similar mechanism of action to achieve a therapeutic outcome, the 
application asserted that Hemospray is a novel device in which the 
mechanism of action differs from alternative treatments by creating a 
diffuse mechanical barrier over the site of bleeding with a non-
thermal, non-traumatic, noncontact modality.
    With respect to the second criterion, whether a product is assigned 
to the same or different MS-DRG, the applicant did not specifically 
comment. The applicant stated that cases involving the use of Hemospray 
would span a wide variety of MS-DRGs, but

[[Page 32627]]

that the technology would most likely be used for cases in MS-DRGs 377, 
378, and 379 (G.I. Hemorrhage with MCC, with CC, and without CC/MCC, 
respectively). We believe that cases involving the use of the 
technology would be assigned to the same MS-DRG as cases involving the 
current standard of care treatments.
    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 note that the 
applicant also did not comment specifically on this criterion. However, 
we believe that this technology would be used to treat the same or 
similar type of disease and the same or similar patient population as 
the current standard of care treatments.
    Based on the applicant's statements as summarized previously, the 
applicant believes that Hemospray is not substantially similar to other 
currently available therapies and/or technologies and meets the 
``newness'' criterion. However, we are concerned that the mechanism of 
action of Hemospray may be similar to existing endoscopic hemostatic 
treatments. Specifically, we note that as described in literature 
provided by the applicant, technologies such as Ankaferd Bloodstopper 
and EndoClot Polysaccharide Hemostatic System appear to utilize a 
similar mechanism of action as Hemospray to achieve hemostasis.\199\ 
Based on the literature provided by the applicant, EndoClot, a device 
developed in California, USA, ``. . . consists of absorbable modified 
polymer . . . [which is] biocompatible, non-pyogenic, and starch-
derived compound that rapidly absorbs water from serum and concentrates 
platelets, red blood cells, and coagulation proteins at the bleeding 
site to accelerate the clotting cascade.'' \200\ EndoClot received 
510(k) premarket notification January 18, 2017 and is indicated by the 
FDA to assist the delivery of a powdered hemostatic agent to the 
treatment site in endoscopic surgeries. Therefore, we are concerned 
with the similarity of this mechanism of action. Moreover, as 
previously noted, the applicant asserted generally it did not meet the 
substantial similarity criteria, but did not specifically address the 
second and third substantial similarity criteria. We believe that cases 
involving the use of the Hemospray would be assigned to the same MS-DRG 
as cases involving the current standard-of-care treatments and that the 
technology would be used to treat the same or similar type of disease 
and the same or similar patient population as the current standard-of-
care treatments.
---------------------------------------------------------------------------

    \199\ Barkun, A., Moosavi, S., & Martel, M. (2013). Topical 
hemostatic agents: A systematic review with particular emphasis on 
endoscopic application in GI bleeding. Gastrointestinal Endoscopy, 
77(5), 692-700.
    \200\ Ibid.
---------------------------------------------------------------------------

    We are inviting public comments on whether Hemospray is 
substantially similar to other currently available therapies and/or 
technologies and whether this technology meets the newness criterion.
    With regard to the cost criterion, the applicant provided the 
following analysis to demonstrate the technology meets the cost 
criterion. The applicant asserted patients who would use Hemospray are 
identified by using a combination of one ICD-10-PCS procedure code and 
one ICD-10-CM diagnosis code. The applicant provided a list of 39 ICD-
10-PCS procedure codes that included 21 Non O.R. digestive system 
procedures and 18 Extensive O.R. digestive system procedures. The 
applicant provided a list of 32 ICD-10-CM diagnosis codes that included 
29 principal diagnoses in MS-DRGs 377, 378, and 379 (G.I. Hemorrhage 
with MCC, with CC, and without CC/MCC, respectively) and 3 principal 
diagnoses in MDC 06 (Diseases and Disorders of the Digestive System) 
across 10 MS-DRG classifications. The applicant extracted claims from 
the FY 2018 MedPAR final rule dataset based on the presence of one 
procedure and one diagnosis code in the list provided. The applicant 
stated MS-DRGs 377, 378, and 379 made up 3 of the top 4 MS-DRGs by 
volume and about 64 percent of cases were grouped to these 3 MS-DRGs. 
The applicant stated consequently they limited their analysis to the 
cases assigned to MS-DRGs 377, 378, and 379 and those claims that would 
be used for IPPS rate setting. The applicant identified a total of 
40,012 cases.
    The applicant first calculated a case weighted threshold of $46,568 
based upon the dollar threshold for each MS-DRG grouping and the 
proportion of cases in each MS-DRG. The applicant then calculated the 
average charge per case. The applicant stated Hemospray may not replace 
other therapies occurring during an inpatient stay and therefore chose 
to not remove charges for the prior technology or technology being 
replaced. Next the applicant calculated the average standardized charge 
per case using the FY 2018 IPPS Final Rule Impact file. The 2-year 
inflation factor of 11.1% (1.11100) was obtained from the FY 2020 IPPS/
LTCH PPS final rule and applied to the average standardized charge per 
case. To determine the charges for Hemospray, the applicant used the 
inverse of the FY 2020 IPPS/LTCH PPS final rule supplies and equipment 
national average CCR of 0.299, based on an assumption that hospitals 
would use the inverse of the national average CCR for supplies and 
equipment to mark-up charges, and therefore assumed an average charge 
for Hemospray of $8,361.20. The applicant calculated the final inflated 
average case-weighted standardized charge per case by adding the 
charges for the new technology to the inflated average standardized 
charge per case. The applicant determined a final inflated average 
case-weighted standardized charge per case of $60,193, which exceeds 
the average case-weighted threshold amount of $46,568.
    We are inviting public comments on whether Hemospray meets the cost 
criterion.
    With respect to the substantial clinical improvement criterion, the 
applicant asserted that Hemospray represents a substantial clinical 
improvement over existing technologies. According to the applicant, 
Hemospray is a topically applied mineral powder that offers a novel 
primary treatment option for endoscopic bleeding management, serves as 
an option for patients who fail conventional endoscopic treatments, and 
serves as an alternative to interventional radiology hemostasis (IRH) 
and surgery. Broadly, the applicant outlined two treatment areas in 
which it asserted Hemospray would provide a substantial clinical 
improvement: (1) As a primary treatment or a rescue treatment after the 
failure of a conventional method, and (2) in the use for the treatment 
of malignant lesions.
    The applicant provided eight articles specifically for the purpose 
of addressing the substantial clinical improvement criterion. Three 
articles are systematic reviews, three are prospective studies, and two 
are retrospective studies.
    The first article provided by the applicant was a prospective 
single armed multicenter phase two safety and efficacy study performed 
in France.\201\ From March 2013 to January 2015, 64 endoscopists in 20 
centers enrolled 202 patients in the study in which Hemospray was used 
as either a first line treatment (46.5%) or salvage therapy (53.5%) 
following the unsuccessful treatment with another method. The 
indication for Hemospray as a first-line therapy or salvage therapy

[[Page 32628]]

was at the discretion of the endoscopist. Of the 202 patients the mean 
age was 68.9, 69.3 percent were male, and all patients were classified 
into four primary etiologic groups: Ulcers (37.1%), malignant lesions 
(30.2%), post-endoscopic bleeding (17.3%), and other (15.3%). Patients 
were further classified by the American Society of Anesthesiologist 
(ASA) physical status scores with 4.5 percent as a normal healthy 
patient, 24.3 percent as a patient with mild systemic disease, 46 
percent as a patient with severe systemic disease, 22.8 percent as a 
patient with severe systemic disease that is a constant threat to life, 
and 2.5 percent as a moribund patient who is not expected to survive 
without an operation.202 203 Immediate hemostasis was 
achieved in 96.5 percent across all patients; among treatment subtypes 
immediate hemostasis was achieved in 96.8 percent of first-line treated 
patients and 96.3 percent of salvage therapy patients. At day 30 the 
overall rebleeding was 33.5 percent of 185 patients with cumulative 
incidences of 41.4 percent for ulcers, 37.7 percent for malignant 
lesions, 17.6 percent for post-endoscopic bleedings, and 25 percent for 
others. When Hemospray was used as a first-line treatment, rebleeding 
at day 30 occurred in 26.5 percent (22/83) of overall lesions, 30.8 
percent of ulcers, 33.3 percent of malignant lesions, 13.6 percent of 
post-endoscopic bleedings, and 22.2 percent of other. When Hemospray 
was used as a salvage therapy, rebleeding at day 30 occurred in 39.2 
percent (40/102) of overall lesions, 43.9 percent of ulcers, 50.0 
percent of malignant lesions, 25.0 percent of post-endoscopic 
bleedings, and 26.3 percent for others. According to the article, the 
favorable hemostatic results seen from Hemospray are due to its 
threefold mechanism of action: Formation of a mechanical barrier; 
concentration of clotting factors at the bleeding site; and enhancement 
of clot formation.\204\ No severe adverse events were noted, however 
the authors note the potential for pain exists due to the use of carbon 
dioxide. Lastly, the authors stated that while Hemospray was found to 
reduce the need for radiological embolization and surgery as salvage 
therapies, it was not found to be better than other hemostatic methods 
in terms of preventing rebleeding of ulcers.
---------------------------------------------------------------------------

    \201\ Haddara S, Jacques J, Lecleire S et al. A novel hemostatic 
powder for upper gastrointestinal bleeding: A multicenter study (the 
GRAPHE registry). Endoscopy 2016; 48: 1084-95.
    \202\ Ibid.
    \203\ ASA House of Delegates/Executive Committee. (2014, October 
15). ASA Physical Status Classification System. Retrieved from 
American Society of Anesthesiologists: https://www.asahq.org/standards-and-guidelines/asa-physical-status-classification-system.
    \204\ Haddara S, Jacques J, Lecleire S et al. A novel hemostatic 
powder for upper gastrointestinal bleeding: A multicenter study (the 
GRAPHE registry). Endoscopy 2016; 48: 1084-95.
---------------------------------------------------------------------------

    A second article provided by the applicant contained a systematic 
review of published Hemospray case data summarizing 17 human and 2 
animal studies.\205\ The authors do not provide the total number of 
articles reviewed but do provide search terms and engines used to 
conduct the review. The studies included in this review included 6 case 
reports and 13 case series taking place in North America, Europe, Hong 
Kong, and Egypt up until August 2014. A total of 234 cases were 
identified of which 28.2 percent involved gastric bleeding, 6.4 percent 
esophageal bleeding, 26.5 percent duodenal bleeding, 3.85 percent 
bleeding of the gastroesophageal junction, and 11 percent bleeding of 
the lower gastrointestinal tract. (We note it is unclear what form of 
bleeding the remaining 24.1 percent of cases addressed.) The mean size 
of the bleeding source was 37.4 mm ranging from 8 mm to 350 mm. 
Hemospray was used as a primary and sole treatment in 83 percent of 
cases while 17 percent of cases used Hemospray as a follow-up 
treatment. Hemospray achieved hemostasis in 88.5 percent of all 
reviewed cases. Within the 72-hour post-treatment period, rebleeding 
occurred in 16.2 percent of patients and 27.3 percent of animal models. 
The authors acknowledge the potential for rare adverse events such as 
embolism, intestinal obstruction, and allergic reaction, but state no 
procedure related adverse events were associated with Hemospray.\206\
---------------------------------------------------------------------------

    \205\ Changela K, Papafragkakis H, Ofori E, et al. Hemostatic 
powder spray: A new method for managing gastrointestinal bleeding. 
Ther Adv Gastroenterol 2015; 8(3): 125-135.
    \206\ Ibid.
---------------------------------------------------------------------------

    The applicant provided a third article consisting of an abstract 
from another systematic review article.\207\ The abstract purports to 
cover a review of prospective, retrospective, and randomized control 
trials evaluating Hemospray as a rescue therapy. Eighty-five articles 
were initially identified and 23 were selected for review. Of those, 5 
studies were selected which met the inclusion criteria of the analysis. 
The median age of patients was 69, 68 percent were male. The abstract 
concludes that when used as a rescue therapy after the failure of 
conventional endoscopic modalities, in nonvariceal gastrointestinal 
bleeding, Hemospray seems to have significantly higher rates of 
immediate hemostasis.
---------------------------------------------------------------------------

    \207\ Moole, V., Chatterjee, T., Saca, D., Uppu, A., Poosala, 
A., & Duvvuri, A. A Systematic review and meta-analysis: Analyzing 
the efficacy of hemostatic nanopowder (TC-325) as rescue therapy in 
patients with nonvariceal upper gastrointestinal bleeding. 
Gastroenterology 2019; 156(6), S-741.
---------------------------------------------------------------------------

    A fourth article provided by the applicant described a single-arm 
retrospective analytical study of 261 enrolled patients conducted at 21 
hospitals in Spain.\208\ The mean age was 67 years old, 69 percent of 
patients were male, and the overall technical success, defined as 
correct assembled and delivery of Hemospray to a bleeding lesion, was 
97.7 percent (95.1%-99.2%). The most common causes of bleeding in 
patients were peptic ulcer (28%), malignancy (18.4%), therapeutic 
endoscopy-related (17.6%), and surgical anastomosis (8.8%). Overall, 
93.5 percent (89.5%-96%) of procedures achieved hemostasis. Recurrent 
bleeding, defined as (1) a new episode of bleeding symptoms, (2) a 
decrease in hemoglobin of >2 g/dL within 48 hours of an index endoscopy 
or >3g/dL in 24 hours, or (3) direct visualization of active bleeding 
at the previously treated lesion on repeat endoscopy, had a cumulative 
incidence at 3 and 30 days of 16.1 percent (11.9%-21%) and 22.9 percent 
(17.8%-28.3%) respectively. The overall risk of Hemospray failure at 3 
and 30 days was 21.1 percent (16.4%-26.2%) and 27.4 percent (22.1%-
32.9%) respectively with no statistically significant differences 
(p=0.07) between causes at 30 days (for example peptic ulcer, 
malignancy, anastomosis, therapeutic endoscopy-related, and other 
causes). With the use of multivariate analysis spurting bleeding vs. 
nonspurting bleeding (subdistribution hazard ratio [sHR] 1.97 (1.24-
3.13)), hypotension vs. normotensive (sHR 2.14 (1.22-3.75)), and the 
use of vasoactive drugs (sHR 1.80 (1.10-2.95)) were independently 
associated with Hemospray failure. The overall 30-day survival was 81.9 
percent (76.5%-86.1%) with 46 patients dying during follow-up and 22 
experiencing bleeding related deaths; twenty patients (7.6%) with 
intraprocedural hemostasis died before day 30. The authors indicated 
the majority of Hemospray failures occurred within the first 3 days and 
the rate of immediate hemostasis was similar to literature reports of 
intraprocedural success rates of over 90 percent. The authors stated 
that the hemostatic powder of Hemospray is eliminated from the GI tract 
as early as 24 hours after use, which could explain the wide ranging 
recurrent bleeding percentage. The authors reported that

[[Page 32629]]

importantly, adverse events are rare, but cases of abdominal 
distension, visceral perforation, transient biliary obstruction, and 
splenic infarct have been reported; one patient involved in this study 
experienced an esophageal perforation without a definitive causal 
relationship.
---------------------------------------------------------------------------

    \208\ Rodriguez de Santiago E, Burgos-Santamaria D, Perez-Carazo 
L, et al. Hemostatic spray TC-325 for GI bleeding in a nationwide 
study: Survival analysis and predictors of failure via competing 
risks analysis. Gastrointest Endosc 2019; 90(4), 581-590.
---------------------------------------------------------------------------

    A fifth article provided by the applicant described a single-arm 
multicenter prospective registry involving 314 patients in Europe which 
collected data on days 0, 1, 3, 7, 14, and 30 after endotherapy with 
Hemospray.\209\ The outcomes of interest in this study were immediate 
endoscopic hemostasis (observed cessation of bleeding within 5 minutes 
post Hemospray application) with secondary outcomes of rebleeding 
immediately following treatment and during follow-up, 7 and 30 day all-
cause mortality, and adverse events. The sample was 74 percent male 
with a median age of 71 with the most common pathologies of peptic 
ulcer (53%), malignancy (16%), post-endoscopic bleeding (16%), bleeding 
from severe inflammation (11%), esophageal variceal bleeding (2.5%), 
and cases with no obvious cause (1.6%). The median baseline Blatchford 
score (BS) and RS were 11 and 7 respectively. The BS ranges from 0 to 
23 with higher scores indicating increasing risk for required 
endoscopic intervention and is based upon the blood urea nitrogen, 
hemoglobin, systolic blood pressure, pulse, presence of melena, 
syncope, hepatic disease, and/or cardiac failure.\210\ The RS ranges 
from 0 to 11 with higher scores indicating worse potential outcomes and 
is based upon age, presence of shock, comorbidity, diagnosis, and 
endoscopic stigmata of recent hemorrhage.\211\ Immediate hemostasis was 
achieved in 89.5 percent of patients following the use of Hemospray; 
only the BS was found to have a positive correlation with treatment 
failure in multivariate analysis (OR 1.21 (1.10-1.34)). Rebleeding 
occurred in 10.3 percent of patients who achieved immediate hemostasis 
again with only the BS having a positive correlation with rebleeding 
(OR: 1.13 (1.03-1.25)). At 30 days the all-cause mortality was 20.1 
percent with 78 percent of these patients having achieved immediate 
endoscopic hemostasis and a cause of death resulting from the 
progression of other comorbidities. A subgroup analysis of treatment 
type (monotherapy, combination therapy, and rescue therapy groups) was 
performed showing no statistically significant difference in immediate 
hemostasis across groups (92.4 percent, 88.7 percent, and 85.5 percent 
respectively). Higher all-cause mortality rates at 30 days were highest 
in the monotherapy group (25.4%, p=0.04) as compared to all other 
groups. According to the authors, in comparison to major recent studies 
they were able to show lower rebleeding rates overall and in all 
subgroups despite the high-risk population.\212\ The authors further 
note limitations in that the inclusion of patients was nonconsecutive 
and at the discretion of the endoscopist, at the time of the endoscopy, 
which allows for the potential introduction of selection bias, which 
may have affected these study results.
---------------------------------------------------------------------------

    \209\ Alzoubaidi D, Hussein M, Rusu R, et al. Outcomes from an 
international multicenter registry of patients with acute 
gastrointestinal bleeding undergoing endoscopic treatment with 
Hemospray. Digestive Endoscopy 2019.
    \210\ Saltzman, J. (2019, October). Approach to acute upper 
gastrointestinal bleeding in adults. (M. Feldman, Editor) Retrieved 
from UpToDate: https://www.uptodate.com/contents/approach-to-acute-upper-gastrointestinal-bleeding-in-adults.
    \211\ Ibid.
    \212\ Alzoubaidi D, Hussein M, Rusu R, et al. Outcomes from an 
international multicenter registry of patients with acute 
gastrointestinal bleeding undergoing endoscopic treatment with 
Hemospray. Digestive Endoscopy 2019.
---------------------------------------------------------------------------

    The fifth article also described the utility of Hemospray in the 
treatment of malignant lesions. According to the applicant, malignant 
lesions pose a significant clinical challenge as successful hemostasis 
rates are as low as 40 percent with high recurrent bleeding over 50 
percent within 1 month following standard treatments.213 214 
The applicant added that bleeding from tumors is often diffuse and 
consists of friable mucosa decreasing the utility of traditional 
treatments (for example, ligation, cautery). From the fifth article, 
the applicant noted that 50 patients were treated for malignant 
bleeding with an overall immediate hemostasis in 94 percent of 
patients.\215\ Of the 50 patients, 33 were treated with Hemospray 
alone, 11 were treated with Hemospray as the final treatment, and 4 
were treated with Hemospray as a rescue therapy of which 100 percent, 
84.6 percent and 75 percent experienced immediate hemostasis 
respectively.\216\ Similarly, from the first discussed article, the 
applicant noted that among malignant bleeding patients, 95.1 percent 
achieved immediate hemostasis with lower rebleeding rates at 8 days 
when Hemospray was used as a primary treatment as compared to when used 
as a rescue therapy (17.1 percent vs. 46.7 percent respectively).\217\ 
The applicant concluded that Hemospray may provide an advantage as a 
primary treatment to patients with malignant bleeding.
---------------------------------------------------------------------------

    \213\ Kim YI, Choi IJ, Cho SJ, et al. Outcome of endoscopic 
therapy for cancer bleeding in patients with unresectable gastric 
cancer. J Gastroenterol Hepatol 2013;28:1489-95.
    \214\ Roberts SE, Button LA, Williams JG. Prognosis following 
upper gastrointestinal bleeding. PLoS One 2012;7:e49507.
    \215\ Alzoubaidi D, Hussein M, Rusu R, et al. Outcomes from an 
international multicenter registry of patients with acute 
gastrointestinal bleeding undergoing endoscopic treatment with 
Hemospray. Digestive Endoscopy 2019.
    \216\ Alzoubaidi D, Hussein M, Rusu R, et al. Outcomes from an 
international multicenter registry of patients with acute 
gastrointestinal bleeding undergoing endoscopic treatment with 
Hemospray. Digestive Endoscopy 2019.
    \217\ Haddara S, Jacques J, Lecleire S et al. A novel hemostatic 
powder for upper gastrointestinal bleeding: A multicenter study (the 
GRAPHE registry). Endoscopy 2016; 48: 1084-95.
---------------------------------------------------------------------------

    A sixth article provided by the applicant consisted of a systematic 
review from January 1950 to August 2014 concerning all available 
powdered topical hemostatic agents.\218\ Of an initial 3,799 articles, 
105 were initially reviewed and after excluding nonendoscopic data, 
review articles, in vitro studies, and animal models 61 articles were 
ultimately included in the study. Three primary hemostatic agents were 
identified in this review, the Ankaferd Blood Stopper (ABS), Hemospray, 
and EndoClot. The applicant noted the authors of this article 
identified 131 high risk patients treated with Hemospray, of which 28 
had tumor bleeding. According to the applicant, all 28 patients 
achieved immediate hemostasis with 25 percent experiencing rebleeding 
at 7-day follow-up. The overall immediate hemostasis in this particular 
study was 91.6 percent and 7-day rebleeding 25.8 percent among high-
risk rebleeding patients.\219\
---------------------------------------------------------------------------

    \218\ Chen Y-I, Barkun A. Hemostatic powders in gastrointestinal 
bleeding, a systematic review. Gastrointest Endoscopy Clin N Am 
2015; 25: 535-552.
    \219\ Ibid.
---------------------------------------------------------------------------

    The applicant provided a seventh article which consisted of a 
journal pre-proof article detailing a 1:1 randomized control trial of 
20 patients treated with Hemospray versus the standard of care (for 
example, thermal and injection therapies) in the treatment of malignant 
gastrointestinal bleeding.\220\ The goals of this pilot study were to 
determine the feasibility of a definitive trial. The primary outcome of 
the study was immediate hemostasis (absence of bleeding after 3 
minutes) with secondary outcomes of recurrent bleeding at days 1, 3, 
30, 90, and 180 and adverse events at days 1, 30, and

[[Page 32630]]

180. The mean age of patients was 67.2, 75 percent were male, and on 
average patients presented with 2.9  1.7 comorbidities. All 
patients had active bleeding at endoscopy and the majority of patients 
had an ASA score of 2 (45%) or 3 (40%). Immediate hemostasis was 
achieved in 90 percent of Hemospray patients and 40 percent of standard 
of care patients (5 injection alone, 3 thermal, 1 injection with clips, 
and 1 unknown). Of those patients in the control group, 83.3 percent 
crossed over to the Hemospray treatment. One patient died while being 
treated with Hemospray from exsanguination; post-mortem examination 
demonstrated that bleeding was caused by rupture of a malignant 
inferior mesenteric artery aneurysm. Overall, 86.7 percent of patients 
treated with Hemospray initially or as crossover treatment achieved 
hemostasis. Recurrent bleeding was lower in the Hemospray group (20%) 
as compared to the control group (60%) at 180 days. Forty percent of 
the treated group received blood transfusions as compared to 70 percent 
of the control group. The overall length of stay was 14.6 days among 
treated patients as compared to 9.4 in the control group. Mortality at 
180 days was 80 percent in both the treated and control groups. The 
authors noted the potential for operator bias in the use of Hemospray 
prior to switching to another method when persistent bleeding exists. 
Lastly, the authors noted that while they did not occur during this 
study, there are concerns around the risks of perforation, obstruction, 
and systemic embolization with the use of Hemospray.
---------------------------------------------------------------------------

    \220\ Chen Y-I, Wyse J, Lu Y, Martel M, Barkun AN, TC-325 
hemostatic powder versus current standard of care in managing 
malignant GI bleeding: A pilot randomized clinical trial. 
Gastrointestinal Endoscopy (2019), doi: https://doi.org/10.1016/j.gie.2019.08.005.
---------------------------------------------------------------------------

    An eighth article provided by the applicant described a single-arm 
multicenter retrospective study from 2011 to 2016 involving 88 patients 
who bled as a result of either a primary GI tumor or metastases to the 
GI tract.\221\ In this study the authors define immediate hemostasis as 
no further bleeding at least one minute after treatment with Hemospray 
and recurrent bleeding was suspected if one of seven criteria were met: 
(1) Hematemesis or bloody nasogastric tube >6 hours after endoscopy; 
(2) melena after normalization of stool color; (3) hematochezia after 
normalization of stool color or melena; (4) development of tachycardia 
or hypotension after >1 hour of vital sign stability without other 
cause; (5) decrease in hemoglobin level greater than or equal to 3 
hours apart; (6) tachycardia or hypotension that does not resolve 
within 8 hours after index endoscopy; or (7) persistent decreasing 
hemoglobin of >3 g/dL in 24 hours associated with melena or 
hematochezia). The sample for this study consisted of 88 patients (with 
a mean age of 65 years old and 70.5 percent male) of which 33.3 percent 
possessed no co-morbid illness, and 25 percent were on current 
antiplatelet/anticoagulant medication. The mean BS was 8.7 plus or 
minus 3.7 with a range from 0 to 18. Overall, 72.7 percent of patients 
had a stage 4 adenocarcinoma, squamous cell carcinoma, or lymphoma. 
Immediate hemostasis was achieved in 97.7 percent of patients. 
Recurrent bleeding occurred among 13 of 86 (15%) and 1 of 53 (1.9%) at 
3 and 30 days, respectively. A total of 25 patients (28.4%) died during 
the 30-day follow up period. Overall, 27.3 percent of patients re-bled 
within 30 days after treatment of which half were within 3 days. Using 
multivariate analysis, the authors found patients with good performance 
status, no end-stage cancer, or receiving any combination of definitive 
hemostasis treatment modalities had significantly greater survival. The 
authors acknowledged the recurrent bleeding rate post Hemospray 
treatment at 30 days of 38 percent is comparable with that seen in sole 
conventional hemostatic techniques and state this implies that 
Hemospray does not differ from conventional techniques and remains 
unsatisfactory.
---------------------------------------------------------------------------

    \221\ Pittayanon R, Rerknimitr R, Barkun A. Prognostic factors 
affecting outcomes in patients with malignana GI bleeding treated 
with a novel endoscopically delivered hemostatic powder. 
Gastrointest Endosc 2018; 87:991-1002.
---------------------------------------------------------------------------

    Ultimately, the applicant concluded nonvariceal gastrointestinal 
bleeding is associated with significant morbidity and mortality in 
older patients with multiple co-morbid conditions. Inability to achieve 
hemostasis and early rebleeding are associated with increased cost and 
greater resource utilization. According to the applicant, patients with 
bleeding from malignant lesions have few options that can provide 
immediate hemostasis without further disrupting fragile mucosal tissue 
and worsening the active bleed. The applicant asserted Hemospray is an 
effective agent that provides immediate hemostasis in patients with GI 
bleeding as part of multimodality treatment, as well as when used to 
rescue patients who have failed more conventional endoscopic 
modalities. Furthermore the applicant stated that in patients with 
malignant bleeding in the GI tract, Hemospray provides a high rate of 
immediate hemostasis and fewer recurrent bleeding episodes, which in 
combination with definitive cancer treatment may lead to improvements 
in long term survival. Lastly, the applicant asserted Hemospray is an 
important new technology that permits immediate and long-term 
hemostasis in GI bleeding cases where standard of care treatment with 
clip ligation or cautery are not effective.
    We note that the majority of studies provided lack a comparator 
when assessing the effectiveness of Hemospray. Three of the articles 
provided are systematic reviews of the literature. While we find these 
articles helpful in establishing a background for the use of Hemospray, 
we are concerned that they may not provide strong evidence of 
substantial clinical improvement. Four studies appear to be single-
armed studies assessing the efficacy of Hemospray in the patient 
setting. In all of these articles, comparisons are made between 
Hemospray and standard of care treatments; however, without the ability 
to control for factors such as study design, patient characteristics, 
etc., it is difficult to determine if any differences seen result from 
Hemospray or confounding variables. Furthermore, within the 
retrospective and prospective studies lacking a control subset, some 
level of selection bias appears to potentially be introduced in that 
providers may be allowed to select the manner and order in which 
patients are treated, thereby potentially influencing outcomes seen in 
these studies.
    Additionally, one randomized control trial provided by the 
applicant appears to be in the process of peer-review and is not yet 
published. Furthermore, this article is written as a feasibility study 
for a potentially larger randomized control trial and contains a sample 
of only 20 patients. This small sample size leaves us concerned that 
the results are not representative of any larger population. Lastly, as 
described we are concerned the control group can receive one of 
multiple treatments which lack a clear designation methodology beyond 
physician choice. For instance, 50 percent of the control patients 
received injection therapy alone, which according to the literature 
provided by the applicant is not an acceptable treatment for endoscopic 
bleeding. Accordingly, it is not clear whether performance seen in the 
treated group as compared to the control group is due to Hemospray 
itself or due to confounding factors.
    Third, we are concerned with the samples chosen in many of the 
studies presented. Firstly, the Medicare population is a diverse group 
of men and women. Many of the samples provided by the applicant are 
overwhelmingly male. Secondly, many

[[Page 32631]]

of the studies provided were performed in European and other settings 
outside of the United States. We are therefore concerned that the 
samples chosen within the literature provided may not represent the 
Medicare population.
    Lastly, we are concerned about the potential for adverse events 
resulting from Hemospray. It is unclear from the literature provided by 
the applicant what the likelihood of these events is and whether or not 
an evaluation for the safety of Hemospray was performed. About one-
third of the articles submitted specifically addressed adverse events 
with Hemospray. However, the evaluation of adverse events was limited 
and most of the patients in the studies died of disease progression. A 
few of the provided articles mention the potential for severe adverse 
reactions (for example, abdominal distension, visceral perforation, 
biliary obstruction, splenic infarct). Specifically, one article \222\ 
recorded adverse events related to Hemospray, including abdominal 
distention and esophageal perforation.
---------------------------------------------------------------------------

    \222\ Rodriguez de Santiago E, Burgos-Santamaria D, Perez-Carazo 
L, et al. Hemostatic spray TC-325 for GI bleeding in a nationwide 
study: Survival analysis and predictors of failure via competing 
risks analysis. Gastrointest Endosc 2019; 90(4), 581-590.
---------------------------------------------------------------------------

    We are inviting public comments on whether Hemospray meets the 
substantial clinical improvement criterion.
    We did not receive any written comments in response to the New 
Technology Town Hall meeting notice published in the Federal Register 
regarding the substantial clinical improvement criterion for Hemospray 
or at the New Technology Town Hall meeting.
h. IMFINZI[supreg] (Durvalumab)
    AstraZeneca PLC submitted an application for new technology add-on 
payments for IMFINZI[supreg] for FY 2021. According to the applicant, 
IMFINZI[supreg] is a selective, high-affinity, human IgG1 monoclonal 
antibody (mAb) that blocks programmed death-ligand 1 (PD-L1) binding to 
programmed cell death-1 and CD80 without antibody-dependent cell-
mediated cytotoxicity.\223\ IMFINZI[supreg] has multiple indications 
but is applying for new technology add-on payments for IMFINZI[supreg] 
in combination with etoposide and either carboplatin or cisplatin for 
the first-line treatment of patients with extensive-stage small cell 
lung cancer (ES-SCLC). IMFINZI[supreg] for the first-line treatment of 
patients with ES-SCLC is not yet approved by the FDA.
---------------------------------------------------------------------------

    \223\ IMFINZI[supreg] (durvalumab) [Prescribing Information]. 
Wilmington, DE; AstraZeneca Pharmaceuticals LP, 2019.
---------------------------------------------------------------------------

    According to the applicant, the FDA initially approved 
IMFINZI[supreg] on May 1, 2017 for the indicated treatment of patients 
with locally advanced or metastatic urothelial carcinoma who have 
disease progression during or following platinum-containing 
chemotherapy or who have disease progression within 12 months of 
neoadjuvant or adjuvant treatment with platinum containing 
chemotherapy. According to the applicant, this indication received 
accelerated approval based on tumor response rate and duration of 
response. Continued approval for this indication may be contingent upon 
verification and description of clinical benefit in confirmatory 
trials.\224\
---------------------------------------------------------------------------

    \224\ Ibid.
---------------------------------------------------------------------------

    The FDA subsequently approved IMFINZI[supreg] on February 16, 2018 
for a second indication, treatment of patients with unresectable, Stage 
III non-small cell lung cancer (NSCLC) whose disease has not progressed 
following concurrent platinum-based chemotherapy and radiation therapy.
    Small cell lung cancer (SCLC) is considered a rare disease, with 
approximately 30,000 new cases diagnosed each year, compared to 200,000 
cases of NSCLC.\225\ SCLC was among the cancers identified by the 
National Cancer Institute for which to develop plans for research under 
the Recalcitrant Cancer Research Act of 2012 which supports research 
for cancers having a 5-year relative survival rate of less than 20 
percent and estimated to cause approximately 30,000 deaths per year in 
the U.S.\226\ SCLC is a rapidly progressive disease with poor prognosis 
and limited treatment options. The overall 5-year survival rate (early 
and late stage) is 6 percent, representing an ongoing significant unmet 
need.\227\ The majority (75 percent) of patients are diagnosed in the 
late/metastatic stage described as ES-SCLC and are considered 
incurable, with a median overall survival of 9-11 months with standard 
of care (SOC).228 229 The median overall survival for ES-
SCLC has remained the same for the past 20 years with essentially no 
improvements or new therapies in 20 years.\230\ According to the 
applicant, the current SOC for first line (1L) treatment of ES-SCLC is 
systemic therapy with standard doublet chemotherapy with platinum plus 
etoposide, administered for 4-6 cycles following diagnosis. Although 
ES-SCLC is highly sensitive to platinum/etoposide in the 1L setting 
with response rates of 50-60 percent, the majority of patients will 
relapse within the first year of treatment, with a median progression 
free survival (PFS) of 4-6 months.\231\ The applicant also asserts that 
overall, responses to SOC are short-lived and long-term outcomes remain 
poor.
---------------------------------------------------------------------------

    \225\ Noone, A.M., Howlader, N., Krapcho, M., Miller, D., Brest, 
A., Yu, M., Ruhl, J., Tatalovich, Z., Mariotto, A., Lewis, D.R., 
Chen, H.S., Feuer, E.J., Cronin, K.A. (eds). SEER Cancer Statistics 
Review, 1975-2015, National Cancer Institute, Bethesda, MD, https://seer.cancer.gov/csr/1975_2015/, based on November 2017 SEER data 
submission, posted to the SEER website, April 2018.
    \226\ Accessed October 16, 2018 3. National Cancer Institute. 
NCI Dictionary of Cancer Terms--small cell lung cancer; Available at 
https://www.cancer.gov/about-nci/legislative/recent-public-laws#recalcitrant-cancer-research-act-of-2012-pl-112-239-s-amdt-3180-to-s-3254hr-4310-112th-congress.
    \227\ https://www.cancer.net/cancer-types/lung-cancer-small-cell/statistics.
    \228\ Sabari, J.K., Lok, B.H., Laird, J.H., et al., 
``Unravelling the biology of SCLC: Implications for therapy,'' 
Nature Reviews Clinical Oncology, 2017, 14(9), pp. 549-561.
    \229\ Farago, A.F., Keane F.K., ``Current standards for clinical 
management of small cell lung cancer,'' Translational Lung Cancer 
Research, 2018, 7, pp. 69-79.
    \230\ Ibid.
    \231\ Hurwitz, J.L., McCoy, F., Scullin, P., et al., ``New 
advances in the second-line treatment of small cell lung cancer,'' 
Oncologist, 2009, 14(10), pp. 986-994.
---------------------------------------------------------------------------

    The applicant states that extensive stage small cell lung cancer is 
the most rapidly progressive lung cancer, with growth of metastases 
that can be extremely fast, with doubling times as low as three to four 
days observed in one patient.\232\ The applicant further states that 
diagnosis often occurs at later stages and SCLC patients may be sicker 
at the time of diagnosis, presenting with other 
comorbidities.233 234 For these reasons, the applicant 
asserts that a significant number of patients present and are diagnosed 
in the hospital inpatient setting. According to the applicant, ES-SCLC 
is very responsive to chemotherapy treatment, with response rates to 
platinum/etoposide ranging from 44 percent to 78 percent,\235\ and 
given the severity of symptoms, it is recommended to initiate treatment 
within two weeks of

[[Page 32632]]

diagnosis.\236\ According to the applicant, many patients have clinical 
response and improvement of symptoms with the initiation of platinum/
etoposide, confirming the clinical observation that many SCLCs are 
highly sensitive to platinum/etoposide in the first-line setting.\237\ 
The applicant suggests that based on the CASPIAN study design, as 
discussed further in this section, patients should receive 
IMFINZI[supreg] in combination with chemotherapy beginning in the first 
cycle. Thus, the applicant expects patients to receive a single dose of 
IMFINZI[supreg] while in the inpatient setting prior to discharge.
---------------------------------------------------------------------------

    \232\ Haque, N., Raza, A., McGoey, R., et al., ``Small cell lung 
cancer: time to diagnosis and treatment,'' Southern Medical Journal, 
2012, 105(8), pp. 418-423.
    \233\ Bennett, B.M., Wells, J.R., Panter, C., et al., ``The 
humanistic burden of small cell lung cancer (SCLC): A systematic 
review of health-related quality of life (HRQoL) literature,'' 
Frontiers in Pharmacology, 2017, 8, p. 339.
    \234\ Aarts, M.J., Aerts, J.G., van den Borne, B.E., et al., 
``Comorbidity in patients with small-cell lung cancer: trends and 
prognostic impact,'' Clinical Lung Cancer, 2015, 16(4), pp. 282-291.
    \235\ Farago, A.F., Keane, F.K, ``Current standards for clinical 
management of small cell lung cancer,'' Translational Lung Cancer 
Research, 2018, 7, pp. 69-79.
    \236\ Haque, N., Raza, A., McGoey, R., et al., ``Small cell lung 
cancer: time to diagnosis and treatment,'' Southern Medical Journal, 
2012, 105(8), pp. 418-423.
    \237\ Ibid.
---------------------------------------------------------------------------

    On November 29, 2019 the FDA accepted a supplemental Biologics 
License Application and granted Priority Review for IMFINZI[supreg] for 
the treatment of patients with previously untreated ES-SCLC. The FDA 
granted IMFINZI[supreg] orphan drug designation in ES-SCLC on July 12, 
2019.\238\ As previously noted, IMFINZI[supreg] for the first-line 
treatment of patients with ES-SCLC is not yet approved by the FDA.
---------------------------------------------------------------------------

    \238\ https://www.accessdata.fda.gov/scripts/opdlisting/oopd/detailedIndex.cfm?cfgridkey=691319.
---------------------------------------------------------------------------

    The applicant states that there are no existing ICD-10-PCS codes 
that uniquely identify the administration of IMFINZI[supreg]. The 
applicant submitted a request for a unique ICD-10-PCS administration 
code for the March 2020 ICD-10 Coordination and Maintenance Committee 
Meeting.
    As previously discussed, if a technology meets all three of the 
substantial similarity criteria, it would be considered substantially 
similar to an existing technology and, therefore, 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 asserted that IMFINZI[supreg] offers a novel mechanism of 
action for the treatment of ES-SCLC compared to the SOC chemotherapy. 
The applicant states that first line SOC treatment of ES-SCLC is 
standard chemotherapy, including a platinum agent (typically 
carboplatin or cisplatin) plus etoposide.\239\ The mechanism of action 
of platinum chemotherapy agents (including cisplatin and carboplatin) 
is based on the agent's ability to crosslink with the purine bases on 
the DNA; interfering with DNA repair mechanisms, causing DNA damage, 
and subsequently inducing apoptosis in cancer cells.240 241
---------------------------------------------------------------------------

    \239\ Farago, A.F., Keane, F.K., ``Current standards for 
clinical management of small cell lung cancer,'' Translational Lung 
Cancer Research, 2018, 7, pp. 69-79.
    \240\ Dasari, S., Tchounwou, P.B., ``Cisplatin in cancer 
therapy: Molecular mechanisms of action,'' European Journal of 
Pharmacology, 2014, 740, pp. 364-378.
    \241\ Thirumaran R, Prendergast GC, Gilman PB, ``Cytotoxic 
chemotherapy in clinical treatment of cancer,'' In: Prendergast, 
G.C., Jaffee, E.M., editors, Cancer Immunotherapy: Immune 
Suppression and Tumor Growth, USA: Elsevier Inc, 2007, pp. 101-116, 
http://dx.doi.org/10.1016/B978-012372551-6/50071-7.
---------------------------------------------------------------------------

    The applicant asserts that etoposide phosphate is a plant alkaloid 
prodrug that is converted to its active moiety, etoposide, by 
dephosphorylation. Further, the applicant explains etoposide causes the 
induction of DNA strand breaks by an interaction with DNA-topoisomerase 
II or the formation of free radicals, leading to cell cycle arrest, 
primarily at the G2 stage of the cell cycle, and cell 
death.242 243
---------------------------------------------------------------------------

    \242\ Ibid.
    \243\ Etopophos[supreg] (etoposide phosphate) [Prescribing 
Information]. Princeton, NJ; Bristol-Myers Squibb, 2019.
---------------------------------------------------------------------------

    The applicant states IMFINZI[supreg] is a selective, high-affinity, 
human IgG1[kappa] monoclonal antibody that blocks PD-L1 binding to 
programmed cell death-1 and CD80 without antibody-dependent cell-
mediated cytotoxicity.\244\ The applicant asserts that IMFINZI[supreg], 
in combination with chemotherapy, demonstrated a statistically and 
clinically significant improvement in overall survival in a randomized 
Phase III study (CASPIAN), which is discussed later in this 
section.\245\
---------------------------------------------------------------------------

    \244\ Pas-Ares, L., Jiang, H., Huang, Y., et al., A Phase III 
Randomized Study of First-Line DurvalumabTremelumimab+Platinum-based Chemotherapy (EP) vs. EP Alone in 
Extensive-Stage Disease Small Cell Lung Cancer (ED-SCLC):CASPIAN 
[Poster]. Presented at: the ASCO annual meeting, Chicago, IL June 2-
6, 2017.
    \245\ Paz-Ares, L., Chen, Y., Reinmuth, N., et al., Overall 
Survival with Durvalumab Plus Platinum-Etoposide in First-Line 
Extensive-Stage SCLC: Results from the CASPIAN Study [presentation], 
Presented at: World Conference on Lung Cancer, Barcelona, Spain, 
September 7-10, 2019.
---------------------------------------------------------------------------

    With respect to the second criterion, whether a product is assigned 
to the same or a different MS-DRG, the applicant asserted that 
extensive stage small cell lung cancer patients are identified under 
category C34 (Malignant neoplasm of bronchus and lung) of the ICD-10-CM 
coding classification system. According to the applicant, category C34 
is all encompassing and does not distinguish between the lung cancer 
subtypes. The applicant also states that both non-small cell lung 
cancer patients as well as earlier stages of small cell lung cancer 
(that is, limited stage) are captured under category C34, all of which 
have differing epidemiological considerations and treatment 
interventions. The applicant concluded that patients diagnosed with ES-
SCLC, identified using category C34, map to MS-DRGs 180, 181, and 182 
(Respiratory Neoplasms with MCC, with CC, and without CC/MCC, 
respectively). The applicant stated that the existing ICD-10-PCS coding 
system does not allow for visibility into the different MS-DRGs that 
ES-SCLC patients map to versus NSCLC patients, making it difficult to 
show that ES-SCLC patients receiving IMFINZI[supreg] would map to a 
unique MS-DRG from NSCLC cases, where IMFINZI[supreg] and other immuno-
oncology therapies are already being used.
    To further identify the patient population of interest, the 
applicant pulled charge level data from the Premier Hospital Database 
to determine which MS-DRGs these cases are mapping to, beyond relying 
on the broad lung cancer category C34. The applicant asserts that the 
Premier Hospital database is a large U.S. hospital-based, all payer 
database that contains discharge information from geographically 
diverse non-governmental, community, and teaching hospitals and health 
systems across both rural and urban areas. The applicant stated that 
this database contains data from standard hospital discharge files 
providing access to all procedures, diagnoses, drugs, and devices 
received for each patient regardless of the insurance or disease state. 
The applicant used charge level hospital data from the Premier Hospital 
Database to identify cases that used category C34 as well as 
carboplatin or cisplatin plus etoposide, the chemotherapy doublet 
specifically used for ES-SCLC patients. The applicant also looked for 
the use of prophylactic cranial irradiation (PCI), a type of radiation 
therapy used for ES-SCLC patients to address the frequent occurrence of 
multiple brain metastases associated with SCLC. Based on this 
assessment of hospital charge-level data, the applicant stated that 
over 60 percent of ES-SCLC patients map to MS-DRGs 180 (Respiratory 
Neoplasms with MCC), 181 (Respiratory Neoplasms with CC), and 164 
(Major Chest Procedures with CC). We agree with the applicant that 
patients receiving IMFINZI[supreg] would map to the same DRGs as 
patients receiving standard therapy for ES-SCLC.
    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 when compared to an 
existing technology, the

[[Page 32633]]

applicant stated that IMFINZI[supreg], in combination with standard 
chemotherapy, represents a new treatment option for patients with 
extensive stage small cell lung cancer, demonstrating statistically and 
clinically significant improved overall survival as compared to 
standard chemotherapy (Hazard ration [HR] 0.73; 95 percent CI 0.59-
0.91; p=0.0047).\246\
---------------------------------------------------------------------------

    \246\ Paz-Ares, L., Dvorkin, M., Chen, Y., et al., ``Durvalumab 
plus platinum-etoposide versus platinum-etoposide in first-line 
treatment of extensive-stage small-cell lung cancer (CASPIAN): a 
randomized, controlled, open-label, phase 3 trial [article and 
supplementary appendix],'' Lancet, 2019.
---------------------------------------------------------------------------

    The applicant asserts that, if approved, IMFINZI[supreg] in 
combination with chemotherapy would represent a new treatment option 
for ES-SCLC patients.
    According to the applicant, SCLC differs significantly from NSCLC, 
in both its prevalence and prognosis. The applicant states that SCLC 
represents only 10-15 percent of all lung cancers, with approximately 
30,000 new cases each year in the US. In contrast, the applicant states 
that NSCLC represents 84 percent of all lung cancers, with 
approximately 200,000 new cases each year.\247\ The applicant states 
SCLC has an extremely poor prognosis, as noted previously, with an 
overall 5-year survival rate of 6 percent, and that ES-SCLC represents 
the overwhelming majority of SCLC cases at diagnosis, approximately 75 
percent, with a 5-year survival rate closer to 3 
percent.248 249 The applicant also describes treatment 
options as limited for ES-SCLC, as compared to patients with NSCLC. The 
applicant also states that many recent studies of the treatment of 
NSCLC have demonstrated positive outcomes with a variety of agents, 
including with combination treatments that the applicant describes as 
having different mechanisms of action.\250\
---------------------------------------------------------------------------

    \247\ Farago, A.F. et al., ``Current standards for clinical 
management of small cell lung cancer,'' Translational Lung Cancer 
Research, 2018, 7(1), pp. 69-79.
    \248\ Ibid.
    \249\ Thirumaran, R., Prendergast, G.C., Gilman, P.B., 
``Cytotoxic chemotherapy in clinical treatment of cancer,'' In: 
Prendergast, G.C., Jaffee, E.M., editors, Cancer immunotherapy: 
immune suppression and tumor growth, USA: Elsevier Inc, 2007, p. 
101-116, http://dx.doi.org/10.1016/B978-012372551-6/50071-7.
    \250\ Yang, S., Zhang, Z., Wang, Q., ``Emerging therapies for 
small cell lung cancer,'' Journal of Hematology & Oncology, 2019, 
12(1), p. 47.
---------------------------------------------------------------------------

    We note that we received an application for new technology add-on 
payments for FY 2021 for TECENTRIQ[supreg], which received FDA approval 
on March 18, 2019 and is indicated, in combination with carboplatin and 
etoposide, for the first-line treatment of adult patients with ES-SCLC. 
Both IMFINZI[supreg] and TECENTRIQ[supreg] seem to be intended for 
similar patient populations and would involve the treatment of the same 
conditions; patients with locally advanced or metastatic urothelial 
carcinoma and patients with SCLC. We are interested in information on 
how these two technologies may differ from each other with respect to 
the substantial similarity criteria and newness criterion, to inform 
our analysis of whether IMFINZI[supreg] and TECENTRIQ[supreg] are 
substantially similar to each other and therefore should be considered 
as a single application for purposes of new technology add-on payments.
    We are inviting public comments on whether IMFINZI[supreg] is 
substantially similar to an existing technology and whether it meets 
the newness criterion.
    With respect to the cost criterion, the applicant conducted the 
following analysis to demonstrate that IMFINZI[supreg] meets the cost 
criterion. To identify cases that may be eligible for the use of 
IMFINZI[supreg], the applicant searched the FY 2018 MedPAR LDS file for 
claims reporting an ICD-10-CM code of category C34 in combination with 
Z51.11 (Encounter for antineoplastic chemotherapy) or Z51.12 (Encounter 
for antineoplastic immunotherapy). The applicant also included any 
cases within MS-DRGs 180, 181, 182 with an ICD-10-CM diagnosis code 
from category C34 as the applicant believes hospitals may not always 
capture the encounter for chemotherapy. Based on the FY 2018 MedPAR LDS 
file, the applicant identified a total of 24,193 cases. Of the MS-DRGs 
with more than 11 cases, the applicant found 23,933 cases which were 
mapped to 12 unique MS-DRGs. The applicant excluded MS-DRGs with case 
volume less than 11 total cases.
    Using these 23,933 cases, the applicant then calculated the 
unstandardized average charges per case for each MS-DRG. The applicant 
determined that it did not need to remove any charges as 
IMFINZI[supreg] is not expected to offset historical charges already 
included within the MS-DRGs. The applicant expects that ES-SCLC 
patients will receive their initial dose of IMFINZI[supreg] in the 
inpatient setting. The applicant then standardized the charges and 
inflated the charges by 1.11100 or 11.10 percent, the same inflation 
factor used by CMS to update the outlier threshold in the FY 2020 IPPS/
LTCH PPS final rule (84 FR 42629). The applicant then added the charges 
for IMFINZI[supreg] by converting the costs to a charge by dividing the 
cost by the national average cost-to-charge ratio of 0.189 for drugs 
from the FY 2020 IPPS/LTCH PPS final rule (84 FR 42179).
    Based on the FY 2020 IPPS/LTCH PPS final rule correction notice 
data file thresholds, the average case-weighted threshold amount was 
$53,209. In the applicant's analysis, the final inflated average case-
weighted standardized charge per case was $111,093. Because the final 
inflated average case-weighted standardized charge per case exceeds the 
average case-weighted threshold amount, the applicant maintained that 
the technology meets the cost criterion.
    As noted previously, we received an application for new technology 
add-on payments for FY 2021 for TECENTRIQ[supreg]. Both IMFINZI[supreg] 
and TECENTRIQ[supreg] seem to be intended for similar patients. The 
ICD-10-CM diagnosis codes and MS-DRGs in the cost analysis for 
IMFINZI[supreg] differ from those used in the cost analysis for 
TECENTRIQ[supreg]. Specifically, as noted previously, the applicant for 
IMFINZI[supreg] searched for category C34 in combination with Z51.11 or 
Z51.12, while the applicant for TECENTRIQ[supreg] only searched for 
claims with category C34. We are concerned as to why the diagnosis 
codes would differ between the cost analysis for IMFINZI[supreg] and 
for TECENTRIQ[supreg] as one analysis may lend more accuracy to the 
calculation depending which is more reflective of the applicable 
patient population. We are inviting public comment on whether 
IMFINZI[supreg] meets the cost criterion.
    With respect to the substantial clinical improvement criterion, the 
applicant asserts that IMFINZI[supreg] represents a substantial 
clinical improvement over existing technologies because it offers a 
treatment option for a patient population unresponsive to currently 
available treatments. The applicant also believes that it represents a 
substantial clinical improvement because the applicant states that the 
technology reduces mortality, decreases disease progression, and 
improves quality of life.
    The CASPIAN clinical trial is a randomized, open-label, phase 3 
trial at 209 sites across 23 countries. Eligible patients were adults 
with untreated ES-SCLC, with World Health Organization (WHO) 
performance status 0 or 1 and measurable disease as per Response 
Evaluation Criteria in Solid Tumors. Patients were randomly assigned 
(in a 1:1:1 ratio) to durvalumab plus platinum-etoposide; durvalumab 
plus tremelimumab plus platinum-etoposide; or platinum-etoposide alone. 
All drugs were administered intravenously. Platinum-etoposide consisted 
of etoposide 80-100 mg/m2 on days 1-3 of each cycle with investigator's 
choice of either

[[Page 32634]]

carboplatin area under the curve 5-6 mg/mL per min or cisplatin 75-80 
mg/m2 (administered on day 1 of each cycle). Patients received up to 
four cycles of platinum-etoposide plus durvalumab 1500 mg with or 
without tremelimumab 75 mg every 3 weeks followed by maintenance 
durvalumab 1500 mg every 4 weeks in the immunotherapy groups and up to 
6 cycles of platinum-etoposide every 3 weeks plus prophylactic cranial 
irradiation (investigator's discretion) in the platinum-etoposide 
group. The primary endpoint was overall survival in the intention-to-
treat population. This study is registered at ClinicalTrials.gov, 
NCT03043872, and is ongoing. The applicant stated that the median OS 
was 13.0 months (95 percent CI, 11.5-14.8) for patients treated with 
IMFINZI[supreg] plus chemotherapy vs. 10.3 months (95 percent CI, 9.3-
11.2) for SOC chemotherapy. It stated that the results also showed a 
sustained OS benefit with 34 percent survival at 18 months following 
treatment with IMFINZI[supreg] plus chemotherapy vs. 25 percent 
following SOC chemotherapy. No data was provided on patients treated 
with durvalumab plus tremelimumab plus platinum-etoposide as this was 
an interim analysis.\251\
---------------------------------------------------------------------------

    \251\ Paz-Ares, L., Dvorkin, M., Chen, Y., et al., ``Durvalumab 
plus platinum-etoposide versus platinum-etoposide in first-line 
treatment of extensive-stage small-cell lung cancer (CASPIAN): A 
randomized, controlled, open-label, phase 3 trial,'' Lancet, 2019, 
https://www.thelancet.com/journals/lancet/article/PIIS0140-6736(19)32222-6/fulltext. Accessed October 7, 2019.
---------------------------------------------------------------------------

    The applicant further states that other key secondary endpoints 
demonstrated consistent and durable improvement for IMFINZI[supreg] 
plus chemotherapy, including a higher progression-free survival (PFS) 
rate at 12 months (17.5 percent vs. 4.7 percent), a 10 percent increase 
in confirmed objective response rate (ORR) (67.9 percent vs. 57.6 
percent), and improved duration of response at 12 months (22.7 percent 
vs. 6.3 percent). The median Progression Free Survival was 5.1 months 
with IMFINZI[supreg] versus 5.4 months for the control arm, which was 
not significantly different.
    The applicant states that in combination with etoposide and 
platinum-based chemotherapy, IMFINZI[supreg] provided a significant 
improvement in survival and notable changes in patient reported 
outcomes. According to the applicant, patients receiving 
IMFINZI[supreg] plus etoposide and platinum-based chemotherapy 
experienced reduced symptom burden over 12 months for pre-specified 
symptoms of fatigue, appetite loss, cough, dyspnea, and chest pain 
(based on adjusted mean change from baseline, MMRM). The applicant 
states a large difference over 12 months was observed for appetite loss 
in favor of IMFINZI[supreg] plus etoposide and platinum-based 
chemotherapy compared to standard-of-care etoposide and platinum-based 
chemotherapy. The applicant further states that patients receiving 
IMFINZI[supreg] plus etoposide and platinum-based chemotherapy also 
experienced longer time to deterioration in a broad range of patient-
reported symptoms (for example, dyspnea, appetite loss, chest pain, 
arm/shoulder pain, other pain, insomnia, constipation, diarrhea), 
functioning (physical, cognitive, role, emotional, social), and Health 
Related Quality of Life (HRQoL) indicators, compared to cisplatin 
(EP).252 253 254 255
---------------------------------------------------------------------------

    \252\ AstraZeneca Press Release, September 9, 2019, Available 
at: https://www.astrazeneca-us.com/content/az-us/media/press-releases/2019/imfinzi-is-first-immunotherapy-to-show-both-significant-survival-benefit-and-improved-durable-responses-in-extensive-stage-small-cell-lung-cancer-09092019.html.
    \253\ Paz-Ares, L., Chen, Y., Reinmuth, N., et al., Overall 
Survival with Durvalumab Plus Platinum-Etoposide in First-Line 
Extensive-Stage SCLC: Results from the CASPIAN Study [presentation], 
Presented at: World Conference on Lung Cancer, Barcelona, Spain, 
September 7-10, 2019.
    \254\ Paz-Ares, L., Dvorkin, M., Chen, Y., et al., ``Durvalumab 
plus platinum-etoposide versus platinum-etoposide in first-line 
treatment of extensive-stage small-cell lung cancer (CASPIAN): a 
randomized, controlled, open-label, phase 3 trial,'' Lancet. 2019, 
https://www.thelancet.com/journals/lancet/article/PIIS0140-6736(19)32222-6/fulltext. Accessed October 7, 2019.
    \255\ Paz-Ares, L., Goldman, J.W., Garassino, M.C., et al., PD-
L1 expression, patterns of progression and patient-reported outcomes 
(PROs) with durvalumab plus platinum-etoposide in ES-SCLC: Results 
from CASPIAN [presentation], Presented at European Society for 
Medical Oncology; Barcelona, Spain, September 27-October 1, 2019.
---------------------------------------------------------------------------

    As stated previously, the applicant asserted that IMFINZI[supreg] 
represents a substantial clinical improvement over existing 
technologies because it offers a treatment option for a patient 
population unresponsive to currently available treatments. The 
applicant explained that the CASPIAN study demonstrated the following 
endpoints: patient population baseline characteristics, treatment 
exposure, overall survival (including pre-specified subgroups), 
progression free survival, sites of progression, objective response 
rate, duration of response, and detailed safety analysis. All results 
provided comparison of the active IMFINZI[supreg] plus chemotherapy arm 
as compared to the standard of care chemotherapy alone arm.\256\ We are 
concerned that the CASPIAN study is ongoing and the information is 
preliminary. Specifically, the three arms in the study have not yet 
been analyzed. Additionally, while the data shows a median survival 
benefit of about 3 months with treatment with IMFINZI[supreg], we did 
not see any data that demonstrates significant improvement in median 
progression free survival. Also, while we recognize that the trials are 
ongoing and that the analysis of the three study arms is not complete, 
we are interested in additional information concerning adverse events 
to help us better understand the safety profile of IMFINZI[supreg].
---------------------------------------------------------------------------

    \256\ Paz-Ares, L., Dvorkin, M., Chen, Y., et al., ``Durvalumab 
plus platinum-etoposide versus platinum-etoposide in first-line 
treatment of extensive-stage small-cell lung cancer (CASPIAN): A 
randomized, controlled, open-label, phase 3 trial [article and 
supplementary appendix],'' Lancet, 2019.
---------------------------------------------------------------------------

    We are inviting public comment on whether IMFINZI[supreg] meets the 
substantial clinical improvement criterion.
    We did not receive any written comments in response to the New 
Technology Town Hall meeting notice published in the Federal Register 
regarding the substantial clinical improvement criterion for 
IMFINZI[supreg] or at the New Technology Town Hall meeting.
i. KTE-X19
    Kite Pharma submitted an application for new technology add-on 
payment for FY 2021 for KTE-X19. KTE-X19 is a CD19 directed genetically 
modified autologous T-cell immunotherapy for the treatment of adult 
patients with relapse and refractory (r/r) mantle cell lymphoma (MCL).
    KTE-X19 is a form of chimeric antigen receptor (CAR) T-cell 
immunotherapy that modifies the patient's own T-cells to target and 
eliminate tumor cells. More specifically, according to the applicant, 
KTE-X19 is a single infusion product consisting of autologous T-cells 
that have been engineered to express an anti-CD19 chimeric antigen 
receptor. According to the applicant, this therapy targets the CD19 
antigen on the cell surface of normal and malignant B-cells. The 
applicant stated that KTE-X19 is different from other previously 
approved technologies because it has a distinct cellular product that 
requires a unique manufacturing process. The applicant explained that 
KTE-X19's unique manufacturing process, as compared to 
YESCARTA[supreg], results in differences in potency, cellular 
impurities, and formulation of the final products.
    According to the applicant, MCL is a rare and aggressive subtype of 
non-Hodgkin lymphoma (NHL) with distinct

[[Page 32635]]

characteristics 257 258 that accounts for 3-6% of all cases 
of NHL in the United States and differs from diffuse large B-cell 
lymphoma (another subtype of NHL).259 260 261 The applicant 
cited that the overall incidence of MCL in the U.S. in 2018 was 3,500 
with 5-year and 10-year prevalence of 12,000 and 18,000 cases.\262\ 
Additionally, the applicant stated that the median age at diagnosis for 
patients with MCL is 68 years and the majority of patients are non-
Hispanic white males.\263\ MCL results from a malignant transformation 
of the B lymphocyle in the outer edge of a lymph node follicle (the 
mantle zone). Prognosis varies for r/r MCL, but the median survival for 
MCL is 3-5 years depending on the risk group (the Mantle Cell Lymphoma 
International Prognostic Index categorizes patients into low, 
intermediate and high risk groups), according to the applicant.\264\ 
The first line therapy for newly diagnosed MCL routinely includes 
chemotherapy in combination with 
rituximab.265 266 267 268 269 According to the applicant, 
rituximab is also the only approved therapy for maintenance for 
patients in remission. The median progression free survival ranges from 
18-51 months with most of MCL patients eventually relapsing. The 
applicant contended that only 30-40% of patients end up with durable 
long-term remission after a chemoimmunotherapy first line 
therapy.270 271 272
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    \257\ Fakhri B, Kahl B. Current and emerging treatment options 
for mantle cell lymphoma. Ther Adv Hematol. 2017;8(8):223-34.
    \258\ National Comprehensive Cancer Network. Clinical Practice 
Guidelines in Oncology; B-cell Lymphomas, Version 1.2019 [November 
30, 2018]. 2017 Available from: https://www.nccn.org/professionals/physician_gls/pdf/b-cell.pdf.
    \259\ The Non-Hodgkin's Lymphoma Classification Project. A 
clinical evaluation of the International Lymphoma Study Group 
classification of non-Hodgkin's lymphoma. Blood. 1997;89(11):3909-
3918.
    \260\ Zhou Y, et al. Incidence trends of mantle cell lymphoma in 
the United States between 1992 and 2004. Cancer. 2008;113(4):791-
798.
    \261\ Teras LR, et al. 2016 US lymphoid malignancy statistics by 
World Health Organization subtypes CA Cancer J Clin. 2016;6:443-459.
    \262\ Kantar Health. CancerMPact[supreg] United States. 
September 2018, v1.2.
    \263\ Fu S, et al. Trends and variations in mantle cell lymphoma 
incidence from 1995 to 2013: A comparative study between Texas and 
National SEER areas. Oncotarget. 2017;8(68):112516-29.
    \264\ Cheah CY, et al. Mantle cell lymphoma. J Clin Oncol. 
2016;34:1256-1269.
    \265\ Ibid.
    \266\ Kantar Health. CancerMPact[supreg] United States. 
September 2018, v1.2.
    \267\ Flinn IW, et al. First-line treatment of patients with 
indolent non-Hodgkin lymphoma or mantle-cell lymphoma with 
bendamustine plus rituximab versus R-CHOP or R-CVP: Results of the 
BRIGHT 5-year follow-up study. J Clin Oncol. 2019 Apr 20;37(12):984-
991. doi: 10.1200/JCO.18.00605. Epub 2019 Feb 27.
    \268\ LaCasce AS, et al. Comparative outcome of initial therapy 
for younger patients with mantle cell lymphoma: An analysis from the 
NCCN NHL Database. Blood. 2012;19(9):2093-2099.
    \269\ Lenz G, et al. Immunochemotherapy with rituximab and 
cyclophosphamide, doxorubicin, vincristine, and prednisone 
significantly improves response and time to treatment failure, but 
not long-term outcome in patients with previously untreated mantle 
cell lymphoma: Results of a prospective randomized trial of the 
German Low Grade Lymphoma Study Group (GLSG). J Clin Oncol. 
2005:23(9): 1984-1992.
    \270\ Flinn IW, et al. First-line treatment of patients with 
indolent non-Hodgkin lymphoma or mantle-cell lymphoma with 
bendamustine plus rituximab versus R-CHOP or R-CVP: Results of the 
BRIGHT 5-year follow-up study. J Clin Oncol. 2019 Apr 20;37(12):984-
991. doi: 10.1200/JCO.18.00605. Epub 2019 Feb 27.
    \271\ LaCasce AS, et al. Comparative outcome of initial therapy 
for younger patients with mantle cell lymphoma: An analysis from the 
NCCN NHL Database. Blood. 2012;19(9):2093-2099.
    \272\ Lenz G, et al. Immunochemotherapy with rituximab and 
cyclophosphamide, doxorubicin, vincristine, and prednisone 
significantly improves response and time to treatment failure, but 
not long-term outcome in patients with previously untreated mantle 
cell lymphoma: Results of a prospective randomized trial of the 
German Low Grade Lymphoma Study Group (GLSG). J Clin Oncol. 
2005:23(9): 1984-1992.
---------------------------------------------------------------------------

    The applicant indicated that there is no standard of care that 
exists for second-line and higher chemotherapy when a patient has 
relapsed or refractory MCL.\273\ According to the applicant, second 
line therapies typically depend on the front line therapy utilized, 
comorbidities, the tumor's sensitivity to chemotherapy, and overall 
risk-benefit. Currently available options for second line therapy 
include: Cytotoxic chemotherapy, proteasome inhibitors, 
immunomodulatory drugs, tyrosine kinase inhibitors, and stem cell 
transplant (both autologous [ASCT] and allogenic stem cell transplant 
[allo-SCT]). According to the applicant, Bruton's tyrosine kinase (BTK) 
inhibitor, ibrutinib, is the most common third-line therapy used for 
patients with r/r MCL and has been shown to offer improvements over 
other chemotherapy-based regimens for r/r MCL patients. The applicant 
also referenced a more selective BTK inhibitor, acalabrutinib, which 
was approved in the US for the treatment of patients with r/r 
MCL.274 275
---------------------------------------------------------------------------

    \273\ Campo E, Rule S. Mantle cell lymphoma: evolving management 
strategies. Blood. 2015;125(1):48-55.
    \274\ Kantar Health. CancerMPact[supreg] United States. 
September 2018, v1.2.
    \275\ Vose JM. Mantle cell lymphoma: 2017 update on diagnosis, 
risk-stratification, and clinical management. Am J Hematol. 
2017;92(8):806-813.
---------------------------------------------------------------------------

    With respect to the newness criterion, the applicant indicated that 
it submitted a biologics license application (BLA) for KTE-X19 on 
December 11, 2019 with a request for priority review. The applicant 
reported it anticipates receiving FDA approval by July 1, 2020. 
According to the applicant, KTE-X19 was granted breakthrough therapy 
designation for the treatment of patients with r/r MCL on June 15, 2018 
and received an orphan drug designation in 2016 for the treatment of 
MCL, acute lymphoblastic leukemia and chronic lymphocytic leukemia. 
Under the current coding system, cases reporting the use of KTE-X19 
would be coded with ICD-10-PCS 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 are currently assigned to MS-DRG 016 
(Autologous Bone Marrow Transplant with CC/MCC or T-Cell 
Immunotherapy). As discussed in section II.D.2.b. of the preamble of 
this proposed rule, we are proposing to assign cases reporting ICD-10-
PCS procedure codes XW033C3 or XW043C3 to a proposed new MS-DRG 018 
(Chimeric Antigen Receptor (CAR) T-cell Immunotherapy), which would 
also include cases reporting the use of KTE-X19, if approved and 
finalized. While we note that the applicant has submitted a request for 
a unique ICD-10-PCS code to describe the use of KTE-X19 beginning in FY 
2021, the MS-DRG assignment of any applicable finalized codes 
describing the use of KTE-X19 will be addressed in the final rule.
    As previously discussed, 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 for substantial similarity, 
whether a product uses the same or similar mechanism of action to 
achieve a therapeutic outcome, according to the applicant, KTE-X19 will 
be the first CAR T-cell immunotherapy indicated for the treatment of r/
r MCL, if approved by FDA. The applicant further asserted that it does 
not use a substantially similar mechanism of action or involve the same 
treatment indication as any other existing therapy for the treatment of 
r/r MCL. The applicant asserts that it uses a different mechanism of 
action as other therapies because the unique manufacturing process 
results in differences in potency, cellular impurities, and formulation 
of the final

[[Page 32636]]

products. Furthermore, the applicant stated that functional autologous 
cellular therapy for the treatment of r/r MCL requires a customized 
product distinct from other currently available CAR T-cell therapy 
products, namely YESCARTA[supreg] and KYMRIAH[supreg]. The applicant 
stated it reviewed data from the FY 2018 100 percent MedPAR Hospital 
Limited Data Set to obtain a reference of currently available products 
used in the treatment of r/r MCL. The applicant stated that based on 
this analysis, available products used in the treatment of r/r MCL 
included: Chemotherapies, proteasome inhibitors, immunomodulatory 
agents, or BTK inhibitors. The applicant described KTE-X19 as an 
autologous CAR T-cell immunotherapy, which genetically modifies the 
patient's own T-cells to target and eliminate tumor cells for the 
treatment of r/r MCL and asserted that because KTE-X19 is an autologous 
CAR T-cell immunotherapy, it does not use the same mechanism of action 
as other treatments currently used to treat r/r MCL (chemotherapies, 
proteasome inhibitors, immunomodulatory agents, or BTK inhibitors).
    To further note the differences between KTE-X19's mechanism of 
action and other available therapies for r/r MCL, the applicant stated 
that KTE-X19 represents a unique product that is customized for B-cell 
malignancies bearing high levels of circulating CD19-expressing tumor 
cells. Given these genetic modifications and differences, as previously 
described, the applicant described KTE-X19 as having a different 
mechanism of action from existing r/r MCL therapies.
    The applicant described that the KTE-X19 construct encodes for the 
following domains of the CAR: An anti-human CD19 single-chain variable 
region fragment (scFv); the partial extracellular domain and complete 
transmembrane and intracellular signaling domains of human CD28, a 
lymphocyte co-stimulatory receptor that plays an important role in 
optimizing T-cell survival and function; and the cytoplasmic portion, 
including the signaling domain, of human CD3[zeta], a component of the 
T-cell receptor complex.\276\ The applicant referenced an April 2018 
pre-BLA meeting with FDA, where the applicant contended that FDA 
determined that KTE-X19 qualified for a new BLA based on differences in 
the manufacturing process between KTE-X19 and YESCARTA[supreg], which 
result in differences in potency, cellular impurities, and formation of 
the final products. The applicant further referenced that KTE-X19 has a 
different mechanism of action as compared to YESCARTA[supreg] given 
that the European Medicines Agency (EMA) deemed KTE-X19 and 
YESCARTA[supreg] as different products.
---------------------------------------------------------------------------

    \276\ Nicholson IC, et al. Construction and characterisation of 
a functional CD19 specific single chain Fv fragment for 
immunotherapy of B lineage leukemia and lymphoma. Molecular 
Immunology. 1997;34(16-17):1157-65.
---------------------------------------------------------------------------

    With respect to the second criterion for substantial similarity, 
whether a product is assigned to the same or a different MS-DRG, the 
applicant noted that CMS previously stated future CAR T-cell therapies 
would likely map to the same MS-DRG as other previously FDA-approved 
CAR T-cell therapies. However, the applicant asserted that KTE-X19 
could not be reported using the same ICD-10-PCS codes as identified for 
YESCARTA[supreg] and KYMRIAH[supreg]. As previously noted, under the 
current coding system, cases reporting the use of KTE-X19 would be 
coded with ICD-10-PCS codes XW033C3 and XW043C3, which are currently 
assigned to MS-DRG 016, and which, for FY 2021, we are proposing to 
reassign to a new proposed MS-DRG 018 for CART-cell therapies. As also 
previously noted, the MS-DRG assignment of any applicable finalized 
codes describing the use of KTE-X19 will be addressed in the final 
rule. The applicant noted that the patients treated by YESCARTA[supreg] 
and KYMRIAH[supreg] are not assigned ICD-10-CM diagnosis code C83.10 
(Mantle cell lymphoma, unspecified site), as would patients treated 
with KTE-X19. To further emphasize this point, the applicant stated 
that CMS indicated YESCARTA[supreg] and KYMRIAH[supreg] are intended to 
treat the same or similar disease: 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 lymphoma, 
high grade B-cell lymphoma, and DLBCL arising from follicular lymphoma. 
The applicant further noted that the patients treated with 
YESCARTA[supreg] and KYMRIAH[supreg] are not identified by ICD-10-CM 
code C83.10 (Mantle cell lymphoma, unspecified site).
    With respect to the third criterion for substantial similarity, 
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 described KTE-X19 as representing a therapy 
for a different type of disease, r/r MCL, as compared to 
YESCARTA[supreg] and KYMRIAH[supreg]. As previously mentioned, the 
applicant described that MCL results from a malignant transformation of 
a B lymphocyte in the outer edge of the lymph node follicle. The 
applicant further stated that diffuse large b-cell lymphoma (DLBCL), 
which YESCARTA[supreg] and KYMRIAH[supreg] treat, is defined as a 
neoplasm of large B cells arranged in a diffuse pattern. The applicant 
described this distinction as evidence that KTE-X19 treats a different 
subtype of NHL, r/r MCL, as compared to other FDA approved CAR T-cell 
therapies. However, we note that the applicant recognized in its 
application that MCL and DLBCL patients share similar clinical 
presentation of lymphadenopathy, splenomegaly and constitutional 
symptoms. The applicant also noted that the disease courses for MCL and 
DLBCL are different given that MCL has a unique molecular pathogenesis. 
The applicant also highlighted the high level of tumor cells in the 
peripheral blood, which is uncommon in DLBCL, to further illustrate 
that the two diseases are different, and asserted that this level of 
tumor cells requires a different and customizable treatment approach 
for the generation of autologous cellular therapies for MCL.
    We have the following concerns regarding whether the technology 
meets the substantial similarity criteria and whether it should be 
considered new.
    With respect to the first criterion for substantial similarity, 
based on the statements as previously summarized, the applicant 
asserted that KTE-X19 would provide a new treatment option for adult 
patients with r/r MCL and therefore is not substantially similar to any 
existing technologies. We note that for FY 2019 (83 FR 41299), CMS 
approved two CD19 directed CAR T-cell therapies, YESCARTA[supreg] and 
KYMRIAH[supreg], for new technology add-on payments. While the 
applicant acknowledged that KTE-X19 is a form of CAR T-cell 
immunotherapy that modifies the patient's own T-cells, as are 
YESCARTA[supreg] and KYMRIAH[supreg], the applicant asserted that the 
production process used by KTE-X19, as required by the disease 
indication, makes the therapy significantly different from 
YESCARTA[supreg] and KYMRIAH[supreg]. However, while the applicant 
stated how its technology is different from previously approved CAR T-
cell therapies, KTE-X19 is also a CD19-directed T-cell immunotherapy 
for the purpose of treating patients with an aggressive subtype of NHL. 
Therefore, we express a potential concern that KTE-X19 has a similar 
mechanism of action to YESCARTA[supreg] and KYMRIAH[supreg].
    The applicant stated that KTE-X19 is a distinct cellular product 
and has a unique manufacturing process

[[Page 32637]]

customized for B-cell malignancies with a high circulating tumor cell 
burden and designed to minimize the CD19-expressing tumor cells in the 
final product. We are concerned as to whether the differences the 
applicant described in the manufacturing process should be considered a 
different mechanism of action, as compared to previous CAR T-cell 
therapies.
    With respect to the second criterion for substantial similarity, we 
note that as discussed in section II.D.2.b. of the preamble of this 
proposed rule, we are proposing to create new MS-DRG 018 for CAR T-cell 
therapies. As previously noted, under the current coding system, cases 
reporting the use of KTE-X19 would be coded with ICD-10-PCS codes 
XW033C3 and XW043C3, which are currently assigned to MS-DRG 016. Also 
as discussed in section II.D.2.b. of the preamble of this proposed 
rule, we are proposing to assign cases reporting ICD-10-PCS procedure 
codes XW033C3 or XW043C3 to a proposed new MS-DRG 018 (Chimeric Antigen 
Receptor (CAR) T-cell Immunotherapy). Should we finalize this proposal, 
we would also assign cases involving the use of KTE-X19 to this 
proposed new MS-DRG 018. We believe that cases reporting the use of 
KTE-X19 would be assigned to the same MS-DRG as existing CAR T-cell 
technologies.
    With regard to the third criterion for substantial similarity, the 
applicant described that MCL results from a malignant transformation of 
a B lymphocyte in the outer edge of the lymph node follicle, while 
DLBCL, which YESCARTA[supreg] and KYMRIAH[supreg] treat, is defined by 
the applicant as a neoplasm of large B cells arranged in a diffuse 
pattern. As described by the applicant, MCL and DLBCL patients share 
similar clinical presentation of lymphadenopathy, splenomegaly and 
constitutional symptoms. We therefore express concern that this therapy 
may involve treatment of a similar type of disease when compared to 
existing CAR T-cell therapies.
    We are inviting public comments on whether KTE-X19 is substantially 
similar to other technologies and whether KTE-X19 meets the newness 
criterion.
    With regard to the cost criterion, the applicant searched the FY 
2018 MedPAR claims data file to identify potential cases representing 
patients who may be eligible for treatment using KTE-X19. The applicant 
identified claims that reported an ICD-10-CM diagnosis code of ICD-10-
CM C83.10 (Mantle cell lymphoma, unspecified site). The applicant 
stated that claims reporting ICD-10-CM code C83.10 would not involve 
the use of the other two approved CAR T-cell therapies because those 
therapies are not used to treat this diagnosis, MCL. As such, the 
applicant stated that it used C83.10 to identify potential MCL cases 
and ICD-10-PCS codes XW033C3 and XW043C3 to identify patients receiving 
CAR T-cell therapy. In its analysis, the applicant identified two sets 
of cohorts (Primary Cohort and Sensitivity Analysis Cohort) to assess 
whether this therapy met the cost criterion. The ICD-10-PCS procedure 
codes listed in the table in this section of this rule were used to 
identify claims involving chemotherapy and the applicant noted that 
these were used for both cohorts.
    The new technology add-on payment Primary Cohort included cases 
with an ICD-10-CM principal diagnosis of MCL, at least one procedure 
code indicating receipt of chemotherapy, and no ICD-10-PCS procedure 
codes indicating CAR T-cell therapy. The applicant believed the Primary 
Cohort most closely aligned with the characteristics and health of r/r 
MCL patients who would receive KTE-X19 given that this cohort includes 
patients with far advanced disease (comparable to the ZUMA-2 study, as 
discussed later in this section). The Sensitivity Analysis Cohort 
included patients with the ICD-10-CM principal or secondary diagnosis 
of MCL, at least one procedure code indicating receipt of chemotherapy, 
and no ICD-10-PCS procedure codes indicating CAR T-cell therapy. The 
claim search conducted by the applicant resulted in 293 claims in the 
Primary Cohort, mapped to 13 MS-DRGs, and 953 claims in the Sensitivity 
Analysis Cohort, mapped to 72 MS-DRGs using the FY 2018 MedPAR Hospital 
LDS based on the requirements for each cohort outlined by the 
applicant.
BILLING CODE 4120-01-P

[[Page 32638]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.128


[[Page 32639]]


[GRAPHIC] [TIFF OMITTED] TP29MY20.129


[[Page 32640]]


[GRAPHIC] [TIFF OMITTED] TP29MY20.130


[[Page 32641]]


[GRAPHIC] [TIFF OMITTED] TP29MY20.131

BILLING CODE 4120-01-C

[[Page 32642]]

    The applicant inflated the charges from the FY 2018 MedPAR claims 
data by applying the 2-year inflation factor used in the FY 2020 IPPS 
final rule to calculate outlier threshold charges (1.11100). The 
applicant stated they then standardized the charges. The applicant 
stated that the cases representing patients who had received 
chemotherapy, as reflected by the Medicare claims data, would generally 
not receive both chemotherapy and KTE-X19 as an inpatient because 
conditioning chemotherapy would be administered in the outpatient 
setting before the patient would be admitted for KTE-X19 infusion and 
monitoring. Otherwise, the applicant asserted that patients receiving 
KTE-X19 would be expected to incur similar charges to those cases in 
the Medicare claims data for patients with a primary diagnosis of MCL 
and receiving chemotherapy (Primary Cohort). In its analysis, the 
applicant noted that in the FY 2018 MedPAR Hospital LDS, charges for 
chemotherapy drugs were grouped with charges for oncology, diagnostic 
radiology, therapeutic radiology, nuclear medicine, CT scans, and other 
imaging services. The applicant believed that removing all radiology 
charges would understate the cost of adverse event (AE) clinical 
management for KTE-X19 patients needed. The applicant found that when 
using data from the Q4 2017 and Q1 Q3 2018 Standard Analytic files and 
comparing total chemotherapy charges to total radiology charges, 2 
percent of radiology charges were chemotherapy charges, on average. 
Therefore, instead of removing all radiology charges, the applicant 
excluded 2 percent of the radiology charge amount to capture the effect 
of removing chemotherapy pharmacy charges.
    The applicant stated that when comparing the Primary Cohort to the 
MS-DRG 016 average case-weighed threshold amount (based on the FY 2020 
IPPS/LTCH PPS final rule correction notice data file thresholds for FY 
2021), the final inflated average case-weighted standardized charge per 
case of $201,459 exceeded the average case-weighted threshold amount of 
$170,573 by $30,886 without consideration of KTE-X19 charges. The 
applicant stated that because the final inflated average case-weighted 
standardized charge per case exceeded the average case-weighted 
threshold amount, the therapy meets the cost criterion.
    When conducting the same review to assess cost for the Sensitivity 
Analysis Cohort, the applicant noted that the Sensitivity Analysis 
Cohort did not meet the cost criterion when compared to the MS-DRG 016 
average case-weighted threshold amount (based on the FY 2020 IPPS/LTCH 
PPS final rule correction notice data file thresholds for FY 2021). As 
reported by the applicant, the final inflated average case-weighted 
standardized charge per case of $111,531 did not exceed the average 
case-weighted threshold amount of $170,573 (difference of $59,042) 
without consideration of KTE-X19 charges. However, the applicant noted 
that considering the cost of currently marketed CAR T-cell therapies, 
this Sensitivity Analysis Cohort would have met the cost criterion if 
it considered KTE-X19 charges. The applicant further noted that the 
characteristics of this cohort's patient population do not represent 
the characteristics of the population that would receive KTE-X19.
    Because the final inflated average case-weighted standardized 
charge per case for the Primary Cohort exceeds the average case-
weighted threshold amount for MS-DRG 016, the applicant maintained that 
the technology meets the cost criterion.
    We note that the applicant, along with other CAR T-cell therapy 
manufacturers, have requested CMS use existing data to create a new MS-
DRG specifically for CAR T-cell therapies. Currently, as previously 
noted, procedures involving CAR T-cell therapies are identified with 
ICD-10-PCS procedure codes XW033C3 and XW043C3. In the FY 2019 IPPS/
LTCH PPS final rule, we finalized our proposal to assign cases 
reporting these ICD-10-PCS procedure codes to MS-DRG 016 and to revise 
the title of this MS-DRG to ``Autologous Bone Marrow Transplant with 
CC/MCC or T-cell Immunotherapy'' effective beginning FY 2019. As 
discussed in section II.D.2.b. of the preamble of this proposed rule, 
for FY 2021, we are proposing to create a new MS-DRG 018, ``Chimeric 
Antigen Receptor (CAR) T-cell Immunotherapy.'' If finalized, this new 
MS-DRG for CAR T-cell therapy cases would include any approved 
procedure codes to describe cases involving the use of KTE-X19. We are 
also proposing to modify the structure of MS-DRG 016 by removing 
procedure codes XW033C3 and XW043C3 and to revise the title to 
``Autologous Bone Marrow Transplant with CC/MCC'' to reflect the 
proposed restructuring. We refer readers to section II.E.2.b of the 
preamble of this proposed rule for a discussion of our proposals 
regarding the development of the relative weights for this proposed new 
MS-DRG for CAR T-cell therapy and to section IV.I. of the preamble of 
this proposed rule for a discussion of our proposal for a payment 
adjustment for clinical trial cases assigned to this proposed new MS-
DRG. In this section of this rule we discuss the impact of our proposal 
to create new MS-DRG 018 for CAR T-cell therapies with regard to the 
new technology add-on payment.
    As we have discussed in prior rulemaking with regard to the 
potential creation of a new MS-DRG for CAR T-cell therapies (83 FR 
41172), 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. Section 1886(d)(5)(K)(ix) of the Act requires that, before 
establishing any add-on payment for a new medical service or 
technology, the Secretary shall seek to identify one or more DRGs 
associated with the new technology, based on similar clinical or 
anatomical characteristics and the costs of the technology and assign 
the new technology into a DRG where the average costs of care most 
closely approximate the costs of care using the new technology. As 
discussed in previous rulemaking (71 FR 47996), no add-on payment will 
be made if the new technology is assigned to a DRG that most closely 
approximates its costs.
    In the FY 2016 IPPS/LTCH PPS final rule (80 FR 49481 and 49482) in 
the discussion of whether the WATCHMAN[supreg] System met the cost 
criterion for a new technology add-on payment, we discussed whether the 
threshold value associated with a proposed new MS-DRG should be 
considered in determining whether the applicant meets the cost 
criterion. We also discussed instances in the past where the coding 
associated with a new technology application is included in a finalized 
policy to change one or more MS-DRGs. For example, in the FY 2013 IPPS/
LTCH PPS final rule, we described the cost analysis for the 
Zenith[supreg] Fenestrated Abdominal Aortic Aneurysm Endovascular 
Graft, which was identified by ICD-9-CM procedure code 39.78 
(Endovascular implantation of branching or fenestrated graft(s) in 
aorta). In that same rule, we finalized a change to the assignment of 
that procedure code, reassigning it from MS-DRGs 252, 253, and 254 to 
MS-DRGs 237 and 238. Because of that change, we determined that, for FY 
2013, in order for the Zenith[supreg] Fenestrated Abdominal Aortic 
Aneurysm Endovascular Graft to meet the cost criteria, it must 
demonstrate that the average case-weighted standardized charge per case 
exceeds the thresholds for MS-DRGs 237 and 238 (77 FR 53360). We noted 
that, in that example, MS-DRGs 237 and

[[Page 32643]]

238 existed previously; therefore, thresholds that were 75 percent of 
one standard deviation beyond the geometric mean standardized charge 
for these MS-DRGs were available to the public in Table 10 at the time 
the application was submitted. (We note that for fiscal years prior to 
FY 2020, Table 10 included the cost thresholds used to evaluate 
applications for new technology add-on payments for the next fiscal 
year.) In the FY 2016 IPPS/LTCH PPS proposed rule, we stated that in 
the case of WATCHMAN[supreg] System, if MS-DRGs 273 and 274 were to be 
finalized for FY 2016, we recognized that thresholds that are 75 
percent of one standard deviation beyond the geometric mean 
standardized charge would not have been available at the time the 
application was submitted. We stated that we believed that it could be 
appropriate for the applicant to demonstrate that the average case 
weighted standardized charge per case exceeded these thresholds for MS-
DRGs 273 and 274. Accordingly, we made available supplemental threshold 
values on the CMS website at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/newtech.html that were calculated 
using the data used to generate the FY 2015 IPPS/LTCH PPS Table 10 and 
reassigned the procedure codes in accordance with the finalized 
policies discussed in section II.G.3.b. of the preamble of the FY 2016 
IPPS/LTCH PPS final rule. In the FY 2016 IPPS/LTCH PPS proposed rule, 
we invited public comments on whether considering these supplemental 
threshold values as part of the cost criterion evaluation for this 
application was appropriate and also on how to address similar future 
situations in a broader policy context should they occur.
    After consideration of the comments, in the FY 2016 IPPS/LTCH PPS 
final rule (80 FR 49482) we stated that we agreed with the commenters 
that we should evaluate the cost threshold in effect at the time the 
new technology add-on payment application is submitted to determine if 
an applicant exceeds the cost threshold. We stated that we agreed with 
commenters that this policy is most predictable for applicants. We also 
stated that we were maintaining our current policy to use the 
thresholds issued with each final rule for the upcoming fiscal year 
when making a determination to continue add-on payments for those new 
technologies that were approved for new technology add-on payments from 
the prior fiscal year.
    At the time of the FY 2016 final rule, in applying this policy, we 
did not anticipate the onset of new, extremely high cost, technologies 
such as CAR T-cell therapy, nor such significant variance between the 
thresholds at the time of application and the thresholds based on the 
finalized MS-DRG assignment for the upcoming year. For example, in the 
FY 2016 final rule, the difference between the MS-DRG threshold amount 
for MS-DRGs 237 ($121,777) and 238 ($87,602) set forth in Table 10 
associated with the FY 2015 final rule, and the supplemental MS-DRG 
threshold amount based on the proposed new MS-DRGs 273 ($95,542) and 
274 ($77,230), was $26,235 and $10,372 respectively. By comparison, 
based on the data file released with the FY 2021 final rule (and 
corresponding correction notice) for FY 2022 applications, the 
threshold amount for MS-DRG 16 is $170,573. However, the threshold 
amount for proposed new MS-DRG 018 (in the data file released with this 
proposed rule) is $1,237,393, which is more than 7 times greater.
    In light of the development of new technologies, such as CAR T-cell 
therapies, and the more substantial shifts in the MS-DRG threshold 
amounts that may result from the reassignment of new technologies for 
the upcoming fiscal year, we believe it is appropriate to revisit the 
policy described in the FY 2016 final rule. While we continue to 
believe that predictability is important, we also believe payment 
accuracy is equally important. Thus, we believe that it is necessary to 
balance predictability with a more accurate evaluation of whether a new 
technology meets the new technology add-on payment cost criterion by 
using threshold values that are consistent with how the cases involving 
the use of the new technology will be paid for in the upcoming fiscal 
year. Therefore, we are proposing to revise our policy in situations 
when the procedure coding associated with a new technology application 
is proposed to be assigned to a proposed new MS-DRG. Specifically, we 
are proposing that effective for FY 2022, for applications for new 
technology add-on payments and previously approved technologies that 
may continue to receive new technology add-on payments, the proposed 
threshold for a proposed new MS-DRG for the upcoming fiscal year would 
be used to evaluate the cost criterion for technologies that would be 
assigned to a proposed new MS-DRG.
    For example, consider a technology that would be coded using 
procedure codes assigned to MS-DRG ABC at the time of its application 
for FY 2022, and then the procedure coding associated with the new 
technology is proposed to be assigned to a proposed new MS-DRG XYZ in 
the FY 2022 proposed rule. Instead of using the threshold for MS-DRG 
ABC based on the data file released with the FY 2021 final rule for FY 
2022 applications, we are proposing to use the proposed threshold for 
the newly proposed MS-DRG XYZ based on the data file released with the 
FY 2022 proposed rule, which would otherwise contain the proposed 
thresholds for FY 2023 applications. We believe using the proposed rule 
thresholds for the proposed new MS-DRG would further promote payment 
accuracy by using the latest data available to assess how the 
technology would be paid for in the upcoming fiscal year, if the 
proposed reassignment to the new MS-DRG was finalized, while also 
providing the applicant and the public adequate time to analyze whether 
the technology meets the cost criterion using these proposed thresholds 
and to provide public comment following the proposed rule.
    We believe it is important that the cost criterion be applied in a 
manner that accurately reflects the anticipated payment for the 
technology. In assessing the adequacy of the otherwise applicable MS-
DRG payment rate for a high cost new technology, where the reassignment 
of such a technology to a proposed new MS-DRG may result in a 
substantial change in the MS-DRG threshold amounts, we believe that it 
is necessary to evaluate that technology using the proposed thresholds 
for the newly proposed MS-DRG to which the technology would be 
reassigned.
    We believe that this policy is also consistent with section 
1886(d)(5)(K)(ix) of the Act which, as previously noted, requires that 
before establishing any add-on payment for a new medical service or 
technology, the Secretary seek to identify one or more DRGs associated 
with the new technology, based on similar clinical or anatomical 
characteristics and the costs of the technology, and assign the new 
technology into a DRG where the average costs of care most closely 
approximate the costs of care using the new technology. This provision 
further states that no add-on payment will be made with respect to such 
new technology. As we have noted in prior rulemaking with regard to the 
CAR T-cell therapies (83 FR 41172), 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.
    For these reasons, for purposes of FY 2021 new technology add-on 
payments,

[[Page 32644]]

we are proposing to evaluate the cost criterion for the CAR T-cell 
therapy technologies using the proposed threshold for the newly 
proposed MS-DRG to which the procedure codes describing the use of the 
CAR T-cell therapies would be assigned in FY 2021 (MS-DRG 018). This 
proposed policy would apply to the new FY 2021 CAR T-cell therapy 
applications, KTE-X19 and Liso-cel, and those CAR T-cell therapies 
previously approved for new technology add-on payments, KYMRIAH[supreg] 
and YESCARTA[supreg].
    As such, we are proposing to evaluate whether KTE-X19 meets the 
cost criterion using the proposed new MS-DRG 018 threshold amount of 
$1,237,393. As previously mentioned and reported by the applicant, the 
final inflated average case-weighted standardized charge per case for 
KTE-X19 was $201,459 for the Primary Cohort. As previously noted, this 
figure does not include the cost of the technology. However, we now 
have cases involving the use of CAR T-cell therapy within the FY 2019 
MedPAR data that we believe may reflect cases that could be eligible 
for KTE-X19 or which can be used to approximate the charges for KTE-X19 
to estimate the average standardized charge per case for purposes of 
this proposed rule. This charge information from the FY 2019 MedPAR 
data can be found in the FY 2021 Proposed Before Outliers Removed (BOR) 
File (available on the CMS website) for Version 38 of the MS-DRGs. 
Based on information from the FY 2021 Proposed BOR File for Version 38 
of the MS-DRGs, the standardized charge per case for MS-DRG 018 is 
$913,224. The average case-weighted threshold amount based on the 
proposed new MS-DRG 018 is $1,237,393. Because this estimated average 
case-weighted standardized charge per case does not exceed the average 
case-weighted threshold amount for proposed MS-DRG 018, we do not 
believe the technology would meet the cost criterion. We note that this 
analysis is based on CMS data. The applicant conducted its own analysis 
as previously described that did not include the cost of the 
technology. We welcome additional information from the applicant 
regarding the cost of KTE-X19 to inform our determination for the final 
rule regarding whether the applicant meets the cost criterion based on 
the applicant's cost analysis.
    We invite public comment on our proposal, for purposes of FY 2021 
new technology add-on payments for CAR T-cell therapy technologies, to 
evaluate the cost criterion using the proposed threshold for the newly 
proposed MS-DRG 018 to which the procedure codes describing the use of 
the CAR T-cell therapies would be assigned in FY 2021, and on whether 
KTE-X19 meets the cost criterion based on this proposal. We also invite 
public comment on our proposal to use the proposed threshold for the 
upcoming fiscal year for any proposed new MS-DRG to evaluate the cost 
criterion for technologies that would be assigned to the proposed new 
MS-DRG, beginning with FY 2022 new technology add-on payments for all 
other non-CAR T-cell therapy technologies.
    With respect to the substantial clinical improvement criterion, the 
applicant asserted that KTE-X19 represents a new treatment option for 
an adult patient population unresponsive to, or ineligible for, 
currently available treatments. The applicant also believes that the 
use of KTE-X19 significantly improves clinical outcomes for a patient 
with r/r MCL as compared to currently available therapies, including 
BTK inhibitors. The applicant stated that KTE-X19 provides access to a 
treatment option for patients with r/r MCL who have not been responsive 
to first line or second line therapies. The applicant provided further 
detail regarding these assertions, referencing the results of a Phase 2 
study and historical and meta analyses, which are summarized in this 
section of this rule.
    The applicant asserted that the use of KTE-X19 significantly 
improves clinical outcomes for a patient population as compared to 
currently available treatments. The applicant contended that Bruton's 
tyrosine kinase (BTK) inhibitor, ibrutinib, is the most common third-
line therapy used for patients with r/r MCL and has been shown to offer 
improvements over other chemotherapy-based regimens for r/r MCL 
patients. The applicant also referenced a more selective BTK inhibitor, 
acalabrutinib, which was approved in the US for the treatment of 
patients with r/r MCL.277 278 In registrational trials, the 
objective response rates and complete response rates were 66% and 17%, 
respectively for ibrutinib, and 81% and 40%, respectively, for 
acalabrutinib.279 280 The applicant contended that primary 
and secondary resistance to BTK inhibitors \281\ is common, and 
subsequent therapies currently available are minimally 
effective.282 283 284 The applicant further summarized two 
retrospective studies that showed patients with r/r MCL with >=3 prior 
lines of therapy before receiving the BTK inhibitor had an objective 
response rate of approximately 25% to BTK salvage 
therapy.285 286 The applicant submitted supplemental 
information describing two additional studies looking at the outcomes 
for patients receiving BTK inhibitors who had received previous 
therapies for their r/r MCL. A study by Regny and colleagues \287\ 
studied 67 subjects who received BTK inhibitor treatment who then 
received a regimen of rituximab, bendamustine, bortezomib, and 
dexamethasone (RiVBD). The objective response rate for the 12 patients 
that had previously received ibrutinib was 67% and the median duration 
of response was 17 months.\288\ The second study, by McCulloch and 
colleagues, was a retrospective study of 35 subjects with r/r MCL who 
had prior BTK inhibitor treatment and subsequently went on to receive a 
regimen of rituximab, bendamustine, and cytarabine (R-BAC). For these 
patients, following the R-BAC regimen, the ORR was 82.3% and the 
combined CR/unconfirmed CR rate was 55.1%. The median progression free 
survival (PFS) was 9.3 months, and the median OS was 12.2 months.\289\
---------------------------------------------------------------------------

    \277\ Kantar Health. CancerMPact[supreg] United States. 
September 2018, v1.2.
    \278\ Vose JM. Mantle cell lymphoma: 2017 update on diagnosis, 
risk-stratification, and clinical management. Am J Hematol. 
2017;92(8):806-813.
    \279\ Ibrutinib USPI. Available from: https://www.imbruvica.com/docs/librariesprovider7/default-document-library/prescribing_information.pdf.
    \280\ Acalabrutinib USPI. Available from: https://www.azpicentral.com/calquence/calquence.pdf#page=1.
    \281\ Rule S, et al. Median 3.5-year follow-up of ibrutinib 
treatment in patients with relapsed/refractory Mantle Cell Lymphoma: 
A pooled analysis. Blood Dec. 2017;130(Suppl 1):151.
    \282\ Cheah CY, et al. Patients with mantle cell lymphoma 
failing ibrutinib are unlikely to respond to salvage chemotherapy 
and have poor outcomes. Ann Oncol. 2015;26(6):1175-9.
    \283\ Martin P, et al. Postibrutinib outcomes in patients with 
mantle cell lymphoma. Blood. 2016;127 (12):1559-63.
    \284\ DerSimonian R, Laird N. Meta-analysis in clinical trials. 
Control Clin Trials. 1986;7(3):177-88.
    \285\ Cheah CY, et al. Patients with mantle cell lymphoma 
failing ibrutinib are unlikely to respond to salvage chemotherapy 
and have poor outcomes. Ann Oncol. 2015;26(6):1175-9.
    \286\ Martin P, et al. Postibrutinib outcomes in patients with 
mantle cell lymphoma. Blood. 2016;127 (12):1559-63.
    \287\ Regny C, et al. Clinical efficacy of the RIBVD regimen for 
refractory/relapsed (r/r) Mantle Cell Lymphoma (MCL) patients: A 
retrospective study of the LYSA Group [Poster]. EHA; 2019 13-16 
June; Amsterdam, Netherlands.
    \288\ Regny C, et al. Clinical efficacy of the RIBVD regimen for 
refractory/relapsed (r/r) Mantle Cell Lymphoma (MCL) patients: A 
retrospective study of the LYSA Group [Poster]. EHA; 2019 13-16 
June; Amsterdam, Netherlands.
    \289\ McCulloch R, et al. R-BAC maintains high response rate in 
Mantle Cell Lymphoma following relapse on BTK inhibitor therapy 
[Abstract 3989]. ASH Annual Meeting; 2019 07-10 December; Orlando, 
FL.

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[[Page 32645]]

    The ZUMA-2 study of KTE-X19 is the only pivotal study of CAR T-cell 
therapy for r/r MCL. ZUMA-2 is a multicenter, open label, Phase 2 study 
which evaluated the safety and efficacy of KTE-X19 in patients with r/r 
MCL that relapsed or are refractory to prior therapy, including BTK 
inhibitors. Participants were required to have received at least 5 
prior regimens of MCL treatment, which must have included anthracycline 
(or bendamustine containing chemotherapy), an anti-CD20 monoclonial 
anitibody and BTK inhibitor. The ZUMA-2 study included 68 subjects 
treated with KTE-X19. The safety analysis included a review of all 68 
subjects, with the primary analysis of efficacy reviewing the first 60 
subjects treated with KTE-X19. ZUMA-2 was conducted in 33 centers in 
the United States, France, Germany and the Netherlands. Of the 60 
subjects in the primary analysis set, 59 were from U.S. sites. Of the 
68 subjects in the safety analysis set, 62 were from U.S. sites. Among 
the 68 subjects, the median age was 65 years (range 38-79) and 54 
subjects (84%) were male. Additionally, 58 of the subjects (85%) had 
stage IV of the disease and the subjects had a median of 3 prior 
therapies, with 55 or 81% of subjects having received >=3 prior 
therapies. In addition, 43% had relapsed after a prior autologous stem 
cell transplant (ASCT); the remaining subjects had either relapsed 
after or were refractory to their last therapy for MCL.
    The applicant initially submitted information from its interim 
analysis of ZUMA-2, which included 28 subjects treated with KTE-X19 who 
had the opportunity to be followed for 12 months at the time of the 
data cutoff (May 30, 2018). In supplemental information shared with 
CMS, which the applicant referred to as its primary analysis, all 60 
subjects were followed for 6 months after the Week 4 disease 
assessment, and the 28 subjects from the interim analysis were followed 
for 24 months.
    According to the applicant, because no effective standard therapy 
for subjects with r/r MCL who have progressed following a prior BTK 
inhibitor therapy exists, ZUMA-2 had no comparison arm. The applicant 
described how a historical control was the only ethical and feasible 
study design for patients with r/r MCL who had not responded to the 
most promising therapies available, including BTK inhibitors. 
Therefore, the historical controls consisted of two studies by Martin 
et al., (2016) and Cheah et al., (2015), and a meta-analysis of six 
studies, consisting of 255 subjects, discovered during a literature 
search.
    According to the Martin et al. (2016), retrospective cohort study 
referenced by the applicant, the investigators-reported best response 
rate (RR) to ibrutinib was 55% (43% partial response [PR], 12% complete 
response [CR]), with 35% of patients having a best response of 
progressive disease. But among patients who received subsequent 
therapy, local clinicians reported that 13 patients (19%) achieved PR, 
and 5 (7%) achieved CR. The median overall survival (OS) following 
cessation of ibrutinib was 2.9 months (95% confidence interval [CI], 
1.6-4.9). Of the 104 patients with data available, 73 underwent at 
least one additional line of currently available treatment after 
stopping ibrutinib with a median OS of 5.8 months (95% confidence 
interval [CI], 3.7-10.4).\290\
---------------------------------------------------------------------------

    \290\ Op cit, Martin.
---------------------------------------------------------------------------

    Also according to the Cheah et al. (2015), retrospective review 
study referenced by the applicant, they found that among the 31 
patients who experienced disease progression following ibrutinib and 
underwent salvage therapy, the overall objective response rate (ORR) 
and complete response rate (CRR) was 32% and 19%, respectively. After a 
median follow-up of 10.7 (range 2.4-38.9) months from discontinuation 
of ibrutinib, the median OS among patients with disease progression was 
8.4 months and the estimated one-year OS was 22.1% (95% CI 8.3% to 
40.2%).\291\
---------------------------------------------------------------------------

    \291\ Op cit, Cheah.
---------------------------------------------------------------------------

    To evaluate the effectiveness of KTE-X19, the applicant noted it 
used an ORR comparison of 25%, which was derived from the two 
aforementioned studies (Martin et al., and Cheah et al.) with patients 
with r/r MCL who progressed on the most predominantly prescribed BTK 
inhibitor, ibrutinib. The results of these two studies showed a median 
OS of 5.8 months after receiving at least 1 additional line of 
currently available therapy to treat r/r MCL. Those who did not receive 
salvage therapy had a median OS of 0.8 months.\292\
---------------------------------------------------------------------------

    \292\ Ibid.
---------------------------------------------------------------------------

    The applicant asserted that the interim analysis of ZUMA-2 
demonstrated the efficacy of KTE-X19 in subjects (n = 28) with r/r MCL 
who were heavily pretreated. The interim analysis showed patients with 
an ORR of 86% (24/28 subjects; 95% CI: 67% to 96%), which was an 
increase compared to the pre-specified historical control ORR of 25% 
and the pooled ORR obtained through the meta-analysis of 28%.
[GRAPHIC] [TIFF OMITTED] TP29MY20.132


[[Page 32646]]


    Based on the primary analysis of the 60 subjects included in the 
ZUMA-2 study, there was an ORR of 93% after a single dose of KTE-X19 
(56 of 60 subjects with a 95% CI of 83.8%, 98.2%). The applicant 
reported that the complete response rate was 67% (40 of 60 subjects 
with a 95% CI of 53.3%, 78.3%). The applicant noted the ORR of 93% and 
CR 67% were observed across age groups (94% ages >=65; 93% ages <65. 
And, of the 40 subjects achieving CR, 22 subjects were aged >=65 and 18 
were aged <65). The applicant highlighted that the ORR of 93% was 
significantly higher than the prespecified historical control rate of 
25%. Furthermore, the applicant noted that among the 42 subjects who 
initially had a partial response (PR) or stable disease (SD), 24 
subjects (57%) went on to achieve a CR after a median of 2.2 months 
(range: 1.8 to 8.3 months). Twenty-one subjects converted from PR to 
CR, and 3 subjects converted from SD to CR.
    The primary analysis from ZUMA-2 showed that with a median follow-
up time of 12.3 months, the median DOR was not reached following the 
KTE-X19 therapy and that this result was consistent across age groups. 
Kaplan-Meier estimates of the progression free survival (PFS) rates at 
6 months and 12 months were 77.0% and 60.9%, respectively, and the 
median PFS was not reached with a median potential follow-up of 12.3 
months (range: 7.0 to 32.3 months) (this analysis was provided by the 
applicant). Additionally, 57% of all patients and 78% of patients with 
a CR remained in remission (results consistent across age groups). 
Furthermore, as reported by the applicant, among the first 28 subjects 
studied as part of the interim analysis, 43% remained in continued 
remission without additional therapy at the follow-up period of 27 
months (range, 25.3--32.3).
    The ZUMA-2 primary analysis 6-month and 1-year survival rate was 
86.7% and 83.2%, respectively. The applicant also conducted an 
additional analysis of OS among the first 28 subjects (ZUMA-2 interim 
analysis) who were treated with KTE-X19 and had a potential follow-up 
of >=24 months. Among these subjects, the OS rate estimate at 24 months 
was 67.9% and the median OS was not reached. In comparison, the Cheah 
and et al. (2015) post-ibrutinib salvage therapy study reported a lower 
one-year survival rate of 22%. Additionally, among the subjects in CR 
at month 3 who had the opportunity to be followed to month 12, 90% 
remained in CR at month 12. The applicant contended that this statistic 
showcased that early responses to KTE-X19 are likely indicative of 
long-term remission after the single infusion of KTE-X19. Furthermore, 
the applicant suggested that a substantial number of patients with r/r 
MCL treated with KTE-X19 will achieve a CR, and that this suggests 
these patients will likely experience a long-term remission after a 
single infusion of KTE-X19. The applicant also noted that these results 
were consistent across age groups at the time of the primary data 
analysis cut-off (July 24, 2019). By contrast, the applicant noted that 
patients with r/r MCL who had prior BTK inhibitor treatment had CR 
rates ranging from 7-22%. Additionally, the applicant noted that the 
majority of patients on BTK inhibitor treatment go on to have 
progressive disease given that the responses achieved with currently 
available salvage therapies are short lived and have a DOR ranging from 
3 to 5.8 months.293 294 295 296
---------------------------------------------------------------------------

    \293\ Kochenderfer JN, et al. Lymphoma Remissions Caused by 
Anti-CD19 Chimeric Antigen Receptor T Cells Are Associated With High 
Serum Interleukin-15 Levels. J Clin Oncol. 2017a;35(16):1803-13.
    \294\ Kochenderfer JN, et al. Long-Duration Complete Remissions 
of Diffuse Large B Cell Lymphoma after Anti-CD19 Chimeric Antigen 
Receptor T Cell Therapy. Mol Ther. 2017b;25(10):2245-53.
    \295\ Gupta S, et al. Recommendations for the design, 
optimization, and qualification of cell-based assays used for the 
detection of neutralizing antibody responses elicited to biological 
therapeutics. Journal of Immunological Methods. 2007;321(1-2):1-18.
    \296\ Davila ML, et al. Efficacy and toxicity management of 19-
28z CAR T cell therapy in B cell acute lymphoblastic leukemia. Sci 
Transl Med. 2014;6(224):224ra25.
---------------------------------------------------------------------------

    In regards to the safety and efficacy of KTE-X19, the applicant 
argued that the ZUMA-2 study demonstrated a positive benefit-risk of 
KTE-X19 over the current therapy options for patients with r/r MCL. The 
applicant stated that the toxicity profile that is associated with KTE-
X19 therapy can be managed and that the KTE-X19 risk evaluation and 
mitigation strategies (REMS) will ensure that hospitals providing KTE-
X19 therapy are certified so that all who prescribe, dispense, or 
administer KTE-X19 are aware of how to manage the risk of cytokine 
release syndrome (CRS) and neurologic events. However, the applicant 
notes that patients who were >=65 years old showed a trend toward a 
higher incidence of Grade 3 or higher CRS compared to those <=65 years 
old. (21% versus 7%). Additionally, all subjects in the ZUMA-2 primary 
analysis had at least 1 adverse event (AE), 99% of subjects had at 
least 1 AE that was Grade 3 or higher, and 68% of subjects had at least 
1 serious adverse event (SAE). The most common Grade 3 or higher AEs 
were anemia and neutrophil count decreased (50% each) and WBC decreased 
(40%). Furthermore, CRS occurred in 62 of 68 (91%) subjects in the 
ZUMA-2 safety analysis. Of these, 8 subjects (12%) had worst Grade 3 
CRS, and 2 subjects (3%) had worst Grade 4 CRS. No subject had Grade 5 
CRS, according to the applicant. Furthermore, according the applicant, 
the most common CRS symptoms of any grade were pyrexia, hypotension, 
and hypoxia. The most common Grade 3 or higher CRS symptoms were 
hypotension (15 subjects, 24%), hypoxia (12 subjects, 19%), and pyrexia 
(7 subjects, 11%). No patient in the ZUMA-2 study treated with KTE-X19 
died from CRS.
    The applicant mentioned that 43 of the 68 patients (63%) in the 
ZUMA-2 study also experienced forms of neurologic events. Of these, 15 
subjects (22%) had a worst Grade 3 neurologic event, and 6 subjects 
(9%) had a worst Grade 4 neurologic event. Twenty-two subjects (32%) 
had serious neurologic events, however, the applicant noted no subject 
had a Grade 5 neurologic event. Of these, the most common neurologic 
events of any grade were tremor, encephalopathy, and confusional state. 
The most common Grade 3 or higher neurologic events were encephalopathy 
(13 subjects, 19%), confusional state (8 subjects, 12%), and aphasia (3 
subjects, 4%). Compared with subjects who were <65 years of age, 
subjects who were >=65 years of age showed a trend toward a higher 
incidence of Grade 3 or higher neurologic events (36% versus 24%). The 
applicant noted that these neurologic events resolved for all but 6 
subjects and that among those whose neurologic events had resolved, the 
median duration was 12 days. Additionally, no patient died from 
neurologic events.
    Overall, ZUMA-2 primary results showed that at the time of the 
analysis cutoff (July 2019), 16 of 68 subjects (24%) had died; 4 deaths 
occurred >30 days through 3 months after infusion of KTE-X19 and 12 
deaths occurred >=3 months after infusion of KTE-X19. Fourteen of the 
16 subjects died as a result of progressive disease and two of the 16 
subjects died due to AEs other than disease progression (Grade 5 AE of 
staphylococcal bacteremia and Grade 5 AE of organizing pneumonia).
    Although the applicant asserted that KTE-X19 represents a 
substantial clinical improvement compared to other currently available 
treatments, we are concerned with the generalizability of the findings 
from ZUMA-2 to the general Medicare population. We note that 85% of 
ZUMA-2 participants had stage IV disease development and that

[[Page 32647]]

this therapy may demonstrate a benefit to a sicker patient population. 
However, we are concerned about whether the population of the ZUMA-2 
study mirrors the characteristics of the Medicare population and 
whether the study included patients that had a similar severity of 
disease as would be common within the Medicare population.
    The literature search performed by the applicant included a total 
of 255 subjects, across 6 studies, and the ZUMA-2 study included 68 
subjects studied in the primary analysis. We are concerned with the 
relatively small combined sample size from the literature search and 
ZUMA-2 study performed by the applicant. We also note that the 
applicant stated that it closely communicated with FDA in the 
development of the ZUMA-2 study, including in the development of the 
sample size, but we remain concerned about whether the ZUMA-2 study 
results support a determination of substantial clinical improvement 
given the small sample size. Although the applicant's analysis of the 
ZUMA-2 study concluded that KTE-X19 offers a treatment option for a 
patient population unresponsive to, or ineligible for, currently 
available treatments, we are concerned as to whether the sample size 
and research presented in this application support extrapolating these 
results across the Medicare population.
    We are also concerned that there has not been a direct study 
completed comparing outcomes of patients with r/r MCL treatment with 
KTE-X19 and BTK inhibitors. According to the applicant, ZUMA-2 remains 
the only study to evaluate patient outcomes after receiving KTE-X19 for 
the treatment of r/r MCL, but this study does not include a direct 
comparison to other existing therapies for r/r MCL. Despite there being 
no standard of second-line care for r/r MCL patients that failed on 
previous therapies, according to the applicant, a BTK inhibitor 
reflects the best currently available therapy for treating r/r 
MCL.\297\
---------------------------------------------------------------------------

    \297\ Campo E, Rule S. Mantle cell lymphoma: Evolving management 
strategies. Blood. 2015;125(1):48-55.
---------------------------------------------------------------------------

    While the ZUMA-2 primary analysis 6 month and one-year survival 
rate was 86.7% and 83.2%, respectively, we are concerned that a longer 
term analysis of this population is not available to evaluate the 
overall survival and mortality data. We note that the applicant did 
conduct an additional analysis of OS among the first 28 subjects (ZUMA-
2 interim analysis) which showed an OS rate estimate at 24 months of 
67.9% while the median OS was not reached. Additionally, the applicant 
referenced that all subjects in the ZUMA-2 primary analysis had at 
least 1 adverse event, and that throughout the course of the ZUMA-2 
study, 16 deaths were recorded. However, while the applicant noted only 
2 of these 16 deaths were related to adverse events, we remain 
concerned that further analysis may be needed to evaluate the safety of 
KTE-X19 and the longer term effects of the CRS and neurological events 
associated with the KTE-X19 therapy.
    We are inviting public comments on whether KTE-X19 meets the 
substantial clinical improvement criterion.
    We did not receive any written comments in response to the New 
Technology Town Hall meeting notice published in the Federal Register 
regarding the substantial clinical improvement criterion for the KTE-
X19 or at the New Technology Town Hall meeting.
j. Lisocabtagene Maraleucel (Liso-cel)
    Juno Therapeutics, a Bristol-Myers Squibb Company, submitted an 
application for new technology add-on payment for FY 2021 for 
lisocabtagene maraleucel (Liso-cel). Liso-cel is an investigational, 
CD19-directed, autologous chimeric antigen receptor (CAR) T-cell 
immunotherapy that is comprised of individually formulated CD8 (killer) 
and CD4 (helper) CAR T-cells that the applicant anticipates to be 
indicated for the treatment of adult patients with relapsed or 
refractory (r/r) large B-cell lymphoma after at least two prior 
therapies. According to the National Comprehensive Cancer Network, 
Diffuse Large B-cell lymphoma (DLBCL) is the most common type of Non-
Hodgkin's Lymphoma (NHL) in the U.S. and worldwide, accounting for 
nearly 30% of newly diagnosed cases of B-cell NHL in U.S.\298\ DLBCL is 
characterized by spreading of B-cells through the body that have either 
arrived de novo or by the transformation from indolent lymphoma.
---------------------------------------------------------------------------

    \298\ Ferlay J, Colombet M, Soerjomataram, et al., Estimating 
the global cancer incidence and mortality in 2018: GLOBOCAN sources 
and methods, Int J Cancer. 144: 1941-1953 (Ferlay, 2019); NCCN 
Clinical Practice Guidelines in Oncology (NCCN Guidelines[supreg]) 
for B-Cell Lymphomas V. 5.2019. (copyright) National 
Comprehensive Cancer Network, Inc. 2019 (NCCN, 2019).
---------------------------------------------------------------------------

    According to the applicant, the standard-of-care, first-line 
immune-chemotherapy for DLBCL includes regimens such as 
cyclophosphamide, doxorubicin, vincristine, and prednisone plus 
rituximab (R-CHOP).\299\ These regimens result in long-lasting 
remission in more than 50% of patients.\300\ However, approximately 10% 
to 15% of patients will have primary refractory disease (that is, 
nonresponse or relapse within three months of first-line therapy), and 
an additional 20% to 25% will relapse following an initial response to 
therapy.\301\ Patients with relapses of aggressive B-cell lymphomas are 
believed to have a poor prognosis because of potential treatment 
resistance and rapid tumor growth, with only about 30% to 40% 
responding to salvage chemotherapy (for example, R-ICE, DHAP, or Gem-
ox) followed by high-dose therapy and autologous stem cell 
transplantation for patients demonstrating chemotherapy-sensitive 
disease.\302\ Among patients eligible to undergo autologous stem cell 
transplantation (ASCT), only 50% will achieve a remission adequate to 
proceed to ASCT, and approximately 50% will relapse after 
transplantation.\303\ The applicant also noted that transplant 
eligibility is also restricted based on age and tolerance to high dose 
chemotherapy and thus excludes a moderate subset of patients with r/r 
DLBCL.
---------------------------------------------------------------------------

    \299\ Coiffier, Bertrand et al., Long-term outcome of patients 
in the LNH-98.5 trial, the first randomized study comparing 
rituximab-CHOP to standard CHOP chemotherapy in DLBCL patients: A 
study by Group d'Etudes des Lymphomes de l'Adulte, blood 2010 116: 
2040-2045. (Coiffier, 2010).
    \300\ Ibid.
    \301\ Ibid.
    \302\ Crump M, Neelapu SS, Farooq U, et al., Outcomes in 
refractory diffuse large B-cell lymphoma: results from the 
international SCHOLAR-1 study, Blood. 2017; 130(16): 1800-1808 
(Crump, 2017); Cunningham D, Hawkes EA, Jack A, et al. Rituximab 
plus cyclophosphamide, doxorubicin, vincristine, and prednisolone in 
patients with newly diagnosed diffuse large B-cell non-Hodgkin 
lymphoma: A phase 3 comparison of dose intensification with 14-day 
versus 21-day cycles Lancet. 2013; 381: 1817-1826 (Cunningham, 
2013).
    \303\ Ibid.
---------------------------------------------------------------------------

    Additionally, the applicant explained that the available therapies 
for 3L+ large B-cell lymphoma include the following:
     CD19-directed genetically modified autologous CAR T-cell 
immunotherapy axicabtagene ciloleucel (YESCARTA[supreg]), approved in 
October 2017 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, primary mediastinal large B-cell lymphoma, 
high grade B-cell lymphoma, and DLBCL arising from follicular lymphoma 
(FL).\304\
---------------------------------------------------------------------------

    \304\ YESCARTA[supreg]'s approval was based on a single arm 
study (ZUMA-1) demonstrating an IRC-assessed ORR of 72%, CR of 51%, 
and an estimated median DOR of 9.2 months in 101 subjects included 
in the modified intent-to-treat (mITT population).

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

[[Page 32648]]

     CAR T-cell therapy tisagenlecluecel (KYMRIAH[supreg]), 
approved in May 2018, 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, high grade B-cell lymphoma, 
and DLBCL arising from FL.\305\
---------------------------------------------------------------------------

    \305\ KYMRIAH[supreg]'s approval was based on a single-arm study 
(JULIET) demonstrating an ORR of 50% and a CR rate of 32% in 68 
efficacy-evaluable subjects. A median DOR was not reached with a 
median follow-up of 9.4 months.
---------------------------------------------------------------------------

     Programmed death receptor-1 (PD-1)-blocking antibody--
(KEYTRUDA[supreg]), approved in 2018, for the treatment of adult and 
pediatric patients with refractory primary mediastinal B-cell lymphoma 
(PMBCL), or who have relapsed after two or more prior lines of 
therapy.\306\
---------------------------------------------------------------------------

    \306\ KEYTRUDA is not recommended for treatment of patients with 
PMBCL who require urgent cytoreductive therapy. Keytruda USPI 
(2019).
---------------------------------------------------------------------------

     CD79b-directed antibody-drug conjugate polatuzumab vedotin 
(POLIVY[supreg]), in combination with bendamustine and rituximab, 
approved in 2019, for the treatment of adult patients with r/r DLBCL, 
not otherwise specified, after at least two prior therapies.
    According to the applicant, despite the availability of these 
therapies, r/r large B-cell lymphoma remains a major cause of morbidity 
and mortality due to the aggressive disease course. The applicant noted 
that the safety profiles of these therapies exclude many r/r large B-
cell lymphoma patients from being able to undergo treatment with these 
therapies.\307\
---------------------------------------------------------------------------

    \307\ Smith SD, Reddy P, Sokolova A, et al., Eligibility for CAR 
T-cell therapy: An analysis of selection criteria and survival 
outcomes in chemorefractory DLBCL, Am. J. Hematol. 2019; E119: 1-4 
(Smith, 2019).
---------------------------------------------------------------------------

    With respect to the newness criterion, the applicant submitted a 
BLA for Liso-cel in October 2019, however, as of the time of the 
development of this proposed rule, had not received FDA approval. Liso-
cel was granted Breakthrough Therapy Designation (BTD) on December 15, 
2016 and Regenerative Medicine Advanced Therapy (RMAT) designation on 
October 20, 2017, for the treatment of patients with r/r aggressive 
large B-cell NHL, including DLBCL, not otherwise specified (DLBCL NOS; 
de novo or transformed from indolent lymphoma), primary mediastinal B-
cell lymphoma (PMBCL), or follicular lymphoma Grade 3B (FL3B)). We note 
that the applicant submitted a request for approval for a unique ICD-
10-PCS procedure code for the administration of Liso-cel beginning in 
FY 2021. We note that procedures involving the CAR T-cell therapies 
previously approved for new technology add-on payments (KYMRIAH[supreg] 
and YESCARTA[supreg] therapies) are 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). Under the current coding system, cases involving the use of 
Liso-cel would be coded using ICD-10-PCS XW033C3 and XW043C3, which are 
currently grouped to MS-DRG 016. As discussed in section II.D.2.b. of 
the preamble of this proposed rule, effective for discharges occurring 
in FY 2021, we are proposing to assign cases reporting ICD-10-PCS 
procedure codes XW033C3 or XW043C3 to a proposed new MS-DRG 018 
(Chimeric Antigen Receptor (CAR) T-cell Immunotherapy), which would 
include cases reporting the use of Liso-Cel, if approved and finalized. 
While we note the applicant has submitted a request for approval for a 
unique ICD-10-PCS code to describe the use of Liso-cel, beginning in FY 
2021, any applicable finalized codes describing the use of Liso-cel 
will be addressed in the final rule.
    As previously discussed, 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 described two ways in which it believes the mechanism of 
action for Liso-cel differs from previously approved therapies for 
DLBCL. First, the applicant described the therapy as being comprised of 
individually formulated cryopreserved patient-specific helper (CD4) and 
killer (CD8) CAR T-cells in suspension that are administered as a 
defined composition of CAR-positive viable T-cells (from individually 
formulated CD8 and CD4 components). The applicant stated that the 
therapy involves a different mechanism of action from other CAR T-cell 
therapies because the CD4 and CD8 T-cells are purified and cultured 
separately to maintain compositional control of each cell type. 
Furthermore, during culture, each cell type is separately modified to 
have the CAR on the cell surface, expanded and quantified, and frozen 
in two separate cell suspensions. The applicant then described how 
Liso-cel is infused with the same target dose of CD4 and CD8 CAR T-
cells for every patient. The applicant asserted that because Liso-cel 
controls the same dosage for both CD4 and CD8, it differs from other 
CAR T-cell therapies for DLBCL and could potentially provide for higher 
safety and efficacy; the applicant stated that CAR T-cell therapies 
that do not control for CD8 CAR T-cell dosage have demonstrated higher 
rates of severe and life-threatening toxicities, such as cytokine 
release syndrome (CRS) and neurotoxicity (NT).
    The second feature the applicant described as distinguishing Liso-
cel's mechanism of action from existing CD19-directed CAR T-cell 
therapies was the presence of an EGFRt cell surface tag. The applicant 
explained that the EGFRt cell surface tag could hypothetically be 
targeted for CAR T-cell clearance by separately administering 
cetuximab, a monoclonal antibody. According to the applicant, if the 
patient was separately administered cetuximab, the presence of the 
EGFRt cell surface tag within Liso-cel would allow cetuximba to bind to 
the CAR T-cells and clear the cells from the patient. The applicant 
highlighted studies that showed that persistent functional CD19-
directed CAR T-cells in patients caused sustained depletion of a 
patient's normal B-cells that expressed CD19, resulting in 
hypogammaglobulinemia and an increased risk of life-threatening or 
chronic infections.\308\ The applicant further explained that such 
prolonged low levels of normal B-cells could place a patient at risk of 
life-threatening or chronic infections. According to the applicant, the 
ability to deplete CAR T-cells, via the administration of cetuximab, 
when a patient achieves a long-term remission could hypothetically 
allow recovery of normal B-cells and potentially reduce the risk of 
life-threatening or chronic infections. The applicant noted that 
experiments in a laboratory setting showed that targeting EGFRt with 
the monoclonal antibody cetuximab eliminated CAR T-cells expressing the 
EGFRt marker, which resulted in long-term reversal of B-cell aplasia in 
mice.\309\ However, the

[[Page 32649]]

applicant noted that this mechanism of CAR T-cell clearance, via 
administration of cetuximab and EGFRt cell surface tags/markers, has 
not been tested in humans nor in other patients treated with Liso-cel.
---------------------------------------------------------------------------

    \308\ Kalos M, Levine BL, Porter DL, 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): 1-21 (Kalos, 2011).
    \309\ Paszkiewicz PJ, Frable SP, Srivastava S, et al., Targeted 
antibody-mediated depletion of murine CD19 CAR T cells permanently 
reverses B cell aplasia, J Clin Invest. 2016; 126(11): 4262-4272 
(Paszkiewicz, 2016).
---------------------------------------------------------------------------

    With respect to the second criterion, whether a product is assigned 
to the same or a different MS-DRG, the applicant acknowledged that 
Liso-cel would likely map to the same MS-DRG as other existing CAR T-
cell therapies, which are currently assigned to MS-DRG 016. The 
applicant also referenced a request made by it and other CAR T-cell 
therapy manufacturers to create a new MS-DRG specifically for CAR T-
cell therapies. The applicant also acknowledged that in previous 
rulemaking CMS stated that all CAR T-cell therapies would be assigned 
to MS-DRG 016, Autologous Bone Marrow Transplant with CC/MCC while CMS 
continues to study the issue. As previously noted and further discussed 
in section II.D.2.b. of the preamble of this proposed rule, we are 
proposing to assign CAR T-cell therapy cases to a new MS-DRG 018 
(Chimeric Antigen Receptor (CAR) T-cell Immunotherapy) effective for 
discharges occurring in FY 2021.
    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, Liso-cel fills an unmet need in the treatment of large B-
cell lymphoma because Liso-cel would be indicated as a third-line 
treatment option for patients with r/r DLBCL, who cannot be treated 
with existing CAR T-cell therapies. The applicant asserted that Liso-
cel would be able to treat these patients that present with uncommon 
subtypes of DLBCL including, PMBCL, FL3B, and DLBCL transformed from 
indolent lymphoma from other follicular lymphoma, elderly patients 
(>=65 years old), patients with secondary CNS involvement by lymphoma, 
and those with moderate renal or cardiac comorbidities. The applicant 
asserted that these patient populations were excluded from 
registrational trials for YESCARTA[supreg] and KYMRIAH[supreg], and 
therefore represent an unmet patient need. Regarding newness, we are 
concerned as to whether a differing production and/or dosage represents 
a different mechanism of action as compared to previously FDA-approved 
CAR T-cell therapies. We are also concerned about whether the existence 
of an EGFRt cell surface tag equates to a new mechanism of action given 
that in order to activate this cell surface tag, an additional 
medication, cetuximab, which targets the CAR T-cells for clearance, 
would be needed. We also express concern that, based on our 
understanding, the presence of the EGFRt cell surface tag is a 
potential way to treat an adverse event of the Liso-cel therapy and is 
not critical to the way the drug treats the underlying disease. We note 
that the applicant referenced that while this EGFRt cell surface tag is 
included within the Liso-cel compound, it remains dormant without 
activation by cetuximab. Finally, the applicant noted that Liso-cel has 
been shown safe and effective for patient populations excluded from 
registrational trials for YESCARTA[supreg] and KYMRIAH[supreg], 
including patients with uncommon subtypes of large B-cell lymphoma, 
including PMBCL, FL3B, and DLBCL transformed from indolent lymphoma 
other than FL, elderly patients (>=65 years old), patients with 
secondary CNS involvement by lymphoma and those with moderate renal or 
cardiac comorbidities.\310\ We note that the FDA label for 
YESCARTA[supreg] and KYMRIAH[supreg] does not appear to specifically 
exclude these patient populations or NHL subtypes. As such, it is 
unclear whether Liso-cel would in fact treat a patient population 
different from other CAR T-cell therapies that treat patients with 
DLBCL. Additionally, as previously discussed, we are proposing to 
assign cases involving the use of Liso-cel to the same MS-DRG as other 
CAR T-cell therapies previously approved for new technology add-on 
payments. We refer readers to section II.D.2.b. of the preamble of this 
proposed rule for discussion of our proposal to create a new MS-DRG 018 
for CAR T-cell therapies which, if finalized, would include cases 
reporting the use Liso-cel.
---------------------------------------------------------------------------

    \310\ Lisocabtagene maraleucel Biologics License Application 
(BLA).
---------------------------------------------------------------------------

    We are inviting public comments on whether Liso-cel is 
substantially similar to other technologies and whether Liso-cel meets 
the newness criterion.
    With regard to the cost criterion, the applicant searched the FY 
2018 MedPAR claims data file to identify potential cases representing 
patients who may be eligible for treatment using Liso-cel. 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). However, the 
applicant noted that the aforementioned ICD-10-CM codes do not 
differentiate r/r patients from the broader DLBCL population. A 
clinical literature search completed by the applicant found that the r/
r population makes up one-third of the DLBCL population, but since r/r 
patients typically have higher inpatient costs, the applicant selected 
one-third of the total identified cases with the highest total charges. 
The applicant also identified potential cases where the claim contained 
either ICD-10-PCS code XW033C3 (Introduction of engineered autologous 
chimeric antigen receptor t-cell immunotherapy into peripheral vein, 
percutaneous approach, new technology group 3) or XW043C3 (Introduction 
of engineered autologous chimeric antigen receptor t-cell immunotherapy 
into central vein, percutaneous approach, new technology group 3) in 
addition to the DLBCL diagnosis codes. The applicant found a total of 
1,798 cases reporting either one of the previously identified diagnosis 
codes or ICD-10-PCS code XW033C3 or XW043C3, mapped to 22 MS-DRGs.
    The applicant noted that this analysis was based on charges from 
claims in the FY 2018 MedPAR final rule file and were selected based on 
the presence of one diagnosis code and one procedure code as previously 
discussed. As discussed previously, because clinical data suggests that 
about 33% of DLBCL patients are r/r and those patients have higher 
inpatient costs than non r/r DLBCL patients, the applicant analyzed the 
top third costliest discharges, but also diversified this analysis by 
randomly selecting 20% of the remaining cases to account for the 
variety of treatment options for patients with DLBCL. The applicant 
stated that the use of Liso-cel's therapy would replace chemotherapy or 
other drug therapies, including other CAR T-cell therapies. Because of 
this, the applicant stated it removed all charges in the drug cost 
center since it was not possible to differentiate between different 
drugs on inpatient claims. The standardized charges per case were then 
calculated using the 2018 IPPS final rule Impact file and the two-year 
inflation factor of 11.1% (1.11100) was applied. The applicant noted 
that the cost of Liso-cel had not yet been determined at the time of 
application. Therefore, without

[[Page 32650]]

considering the charges for Liso-cel, based on the FY 2020 IPPS/LTCH 
PPS final rule correction notice data file thresholds for FY 2021, the 
final inflated average case-weighted standardized charge per case was 
$117,726, which is lower than the MS-DRG 016 average case-weighted 
threshold of $170,573. However, we note that the applicant expects the 
cost of Liso-cel to be higher than the new technology add-on payment 
threshold amount for MS-DRG 016. Therefore, the applicant stated that 
Liso-cel met the cost criterion.
    As we have discussed in prior rulemaking with regard to the 
potential creation of a new MS-DRG for CAR-T cell therapies (83 FR 
41172), 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. Section 1886(d)(5)(K)(ix) of the Act requires that, before 
establishing any add-on payment for a new medical service or 
technology, the Secretary shall seek to identify one or more DRGs 
associated with the new technology, based on similar clinical or 
anatomical characteristics and the costs of the technology and assign 
the new technology into a DRG where the average costs of care most 
closely approximate the costs of care using the new technology. As 
discussed in previous rulemaking (71 FR 47996), no add-on payment will 
be made if the new technology is assigned to a DRG that most closely 
approximates its costs.
    As noted previously and discussed in section II.D.2.b of the 
preamble of this proposed rule, we are proposing to create proposed new 
MS-DRG 018 for cases reporting the use of CAR T-cell therapies 
beginning in FY 2021. We also refer readers to section II.G.5.i. of the 
preamble of this proposed rule, regarding the new technology add-on 
payment application for KTE-X19, for a complete discussion of our 
proposal that, effective for FY 2022, for applications for new 
technology add-on payments and for previously approved technologies 
that may continue to receive new technology add-on payments, the 
proposed threshold for a proposed new MS-DRG for the upcoming fiscal 
year would be used to evaluate the cost criterion for technologies that 
would be assigned to a proposed new MS-DRG. As also discussed in 
section II.G.5.i. of this proposed rule, in light of the significant 
variance in the threshold amount for the proposed new MS-DRG for cases 
reporting CAR T-cell therapies, we are also proposing to apply this 
policy when evaluating the CAR T-cell therapy technologies for FY 2021 
new technology add-on payments. The application of this proposed policy 
for FY 2021 would include the new FY 2021 CAR T-cell therapy 
applications and, as discussed in section II.G.4.a. of the preamble of 
this proposed rule, those CAR T-cell therapy technologies previously 
approved for new technology add-on payments.
    As such, we are proposing to evaluate whether Liso-cel meets the 
cost criterion using the proposed new MS-DRG 018 threshold amount of 
$1,237,393. As previously mentioned, without considering the cost of 
the technology, the final inflated average case-weighted standardized 
charge per case is $117,726. However, we now have cases involving the 
use of CAR T-cell therapy within the FY 2019 MedPAR data that we 
believe may reflect cases that could be eligible for Liso-cel or which 
can be used to approximate the charges for Liso-cel to estimate the 
average standardized charge per case for purposes of this proposed 
rule. This charge information from the FY 2019 MedPAR data can be found 
in the FY 2021 Proposed Before Outliers Removed (BOR) File (available 
on the CMS website) for Version 38 of the MS-DRGs. Based on information 
from the FY 2021 Proposed BOR File for Version 38 of the MS-DRGs, the 
standardized charge per case for MS-DRG 018 is $913,224. The average 
case-weighted threshold amount based on the proposed new MS-DRG 018 is 
$1,237,393. Because this estimated average case-weighted standardized 
charge per case does not exceed the average case-weighted threshold 
amount for proposed MS-DRG 018, we do not believe that the technology 
would meet the cost criterion. We note that this analysis is based on 
CMS data. The applicant conducted its own analysis as previously 
described that did not include the cost of the technology. We welcome 
additional information from the applicant regarding the cost of Liso-
cel to inform our determination for the final rule regarding whether 
the applicant meets the cost criterion based on the applicant's cost 
analysis.
    We invite public comment on our proposal to evaluate the cost 
criterion for Liso-cel using the proposed threshold amount for proposed 
new MS-DRG 018 and whether Liso-cel meets the cost criterion based on 
this proposal.
    With respect to the substantial clinical improvement criterion, the 
applicant asserted that Liso-cel represents a substantial clinical 
improvement over existing technologies because it offers a treatment 
option for a patient population unresponsive to, or ineligible for, 
currently available treatments. The applicant stated that Liso-cel 
fills an unmet need in the treatment of patients with large B-cell 
lymphoma, including DLBCL, and provides an immunotherapy treatment 
option for r/r DLBCL patients who cannot be treated with existing CAR 
T-cell therapies. To support this statement, the applicant described 
what it considered were important populations that were excluded from 
the registrational trials for YESCARTA[supreg] and KYMRIAH[supreg] 
(such as renal and cardiac insufficiency, limited marrow reserve, 
central nervous system (CNS) involvement by lymphoma, and relapse after 
allogeneic hematopoietic stem cell transplant (HSCT)). The applicant 
stated that these trials also excluded certain large B-cell lymphoma 
subtypes such as DLBCL transformed from indolent lymphomas other than 
FL, PMBCL, and follicular lymphoma Grade 3B (FL3B), but that these 
excluded patient populations were included in the registrational trial 
for Liso-cel.\311\ The applicant referenced that the use of Liso-cel 
had been studied for these patients, and was shown to be safe and 
resulted in durable responses, including for patients with uncommon 
subtypes of large B-cell lymphoma, including PMBCL, FL3B, and DLBCL 
transformed from indolent lymphoma other than FL, elderly patients 
(>=65 years old), patients with secondary CNS involvement by lymphoma, 
and those with moderate renal or cardiac comorbidities.\312\ According 
to the applicant, the registrational trials for YESCARTA[supreg] and 
KYMRIAH[supreg] also did not include adequate numbers of Medicare 
eligible subjects,313 314 315 and therefore the applicant 
asserted that Liso-cel represents a substantial clinical improvement 
over these existing therapies because it has been shown to have a 
benefit to a meaningful number of Medicare beneficiaries. To support 
this assertion, the applicant stated that 41% of the subjects treated 
with Liso-cel were over the age of 65 years and a similar safety and 
efficacy profile was seen for this patient cohort as compared

[[Page 32651]]

to a younger cohort.\316\ The applicant provided further detail 
regarding these assertions, referencing the results of Phase I and 
Phase II studies.
---------------------------------------------------------------------------

    \311\ Neelapu, 2017; Schuster SJ, Bishop MR, Tam CS, et al., 
Tisagenlecleucel in Adult Relapsed or Refractory Diffuse Large B-
Cell Lymphoma, N Engl J Med. 2019; 380(1): 45-56 (Schuster, 2019).
    \312\ Lisocabtagene maraleucel Biologics License Application 
(BLA).
    \313\ Neelapu, 2017.
    \314\ Schuster, 2019.
    \315\ Yescarta USPI (2019); Kymriah USPI (2018).
    \316\ Lisocabtagene maraleucel Biologics License Application 
(BLA).
---------------------------------------------------------------------------

    The applicant shared the results of the Phase I TRANSCEND NHL 001 
trial, which was a prospective, single arm, multicenter study of 
lisocabtagene maraleucel in patients with relapsed/refractory 
aggressive B-cell NHL. The applicant noted that TRANSCEND NHL 001 
included subjects with the average age of 63 years with 111 subjects 
(41%) over 65 years of age and 27 (10%) subjects older than 75 years of 
age. These patients also failed previous therapies. Of the total number 
of subjects studied (efficacy: n=256; safety: n=269), 137 subjects 
(51%) had DLBCL, 60 (22%) had DLBCL transformed from FL, 18 (7%) had 
DLBCL transformed other indolent lymphomas, 36 patients (13%) had high 
grade lymphoma, 15 (6%) had PMBCL and 3 (1%) had FL3B.\317\ 
Additionally, the applicant explained that TRANSCEND NHL 001 was more 
inclusive, compared to the registrational trials for KYMRIAH[supreg] 
and YESCARTA[supreg], of Medicare aged patients with comorbidities and 
NHL disease subtypes seen in the real world presentation of the 
disease. To support this, the applicant referenced that within this 
study, between 40% to 50% of subjects studied had cardiac ejection 
fraction, 3% had secondary CNS lymphoma, 51 patients (19%) had a 
creatinine clearance between 30-60 mL/min and 39 patients (14.6%) had 
grade >=3 cytopenias. Furthermore, the applicant noted that 51 patients 
(19%) had decreased renal function and 13 patients (4.9%) had decreased 
cardiac function. The applicant stated that the TRANSCEND NHL 001 study 
showcased that the patient population treated during the study better 
reflected the real world large B-cell lymphoma patient population, a 
population that the applicant asserted included NHL subtypes not 
studied or approved for treatment with currently approved or 
conditionally approved agents, while providing similar safety and 
efficacy. The applicant contended that these high-unmet need large B-
cell lymphoma subsets included patients with DLBCL transformed from 
rare indolent lymphomas other than FL, patients with FL3B, patients 65 
years of age and older, as well as patients with moderate comorbidities 
of renal and cardiac insufficiency.
---------------------------------------------------------------------------

    \317\ Ibid.
---------------------------------------------------------------------------

    The applicant further explained that Liso-cel provided improved 
effectiveness as compared to existing therapies. Patients with 
aggressive large B-cell NHL who have failed at least 2 prior therapies 
or SCT are treated with combinations of agents or monotherapy based on 
institutional preferences, but there is no standard of care for salvage 
therapies beyond first treatment therapy.\318\ The applicant noted that 
commonly used salvage therapies (non-CAR T-cell therapies) for 
relapsed, large B-cell lymphoma demonstrated objective response rates 
(ORRs) in the range of 12% to 46% and complete response (CR) rates of 
6% to 38%. Among the patients who did achieve a response, the median 
duration of response (DOR) ranges from approximately 6 to 17 months and 
median overall survival was generally less than 12 months.\319\ 
Comparatively, TRANSCEND NHL 001, which provided subjects with Liso-
cel, met its primary endpoint of Independent Review Committee (IRC)-
assessed ORR in adult patients with r/r large lymphoma after at least 2 
prior therapies, as reported by the applicant. In the 256 efficacy 
evaluable patients, the ORR was 73% (95% confidence interval (CI]): 
67.0% to 78.3%), and the CR rate was 53% (95% CI: 46.6% to 59.2%). With 
a median follow-up of 10.8 months, the median DOR per IRC assessment 
was 13.3 months and the median DOR for CR was not reached. By 
comparison, the applicant summarized that YESCARTA[supreg], as 
demonstrated in the Phase I-II ZUMA-1 study (see the FY 2019 IPPS/LTCH 
PPS final rule 83 FR 41295 for a description of this study), had an ORR 
of 72.0% (95% confidence interval (CI: 62.0% to 81.0%). Also, according 
to the applicant, KYMRIAH[supreg], as demonstrated by the Phase II 
JULIET study (see the FY 2019 IPPS/LTCH PPS final rule 83 FR 41293 for 
a description of this study), had an ORR of 50.0% (95% confidence 
interval (CI: 38.0% to 62.0%). The applicant contended that the results 
for Liso-cel (ORR of 73% (95% confidence interval (CI]): 67.0% to 
78.3%), and the CR rate of 53% (95% CI: 46.6% to 59.2%)) were observed 
across all subgroups tested, including elderly subjects, those with 
high burden disease or high baseline inflammatory biomarkers, those 
requiring anti-lymphoma therapy for disease control, as well as rare 
patient populations with a high unmet medical need (for example, PMBCL, 
DLBCL transformed from indolent lymphoma other than FL, and FL3B). The 
applicant contended that this data supports that Liso-cel demonstrates 
comparable or superior effectiveness compared to existing therapies for 
patients with r/r large B-cell NHL.320 321
---------------------------------------------------------------------------

    \318\ NCCN, 2019.
    \319\ Czuczman MS, Davies A, Linton KM, et al., A Phase \2/3\ 
Multicenter, Randomized Study Comparing the Efficacy and Safety of 
Lenalidomide Versus Investigator's Choice in Relapsed/Refractory 
DLBCL, Blood. 2014; 124: 628 (Czuczman, 2014); Jacobsen ED, Sharman 
JP, Oki Y, et al., Brentuximab vedotin demonstrates objective 
responses in a phase 2 study of relapsed/refractory DLBCL with 
variable CD30 expression, Blood. 2015; 125(9): 1394-1402 (Jacobsen, 
2015); Nagle SJ, Woo K, Schuster SJ, et al., Outcomes of patients 
with relapsed/refractory diffuse large B-cell lymphoma with 
progression of lymphoma after autologous stem cell transplantation 
in the rituximab era, Am. J. Hematol. 2013; 88: 890-894 (Nagle, 
2013); Pettengell R, Coiffier B, Narayanan G, et al., Pixantrone 
dimaleate versus other chemotherapeutic agents as a single-agent 
salvage treatment in patients with relapsed or refractory aggressive 
non-Hodgkin lymphoma: a phase 3, multicenter, open-label, randomised 
trial, Lancet Oncol. 2012; 13: 696-706 (Pettengell, 2012); Rigacci 
L, Puccini B, Cortelazzo S, et al., Bendamustine with or without 
rituximab for the treatment of heavily pretreated non-Hodgkin's 
lymphoma patients, Ann Hematol. 2012; 91: 1013-1022 (Rigacci, 2012); 
Van Den Neste E, Schmitz N, Mounier N, et al., Outcome of patients 
with relapsed diffuse large B-cell lymphoma who fail second-line 
salvage regimens in the International CORAL study, Bone Marrow 
Transplantation. 2016; 51: 51-57 (Van Den Neste, 2016); Wang M, 
Fowler N, Wagner-Bartak N, et al., Oral lenalidomide with rituximab 
in relapsed or refractory diffuse large cell, follicular and 
transformed lymphoma: a phase II clinical trial, Leukemia. 2013; 27: 
1902-1909 (Wang, 2013).
    \320\ YESCARTA[supreg] USPI (2019).
    \321\ KYMRIAH[supreg] USPI (2018).
---------------------------------------------------------------------------

    Furthermore, the applicant stated that Liso-cel had an improved 
safety profile in comparison to YESCARTA[supreg] and KYMRIAH[supreg]. 
The applicant stated that both of these FDA-approved CAR T-cell 
therapies had higher rates of toxicity as compared to Liso-cel. In the 
TRANSCEND NHL 001 registrational study (n=268), 42% and 2% of subjects 
developed all-grade and Grade >3 CRS, respectively, and 30% and 10% 
developed all-grade and Grade >3 NT. The applicant compared these 
results to the results of the JULIET study as found in 
KYMRIAH's[supreg] prescribing information and summarized that 
KYMRIAH[supreg] had higher rates of all-grade and Grade >3 CRS (74% and 
23%, respectively) and all-grade and Grade >3 NT (58% and 18%, 
respectively). The applicant provided the same comparison of the 
toxicity results of Liso-cel to the results showcased in the ZUMA-1 
study featuring YESCARTA[supreg] as found in YESCARTA[supreg]'s 
prescribing information and summarized that YESCARTA[supreg] had higher 
rates of all-grade and Grade >3 CRS (94% and 13%, respectively) and 
all-grade and Grade >3 NT (87% and 31%, 
respectively).322 323
---------------------------------------------------------------------------

    \322\ YESCARTA[supreg] USPI (2019).
    \323\ KYMRIAH[supreg] USPI (2018).
---------------------------------------------------------------------------

    After reviewing the information submitted by the applicant as part 
of its

[[Page 32652]]

FY 2021 new technology add-on payment application, we are concerned 
that no published studies directly comparing Liso-cel and the two 
currently available CAR T-cell therapies for r/r DLBCL, 
YESCARTA[supreg] and KYMRIAH[supreg], were provided. Additionally, we 
are concerned with the lack of long-term data supporting the 
effectiveness and efficacy of Liso-cel and whether the lack of long-
term data may limit the generalizability of the findings from the 
TRANSCEND NHL 001 study to the general Medicare population. While there 
is no direct comparison study of Liso-cel, YESCARTA[supreg] and 
KYMRIAH[supreg], the applicant does provide a comparison of the ORR, 
CR, PR and DOR across all three CAR T-cell therapies. While we note 
that Liso-cel does appear to provide an improved ORR, CR, PR, and DOR 
compared to the other FDA-approved CAR T-cell therapies based on the 
data presented by the applicant, we further note that these differences 
appear to be small in magnitude, between 1-2% for the ORR, CR, and PR. 
Without a direct comparison of outcomes between these therapies, we are 
concerned as to whether these differences translate to clinically 
meaningful differences or improvements. Liso-cel appears to demonstrate 
similar patient outcomes to that of YESCARTA[supreg] and we question 
whether the TRANSCEND NHL 001 study is evidence that Liso-cel is a more 
effective therapy to treat DLBCL over existing CAR T-cell therapies. 
Additionally, as previously discussed, the applicant noted that Liso-
cel has been shown safe and effective for patient populations excluded 
from registrational trials for YESCARTA[supreg] and KYMRIAH[supreg]. 
However, it is unclear whether this suggests that Liso-cel is a 
treatment option for patients who cannot be treated with these existing 
CAR-T cell therapies, given that the FDA label for YESCARTA[supreg] and 
KYMRIAH[supreg] appears to not specifically exclude these patient 
populations. Finally, we are concerned that the use of the EGFRt cell 
surface tag was not activated in patients receiving Liso-cel to study 
the impact of clearing these CAR T-cells after remission and that this 
feature has not yet been tested on humans or in conjunction with 
patients treated with Liso-cel. We express concern regarding the safety 
and efficacy of this feature given its lack of testing.
    We are inviting public comments on whether Liso-cel meets the 
substantial clinical improvement criterion.
    We did not receive any written comments in response to the New 
Technology Town Hall meeting notice published in the Federal Register 
regarding the substantial clinical improvement criterion for Liso-cel 
or at the New Technology Town Hall meeting.
k. Soliris
    Alexion, Inc, submitted an application for new technology add-on 
payments for Soliris[supreg] (eculizumab) for FY 2021. Soliris[supreg] 
is approved for the treatment of neuromyelitis optica spectrum disorder 
(NMOSD) in adult patients who are anti-aquaporin-4 (AQP4) antibody 
positive.
    According to the applicant, NMOSD is a rare and severe condition 
that attacks the central nervous system without warning. The applicant 
explained that NMOSD attacks, also referred to as relapses, can cause 
progressive and irreversible damage to the brain, optic nerve and 
spinal cord, which may lead to long-term disability, and in some 
instances, the damage may result in death. According to the applicant, 
the serious nature of an NMOSD relapse frequently requires inpatient 
hospitalization and treatment should be initiated as quickly as 
possible.
    According to the applicant, in patients with AQP4 antibody-positive 
NMOSD, the body's own immune system can turn against itself to produce 
auto-antibodies against AQP4, a protein on certain cells in the eyes, 
brain and spinal cord that are critical for the survival of nerve 
cells. The applicant explained that the binding of these anti-AQP4 
auto-antibodies activates the complement cascade, another part of the 
immune system.
    According to the applicant, complement activation by anti-AQP4 
auto-antibodies is one of the primary causes of NMOSD. The applicant 
explained that formation of membrane attack complex (MAC) is the end 
product of the activated complement system which is directly 
responsible for the damage to astrocytes leading to astrocytopathy 
(astrocyte death) and ensuing neurologic damage associated with NMOSD 
and relapses. According to the applicant, the primary goal of NMOSD 
treatment is to prevent these relapses, which over time lead to 
irreversible neurologic damage.
    According to the applicant, Soliris[supreg] is a first-in-class 
complement inhibitor that works by selectively inhibiting the 
complement system, a central part of the immune system involved in 
inflammatory processes, pathogen elimination, activation of the 
adaptive immune response, and maintenance of homeostasis. The applicant 
explained that the complement system distinguishes between healthy host 
cells, cell debris, apoptotic cells, and external pathogens. The 
applicant further explained that the complement system triggers a 
modulated immune response, and functions through a combination of 
effector proteins, receptors, and regulators. The applicant asserted 
that when the complement system detects a threat, an initial protease 
is activated. This protease (either alone or in a complex) then cleaves 
its target, which in turn becomes active and starts to cleave the next 
target in the chain, and so on, leading to a cascade.
    Per the applicant, initial activation of the complement system 
occurs via three different pathways, which all ultimately lead to the 
formation of the membrane attack complex (MAC) and release of the 
anaphylatoxins: (1) The classical pathway is activated by antibody-
antigen complexes; (2) The alternative pathway is activated at a 
constant low level via ``tick-over'' (spontaneous hydrolysis) of 
Complement component 3 (C3), a protein of the immune system; (3) The 
lectin pathway is activated by carbohydrates frequently found on the 
surface of microbes. According to the applicant, all pathways of 
complement activation result in the formation of C3 convertase 
(``proximal complement''), and converge at the cleavage of C5 leading 
to the generation of C5a and C5b by the C5 convertase enzyme complexes 
(``Terminal complement''). The applicant explained that C3 is the most 
abundant complement protein in plasma, occurring at a concentration of 
1.2 mg/mL and C3 cleavage products bridge the innate and the adaptive 
immune systems. The applicant also explained that C3a acts as an 
anaphylatoxin and is a mediator of inflammatory processes and C3b 
opsonizes the surface of recognized pathogens and facilitates 
phagocytosis and binds C3 convertase to form C5 convertase. The 
applicant also explained that C5 convertase cleaves C5 into C5a and 
C5b; C5a is chemotactic agent and anaphylatoxin, causing leukocyte 
activation, endothelial cell activation, and proinflammatory and 
prothrombotic effects.
    According to the applicant, imbalance between complement activation 
and regulation leads to host tissue damage, and congenital deficiencies 
in the complement system can lead to an increased susceptibility to 
infection. The applicant explained that the complement system is also 
associated with the pathogenesis of non-infectious diseases such as 
chronic inflammation, autoimmune diseases, thrombotic

[[Page 32653]]

microangiopathy, transplant rejection reactions, ischemic, 
neurodegenerative age-associated diseases, and cancer. According to the 
applicant, the complement system is also recognized as important in the 
antibody-mediated autoimmune disease AQP4 antibody-positive NMOSD. The 
applicant stated that Soliris[supreg] is the first and only FDA 
approved treatment for adult patients with NMOSD who are AQP4 antibody-
positive that is proven to reduce the risk of relapse.
    The incidence of NMOSD in the United States is 0.7/100,000 while 
the prevalence is 3.9/100,000 population.\324\ The median onset of 
NMOSD is 39 years of age and 83 percent of cases are 
female.325 326 NMOSD was commonly misdiagnosed as multiple 
sclerosis (MS) in the past.\327\ According to the applicant, at least 
two-thirds of NMOSD cases are associated with aquaporin-4 antibodies 
(AQP4-IgG) and complement-mediated damage to the central nervous 
system.
---------------------------------------------------------------------------

    \324\ Flanagan EP, et al., ``Epidemiology of aquaporin-4 
autoimmunity and neuromyelitis optica spectrum,'' Ann Neurol, 2016, 
vol. 79(5), pp. 775-783.
    \325\ Bukhari W, et al., ``Incidence and prevalence of NMOSD in 
Australia and New Zealand,'' J Neurol Neurosurg Psychiatry, 2017, 
vol. 88(8), pp. 632-638.
    \326\ Wingerchuk DM, et al., ``The spectrum of neuromyelitis 
optica,'' Lancet Neurol, 2007, vol. 6, pp. 805-815.
    \327\ Jarius S, et al., ``Contrasting disease patterns in 
seropositive and seronegative neuromyelitis optica: A multicentre 
study of 175 patients,'' J Neuroinflammation, 2012, vol. 9, pp. 14.
---------------------------------------------------------------------------

    According to the applicant, Soliris[supreg] is administered via an 
IV infusion by a healthcare professional. The applicant explained that 
for adult patients with neuromyelitis optica spectrum disorder, 
Soliris[supreg] therapy consists of 900 mg weekly for the first 4 
weeks, followed by 1200 mg for the fifth dose 1 week later, then 1200 
mg every 2 weeks thereafter. According to the applicant, 
Soliris[supreg] should be administered at the recommended dosage 
regimen time points, or within 2 days of these time points. The 
applicant also explained that for adult and pediatric patients with 
NMOSD, supplemental dosing of Soliris[supreg] is required in the 
setting of concomitant plasmapheresis or plasma exchange, or fresh 
frozen plasma infusion (PE/PI).
    The applicant explained that Soliris[supreg] has a boxed warning 
for risk of serious meningococcal infections. According to the 
applicant, life-threatening and fatal meningococcal infections have 
rarely occurred in patients treated with Soliris[supreg] and can be 
mitigated with proper vaccination. The applicant explained that by 
blocking the terminal complement system, Soliris[supreg] increases the 
risk of meningococcal and encapsulated bacterial infection. According 
to the applicant, all the patients in a pivotal trial received 
meningococcal vaccination, and no cases of meningococcal infection were 
reported. The applicant also noted that Soliris[supreg] is available 
only through a restricted program under a Risk Evaluation and 
Mitigation Strategy (REMS) and under the Soliris[supreg] REMS, 
prescribers must enroll in the program.
    With respect to the newness criterion, the FDA approved 
Soliris[supreg] for the indication of treatment of NMOSD in adult 
patients who are AQP4 antibody positive on June 27, 2019. 
Soliris[supreg] was first approved by the FDA on March 19, 2007 for the 
treatment of patients with paroxysmal nocturnal hemoglobinuria (PNH) to 
reduce hemolysis, followed by approvals for the treatment of patients 
with atypical hemolytic uremic syndrome (aHUS) to inhibit complement 
mediated thrombotic microangiopathy, and for an efficacy supplement to 
add the indication of treatment of generalized myasthenia gravis (gMG) 
in adult patients who are anti-acetylcholine receptor (AChR) antibody 
positive. The applicant has applied for new technology add-on payments 
for use of Soliris[supreg] only for the indication of treatment of 
NMOSD in adult patients who are AQP4 antibody positive. The applicant 
stated that the FDA granted Soliris[supreg] Orphan Drug Designation for 
the treatment of neuromyelitis optica on June 24, 2014. Additionally, 
the applicant stated that Soliris[supreg] was filed as a supplemental 
biologics license application (sBLA; BLA125166/S-431) for the treatment 
of NMOSD in adult patients who are AQP4 antibody positive, which the 
FDA assigned Priority Review status.
    According to the applicant, patients with NMOSD are currently 
identified by ICD-10-CM diagnosis code: G36.0 Neuromyelitis optica 
(Devic's syndrome). The applicant also noted that there is currently no 
ICD-10-PCS procedure code to specifically identify NMOSD cases where 
Soliris[supreg] is used. We note that the applicant has submitted a 
request for approval for a unique ICD-10-PCS procedure code for the 
administration of the Soliris[supreg] beginning in FY 2021.
    As stated previously, if a technology meets all three of the 
substantial similarity criteria, it would be considered substantially 
similar to an existing technology and, therefore, would not be 
considered ``new'' for purposes of new technology add-on payments.
    With regard to the first criterion, whether a product uses the same 
or similar mechanism of action to achieve a therapeutic outcome, 
according to the applicant, Soliris[supreg] is the only treatment for 
NMOSD that works by specifically inhibiting the complement cascade as 
described previously. According to the applicant, Soliris[supreg] is 
the only FDA approved treatment for NMOSD, although several off-label 
products are used to treat relapse prevention in NMOSD. As mentioned 
previously, the applicant explained that the formation of the membrane 
attack complex (MAC) is the end product of the activated complement 
system which is directly responsible for the damage to astrocytes 
leading to astrocytopathy (astrocyte death) and the ensuing neurologic 
damage associated with NMOSD and relapses.
    With respect to the second criterion, whether a product is assigned 
to the same or a different MS-DRG, the applicant stated that cases 
involving the administration of Soliris[supreg] will likely be assigned 
to the same MS-DRGs as other therapies are that are currently used but 
not indicated to treat NMOSD. These therapies that are used off-label 
include axiothiprine, rituximab, low-dose steroids (prednisone), 
mycophenolate, methotrexate, mitoxantrone, cyclophosphamide, 
tacrolimus, tocilizumab, cyclosporin A, and plasma exchange. As stated 
previously, the applicant asserted that Soliris[supreg] is the first 
approved treatment for NMOSD in adult patients who are AQP4 antibody 
positive.
    With respect to the third criterion, whether the new use of the 
technology involves the treatment of the same or similar type of 
disease and the same or similar patient population, the applicant 
maintained that, although Soliris[supreg] will be treating the same 
disease and patient population as currently available therapies, it 
will improve the treatment of NMOSD as there were previously no FDA 
labeled treatments. As stated previously, the applicant asserted that 
Soliris[supreg] is the first approved treatment for NMOSD in adult 
patients who are AQP4 antibody positive.
    In summary, the applicant asserted that Soliris[supreg] meets the 
newness criterion because it is the only treatment for NMOSD that works 
by specifically inhibiting the complement cascade. We are inviting 
public comments on whether Soliris[supreg] is substantially similar to 
other technologies and whether Soliris[supreg] 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. The applicant searched claims in the FY 2018 MedPAR final 
rule dataset

[[Page 32654]]

reporting an ICD-10-CM diagnosis code of G36.0. This search identified 
1,151 cases primarily spanning 14 MS-DRGs. According to the applicant, 
cases representing patients who may be eligible for treatment with 
Soliris[supreg] for NMOSD would most likely map to MS-DRGs 058, 059 and 
060 (Multiple Sclerosis and Cerebellar Ataxia with MCC, with CC and 
without CC/MCC, respectively)--the family of MS-DRGs for multiple 
sclerosis & cerebellar ataxia. According to the applicant, these three 
MS-DRGs were three of the top four MS-DRGs by volume to which cases 
reporting a diagnosis code G36.0 were assigned, and together these MS-
DRGs accounted for about 32 percent of the 1,151 originally identified 
cases reporting a diagnosis code G36.0. Consequently, the applicant 
limited its analysis to the 376 cases that grouped to these three MS-
DRGs (058, 059 and 060).
    The applicant performed its cost analysis based on the 376 claims 
assigned to MS-DRGs 058, 059 and 060. The applicant first removed 
charges for other technologies. According to the applicant, 
Soliris[supreg] would replace other drug therapies, such as 
azathioprine, methotrexate, and rituximab, among others. Because it is 
generally not possible to differentiate between different drugs on 
inpatient claims, the applicant removed all charges in the drug cost 
center. The applicant also removed all charges from the blood cost 
center, because Soliris[supreg] will replace plasma exchange 
procedures. Lastly, the applicant removed an additional $12,000 of cost 
for the plasma exchange procedural costs, based on an internal analysis 
of the average cost of plasma exchange. To convert these costs to 
charges, the applicant used the ``other services'' national average 
cost-to-charge ratio (0.346). According to the applicant, this was 
likely an overestimate of the charges that would be replaced by using 
Soliris[supreg].
    After removing charges for the prior technology to be replaced, the 
applicant standardized the charges. The applicant then used the 2-year 
inflation factor of 11.1 percent, as published in the FY 2020 IPPS 
final rule (84 FR 42629), to inflate the charges from FY 2018 to FY 
2020. To determine the charges for Soliris[supreg], the applicant 
assumed hospitals would use the inverse of the national average cost to 
charge ratio for pharmacy costs (0.189) from the FY 2020 IPPS/LTCH PPS 
final rule to mark-up charges.
    Based on the aforementioned analysis, the applicant computed a 
final inflated average case-weighted standardized charge per case of 
$72,940, as compared to a calculated threshold value of $44,420. 
Because the final inflated average case-weighted standardized charge 
per case exceeded the average case-weighted threshold amount, the 
applicant asserted that the technology meets the cost criterion. We are 
inviting public comments on whether Soliris[supreg] meets the cost 
criterion.
    With respect to the substantial clinical improvement criterion, the 
applicant asserted that Soliris[supreg] represents a substantial 
clinical improvement over existing technologies because it 
significantly improves clinical outcomes relative to services or 
technologies previously available, as demonstrated by the applicant's 
clinical data and patient outcomes, such as the prevention of relapses 
in patients with NMOSD.
    The applicant provided a randomized, controlled trial in support of 
its claims of reduction of first-adjudicated on-trial relapse with 
Soliris[supreg] (PREVENT).\328\ The PREVENT study enrolled 143 adults 
who were randomly assigned in a 2:1 ratio to receive intravenous 
eculizumab (at a dose of 900 mg weekly for the first four doses 
starting on day 1, followed by 1200 mg every 2 weeks starting at week 
4) or a matched placebo. The continued use of stable-dose 
immunosuppressive therapy was permitted. The primary endpoint studied 
was first adjudicated relapse. Secondary outcomes included the 
adjudicated annualized relapse rate, quality-of-life measures, and the 
score on the Expanded Disability Status Scale (EDSS), which ranges from 
0 (no disability) to 10 (death). Adjudicated relapses occurred in 3 of 
96 patients (3 percent) in the Soliris[supreg] group and 20 of 47 (43 
percent) in the placebo group (hazard ratio, 0.06; 95 percent 
confidence interval [CI], 0.02 to 0.20; P<0.001). The adjudicated 
annualized relapse rate was 0.02 in the eculizumab group and 0.35 in 
the placebo group (rate ratio, 0.04; 95 percent CI, 0.01 to 0.15; 
P<0.001). The applicant also explained that 97.9 percent of patients on 
Soliris[supreg] remained NMOSD relapse free at 48 weeks, 96.4 percent 
at 96 weeks and 96.4 percent at 144 weeks. There was no significant 
between-group difference in measures of disability progression. The 
mean change in the EDSS score was -0.18 in the eculizumab group and 
0.12 in the placebo group (least-squares mean difference, -0.29; 95% 
CI, -0.59 to 0.01).
---------------------------------------------------------------------------

    \328\ Pittock, S.J., Berthele, A., Fujihara, K., Kim, H.J., 
Levy, M., Palace, J., Nakashima, I., Terzi, M., Totolyan, N., 
Viswanathan, S., Wang, K.C., Pace, A., Futita, K.P., Armstrong, R., 
Wingerchuk, D.M., ``Eculizumab in Aquaporin-4-Positive Neuromyelitis 
Optica Spectrum Disorder.'' N Engl J Med., 2019, vol 381(7), pp., 
614-625.
---------------------------------------------------------------------------

    The applicant also submitted a poster presentation of post hoc 
efficacy analyses in pre-specified subgroups from the PREVENT 
study.\329\ Pre-specified subgroup summaries for time to first 
adjudicated relapse were based on immunosuppressive therapies (IST) use 
(five subgroups for concomitant IST use; two subgroups according to 
whether or not rituximab was previously used), geographic region, age, 
sex, race and randomization stratum. Time to first adjudicated relapse 
was increased with eculizumab compared with placebo in all subgroups 
analyzed. Significant treatment effects were observed in all subgroups 
for IST use, region, age, sex and race, except for the smallest 
subgroups in which the differences were similar to the others but did 
not reach nominal significance owing to small sizes (patients using 
other ISTs, n = 7; Black/African American patients, n = 17, among whom 
none of the nine patients receiving eculizumab experienced a relapse), 
and in patients from the Americas owing to the performance of the 
placebo arm. In patients who had received rituximab more than 3 months 
before the study, the adjudicated relapse risk reduction was 90.7 
percent with eculizumab compared with placebo (p = 0.0055). The 
proportion of patients who were relapse-free at week 48 was 
consistently higher with eculizumab than with placebo in all pre-
specified IST subgroups.
---------------------------------------------------------------------------

    \329\ Pittock, S.J., Berthele, A., Fujihara, K., Kim, H.J., 
Levy, M., Palace, J., Nakashima, I., Terzi, M., Totolyan, N., 
Viswanathan, S., Wang, K.C., Pace, A., Futita, K.P., Yountz, M., 
Armstrong, R., Wingerchuk, D.M., ``Subgroup analyses from the phase 
3 PREVENT study in patients with aquaporin-4 antibody-positive 
neuromyelitis optica spectrum disorder,'' September 11-13, 2019, 
Poster presentation at ECTRIMS, Stockholm, Sweden.
---------------------------------------------------------------------------

    As stated previously the applicant asserted that Soliris[supreg] 
represents a substantial clinical improvement over existing 
technologies because it reduces relapses in patients with NMOSD. The 
applicant explained that the PREVENT study demonstrated several 
endpoints. The applicant explained that Soliris[supreg] reduced first 
adjudicated on-trial relapse with eculizumab in comparison to placebo 
with a 94 percent relative risk reduction (Hazard Ratio, 0.006; 95% CI, 
0.02-0.20). The applicant also explained that 97.9 percent of 
Soliris[supreg] patients were relapse free at 48 weeks, compared to 
63.2 percent for the placebo group. The applicant further noted that in 
a subgroup of patients utilizing monotherapy (patients on eculizumab or 
placebo only, without

[[Page 32655]]

concomitant immunosuppressant agents), 100 percent of Soliris[supreg] 
patients were relapse free at 48 weeks compared to 60.6 percent for 
placebo. The applicant also explained that in the PREVENT subgroup 
analysis presented as a poster, the treatment effect was observed 
regardless of whether it was used as a monotherapy or with concomitant 
ISTs (corticosteroids alone, azathioprine, mycophenolate mofetil); 
previous IST use (including rituximab); geographical region; age; sex; 
and race.
    The applicant also explained that the Soliris[supreg] U.S. 
Prescribing Information contains the following information on resource 
utilization in the applicant's phase III trials (corticosteroid use, 
plasma exchange treatment, and hospitalizations): Compared to placebo-
treated patients, the PREVENT study showed that Soliris[supreg]-treated 
patients had reduced annualized rates of (1) hospitalizations (0.04 for 
Soliris[supreg] versus 0.31 for placebo), (2) of corticosteroid 
administration to treat acute relapses (0.07 for Soliris[supreg] versus 
0.42 for placebo), and (3) of plasma exchange treatments (0.02 for 
Soliris[supreg] versus 0.19 for placebo). The applicant explained that 
annualized rates were calculated by dividing the total number of on-
trial relapses requiring acute treatment during the study period for 
all patients by the number of patient-years in the study period.
    After reviewing the information submitted by the applicant as part 
of its FY 2021 new technology add-on payment application for Soliris, 
we are concerned that the applicant provided only one study in support 
of its assertions of substantial clinical improvement, which is the 
PREVENT trial, with additional supporting documents all based on the 
same trial. We note that the study compared Soliris to placebo but that 
there was no comparison of Soliris to currently available treatments to 
gauge real world efficacy, nor was there information about how these 
current treatments work and why they are ineffective. Furthermore, in 
the PREVENT trial, the applicant did not provide the dosage amounts for 
the patients on continuing medication in addition to placebo or 
Soliris. It is not clear to us if the patients receiving Soliris had 
higher dosages of continuing medications than those in the placebo 
group. We would be interested in more information about the dosage 
amounts in the treatment and control groups in the PREVENT trial. We 
are inviting public comment on whether Soliris[supreg] technology meets 
the substantial clinical improvement criterion.
    We did not receive any written comments in response to the New 
Technology Town Hall meeting notice published in the Federal Register 
regarding the substantial clinical improvement criterion for 
Soliris[supreg] or at the New Technology Town Hall meeting.
l. SpineJack[supreg] System
    Stryker, Inc., submitted an application for new technology add-on 
payments for the SpineJack[supreg] Expansion Kit (hereinafter referred 
to as the SpineJack[supreg] system) for FY 2021. The applicant 
described the SpineJack[supreg] system as an implantable fracture 
reduction system, which is indicated for use in the reduction of 
painful osteoporotic vertebral compression fractures (VCFs) and is 
intended to be used in combination with Stryker VertaPlex and VertaPlex 
High Viscosity (HV) bone cement.
    The applicant explained that the SpineJack[supreg] system is 
designed to be implanted into a collapsed vertebral body (VB) via a 
percutaneous transpedicular approach under fluoroscopic guidance. 
According to the applicant, once in place, the intravertebral implants 
are expanded to mechanically restore VB height and maintain the 
restoration. The applicant explained that the implants remain within 
the VB and, together with the delivered bone cement, stabilize the 
restoration, provide pain relief and improve patient mobility. 
According to the applicant, the SpineJack[supreg] system further 
reduces the risk of future adjacent level fractures (ALFs).\330\
---------------------------------------------------------------------------

    \330\ Noriega, D., et al., ``A prospective, international, 
randomized, noninferiority study comparing an implantable titanium 
vertebral augmentation device versus balloon kyphoplasty in the 
reduction of vertebral compression fractures (SAKOS study),'' The 
Spine Journal, November 2019, vol 19(11), pp. 1782-1795.
---------------------------------------------------------------------------

    The applicant explained that the SpineJack[supreg] system is 
available in three sizes (4.2, 5.0 and 5.8 mm), and implant size 
selection is based upon the internal cortical diameter of the pedicle. 
According to the SpineJack[supreg] system Instructions for Use, the use 
of two implants is recommended to treat a fractured VB. According to 
the applicant, multiple VBs can also be treated in the same operative 
procedure as required.
    The applicant explained that using a bilateral transpedicular 
approach, the SpineJack[supreg] implants are inserted into the 
fractured VB. The applicant stated that the implants are then 
progressively expanded though actuation of an implant tube that pulls 
the two ends of the implant towards each other in situ to mechanically 
restore VB height. The applicant explained that the mechanical working 
system of the implant allows for a progressive and controlled reduction 
of the vertebral fracture.\331\ The applicant stated that when 
expanded, each SpineJack[supreg] implant exerts a lifting pressure on 
the fracture through a mechanism that may be likened to the action of a 
scissor car jack, and that the longitudinal compression on the implant 
causes it to open in a craniocaudal direction. The applicant explained 
that the implant is locked into the desired expanded position as 
determined and controlled by the treating physician.\332\
---------------------------------------------------------------------------

    \331\ Vanni D., et al., ``Third-generation percutaneous 
vertebral augmentation systems,'' J. Spine Surg., 2016, vol. 2(1), 
pp. 13-20.
    \332\ Noriega D. et al., ``Clinical Performance and Safety of 
108 SpineJack Implantations: 1-Year Results of a Prospective 
Multicentre Single-Arm Registry Study,'' BioMed Res. Int., 2015, 
vol. 173872.
---------------------------------------------------------------------------

    The applicant further explained that once the desired expansion has 
been obtained, polymethylmethacrylate (PMMA) bone cement is injected at 
low pressure into and around the implant to stabilize the restored 
vertebra, which leads the implant to become encapsulated with the 
delivered bone cement. According to the applicant, restoration of the 
anatomy and stabilization of the fracture results in pain relief as 
well as improved mobility for the patient.\333\
---------------------------------------------------------------------------

    \333\ Ibid.
---------------------------------------------------------------------------

    According to the applicant, osteoporosis is one of the most common 
bone diseases worldwide that disproportionately affects aging 
individuals. The applicant explained that in 2010, approximately 54 
million Americans aged 50 years or older had osteoporosis or low bone 
mass,\334\ which resulted in more than 2 million osteoporotic fragility 
fractures in that year alone.\335\ The applicant stated it has been 
estimated that more than 700,000 VCFs occur each year in the United 
States (U.S.),\336\ and of these VCFs, about 70,000 result in hospital 
admissions with an average length of stay of 8 days per patient.\337\

[[Page 32656]]

Furthermore, the applicant noted that in the first year after a painful 
vertebral fracture, patients have been found to require primary care 
services at a rate 14 times greater than the general population.\338\ 
The applicant explained that medical costs attributed to VCFs in the 
U.S. exceeded $1 billion in 2005 and are predicted to surpass $1.6 
billion by 2025.\339\
---------------------------------------------------------------------------

    \334\ National Osteoporosis Foundation. (2019). What is 
osteoporosis and what causes it? Available from: https://www.nof.org/patients/what-is-osteoporosis/.
    \335\ King A and Fiorentino D. ``Medicare payment cuts for 
osteoporosis testing reduced use despite tests' benefit in reducing 
fractures.'' Health Affairs (Millwood), 2011, vol. 30(12), pp. 2362-
2370.
    \336\ Riggs B and Melton L. ``The worldwide problem of 
osteoporosis: Insights afforded by epidemiology.'' Bone, 1995, vol. 
17(Suppl 5), pp. 505-511.
    \337\ Siemionow K and Lieberman I. ``Vertebral augmentation in 
osteoporotic and osteolytic fractures: Current Opinion in Supportive 
and Palliative Care.'' 2009, vol. 3(3), pp. 219-225.
    \338\ Wong C and McGirt M. ``Vertebral compression fractures: A 
review of current management and multimodal therapy.'' Journal of 
Multidisciplinary Healthcare, 2013, vol 6, pp. 205-214.
    \339\ Burge R et al. ``Incidence and economic burden of 
osteoporosis-related fractures in the United States: 2005-2025.'' 
Journal of Bone and Mineral Research. 2007, vol 22(3), pp. 465-475.
---------------------------------------------------------------------------

    The applicant explained that osteoporotic VCFs occur when the 
vertebral body (VB) of the spine collapses and can result in chronic 
disabling pain, excessive kyphosis, loss of functional capability, 
decreased physical activity and reduced quality of life. The applicant 
stated that as the spinal deformity progresses, it reduces the volume 
of the thoracic and abdominal cavities, which may lead to crowding of 
internal organs. The applicant noted that the crowding of internal 
organs may cause impaired pulmonary function, abdominal protuberance, 
early satiety and weight loss. The applicant indicated that other 
complications may include bloating, distention, constipation, bowel 
obstruction, and respiratory disturbances, such as pneumonia, 
atelectasis, reduced forced vital capacity and reduced forced 
expiratory volume in 1 second.
    The applicant stated that if VB collapse is >50 percent of the 
initial height, segmental instability will ensue. As a result, the 
applicant explained that adjacent levels of the VB must support the 
additional load and this increased strain on the adjacent levels may 
lead to additional VCFs. Furthermore, the applicant summarized that 
VCFs also lead to significant increases in morbidity and mortality risk 
among elderly patients, as evidenced by a 2015 study by Edidin et al., 
in which researchers investigated the morbidity and mortality of 
patients with a newly diagnosed VCF (n = 1,038,956) between 2005 to 
2009 in the U.S. Medicare population. For the osteoporotic VCF 
subgroup, the adjusted 4-year mortality was 70 percent higher in the 
conservatively managed group than in the balloon kyphoplasty procedures 
(BKP)-treated group, and 17 percent lower in the BKP group than in the 
vertebroplasty (VP) group. According to the applicant, when evaluating 
treatment options for osteoporotic VCFs, one of the main goals of 
treatment is to restore the load bearing bone fracture to its normal 
height and stabilize the mechanics of the spine by transferring the 
adjacent level pressure loads across the entire fractured vertebra and 
in this way, the intraspinal disc pressure is restored and the risk of 
adjacent level fractures (ALFs) is reduced.
    The applicant explained that treatment of osteoporotic VCFs in 
older adults most often begins with conservative care, which includes 
bed rest, back bracing, physical therapy and/or analgesic medications 
for pain control. According to the applicant, for those patients that 
do not respond to conservative treatment and continue to have 
inadequate pain relief or pain that substantially impacts quality of 
life, vertebral augmentation (VA) procedures may be indicated. The 
applicant explained that VP and BKP are two minimally invasive 
percutaneous VA procedures that are most often used in the treatment of 
osteoporotic VCFs and another VA treatment option includes the use of a 
spiral coiled implant made from polyetheretherketone (PEEK), which is 
part of the Kiva[supreg] system.
    According to the applicant, among the treatment options available, 
BKP is the most commonly performed procedure and the current gold 
standard of care for VA treatment. The applicant stated that it is 
estimated that approximately 73 percent of all vertebral augmentation 
procedures performed in the United States between 2005 and 2010 were 
BKP.\340\ According to the applicant, the utilization of the 
Kiva[supreg] system is relatively low in the U.S. and volume 
information was not available in current market research data.\341\
---------------------------------------------------------------------------

    \340\ Goz V et al. ``Vertebroplasty and kyphoplasty: National 
outcomes and trends in utilization from 2005 through 2010.'' The 
Spine Journal. 2015, vol. 15(5), pp. 959-965.
    \341\ Lin M. ``Minimally invasive vertebral compression fracture 
treatments. Medtech 360, Market Insights, Millennium Research Group. 
2019.
---------------------------------------------------------------------------

    The applicant stated that VA treatment with VP may alleviate pain, 
but it cannot restore VB height or correct spinal deformity. The 
applicant stated that BKP attempts to restore VB height, but the 
temporary correction obtained cannot be sustained over the long-term. 
The applicant stated that the Kiva[supreg] implant attempts to 
mechanically restore VB height, but it has not demonstrated superiority 
to BKP for this clinical outcome.\342\
---------------------------------------------------------------------------

    \342\ Ibid.
---------------------------------------------------------------------------

    With respect to the newness criterion, the SpineJack[supreg] 
Expansion Kit received FDA 510(k) clearance on August 30, 2018, based 
on a determination of substantial equivalence to a legally marketed 
predicate device. The applicant explained that although the 
SpineJack[supreg] Expansion Kit received FDA 510(k) clearance on August 
30, 2018, due to the time required to prepare for supply and 
distribution channels, it was not available on the U.S. market until 
October 11, 2018. As we discussed previously, the SpineJack[supreg] 
Expansion Kit is indicated for use in the reduction of painful 
osteoporotic VCFs and is intended to be used in combination with 
Stryker VertaPlex and VertaPlex High Viscosity (HV) bone cements. 
According to the applicant, there are currently no ICD-10-PCS procedure 
codes to distinctly identify the SpineJack[supreg] system. We note that 
the applicant submitted a request for approval for a unique ICD-10-PCS 
procedure code for the implantation of the SpineJack[supreg] system 
beginning in FY 2021.
    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 therefore would not be considered 
``new'' for purposes of new technology add-on payments.
    With regard to the first criterion, whether a product uses the same 
or similar mechanism of action to achieve a therapeutic outcome, 
according to the applicant, there are several factors that highlight 
the different mechanism of action in treating osteoporotic VCFs with 
the SpineJack[supreg] system compared to other BKP implants to reduce 
the incidence of ALFs and improve midline VB height restoration. 
According to the applicant, these differences include implant 
construction, mechanism of action, bilateral implant load support and 
>500 Newtons (N) of lift pressure.
    The applicant described the SpineJack[supreg] system as including 
two cylindrical implants constructed from Titanium-6-Aluminum-4-
Vanadium (Ti6Al4V) with availability in three sizes 4.2 mm (12.5 mm 
expanded), 5.0 mm (17 mm expanded) and 5.8 mm (20 mm expanded).
    According to the applicant, the SpineJack[supreg] implant exerts 
lifting pressure on the fracture through a mechanism that may be 
likened to the action of a scissor car jack. The applicant explained 
that following the insertion of the implant into the vertebral body 
(VB), it is progressively expanded though actuation of an implant tube 
that pulls the two ends of the implant towards each other and the 
longitudinal compression on the implant causes it to open in a 
craniocaudal direction. According to the

[[Page 32657]]

applicant, the force generated by the bilateral SpineJack[supreg] 
implants varies according to implant size, ranging from 500-1,000 
Newtons for fracture reduction and superior endplate lift. In addition, 
the applicant explained that the SpineJack[supreg] implant provides 
symmetric, broad load support under the fractured endplate and spinal 
column which differentiates the mechanism of action from BKPs.\343\
---------------------------------------------------------------------------

    \343\ Jacobson R et al. ``Re-expansion of osteoporotic 
compression fractures using bilateral SpineJack implants: Early 
clinical experience and biomechanical considerations.'' Cureus. 
2019, vol 11(4), e4572.
---------------------------------------------------------------------------

    The applicant stated that the SpineJack[supreg] implant is uniquely 
constructed from a titanium alloy, which the applicant claims allows 
for plastic deformation when it encounters the hard cortical bone of 
the endplate yet still provides the lift force required to restore 
midline VB height in the fractured vertebra. The applicant stated that 
the SpineJack[supreg] system notably contains a self-locking security 
mechanism that restricts further expansion of the device when extreme 
load forces are concentrated on the implant. As a result, the applicant 
asserted that this feature significantly reduces the risk of vertebral 
endplate breakage while it further allows functional recovery of the 
injured disc.\344\
---------------------------------------------------------------------------

    \344\ Vanni D et al. ``Third-generation percutaneous vertebral 
augmentation systems.'' Journal of Spine Surgery. 2016, vol 2(1), 
pp. 13-20.
---------------------------------------------------------------------------

    According to the applicant, the expansion of the SpineJack[supreg] 
implants creates a preferential direction of flow for the bone cement; 
PMMA bone cement is deployed from the center of the implant into the 
VB. The applicant stated that when two implants are symmetrically 
positioned in the VB, this allows for a more homogenous spread of PMMA 
bone cement. The applicant asserted that the interdigitation of bone 
cement creates a broad supporting ring under the endplate, which is 
essential to confer stability to the VB.
    The applicant explained that the SpineJack[supreg] implants provide 
symmetric, broad load support for osteoporotic vertebral collapse, 
which is based upon precise placement of bilateral ``struts'' that are 
encased in PMMA bone cement, whereas BKP and vertebroplasty (VP) do not 
provide structural support via an implanted device. The applicant 
explained that the inflatable balloon tamps utilized in BKP are not 
made from titanium and are not a permanent implant. According to the 
applicant, the balloon tamps are constructed from thermoplastic 
polyurethane, which have limited load bearing capacity. The applicant 
noted that although the balloon tamps are expanded within the VB to 
create a cavity for bone cement, they do not remain in place and are 
removed before the procedure is completed. The applicant explained that 
partial lift to the VB is obtained during inflation, resulting in 
kyphotic deformity correction and partial gains in anterior VB height 
restoration, but inflatable balloon tamps are deflated prior to removal 
so some of the VB height restoration obtained is lost upon removal of 
the bone tamps. According to the applicant, BKP utilizes the placement 
of PMMA bone cement to stabilize the fracture and does not include an 
implant that remains within the VB to maintain fracture reduction and 
midline VB height restoration.
    According to the applicant the Kiva[supreg] system is constructed 
of a nitinol coil and PEEK-OPTIMA sheath, with sizes including a 4-loop 
implant (12 mm expanded) and a 5-loop implant (15 mm expanded) and 
unlike the SpineJack[supreg] system, is not made of titanium and does 
not include a locking scissor jack design. The applicant stated that 
the specific mechanism of action for the Kiva[supreg] system is 
different from the SpineJack[supreg] system. The applicant explained 
that during the procedure that involves implanting the Kiva[supreg] 
system, nitinol coils are inserted into the VB to form a cylindrical 
columnar cavity. The applicant stated that the PEEK-OPTIMA is then 
placed over the nitinol coil. The applicant explained that the nitinol 
coil is removed from the VB and the PEEK material is filled with PMMA 
bone cement. The applicant stated that the deployment of 5 coils 
equates to a maximum of height of 15 mm. The applicant stated that the 
lifting direction of the Kiva implant is caudate and unidirectional. 
According to the applicant, in the KAST (Kiva Safety and Effectiveness 
Trial) pivotal study, it was reported that osteoporotic VCF patients 
treated with the Kiva[supreg] system had an average of 2.6 coils 
deployed.\345\ Additionally, in a biomechanical comparison conducted 
for the Kiva[supreg] system and BKP using a loading cycle of 200-500 
Newtons in osteoporotic human cadaver spine segments filled with bone 
cement, there were no statistically significant differences observed 
between the two procedures for VB height restoration, stiffness at high 
or low loads, or displacement under compression.\346\
---------------------------------------------------------------------------

    \345\ Tutton S et al. KAST Study: The Kiva system as a vertebral 
augmentation treatment--a safety and effectiveness trial: A 
randomized, noninferiority trial comparing the Kiva system with 
balloon kyphoplasty in treatment of osteoporotic vertebral 
compression fractures. Spine. 2015; 40(12):865-875.
    \346\ Wilson D et al. An ex vivo biomechanical comparison of a 
novel vertebral compression fracture treatment system to 
kyphoplasty. Clinical Biomechanics. 2012; 27(4):346-353.
---------------------------------------------------------------------------

    The applicant summarized the differences and similarities of the 
SpineJack[supreg], BKP, and PEEK coiled implant as follows: (1) With 
respect to construction, SpineJack[supreg] is made of Titanium-6-
Aluminum-4-Vanadium compared to thermoplastic polyurethanes for BKP and 
nitinol and PEEK for the PEEK coiled implant; (2) with respect to 
mechanism of action, the SpineJack[supreg] uses a locking scissor jack 
encapsulated in PMMA bone cement compared to hydrodynamic cavity 
creation and PMMA cavity filler for BKP and coil cavity creation and 
PEEK implant filled with PMMA bone cement for the PEEK coiled implant; 
(3) with respect to plastic deformation, SpineJack[supreg] and BKP 
allow for plastic deformation while the PEEK coiled implant does not; 
(4) with respect to craniocaudal expansion, SpineJack[supreg] allows 
for craniocaudal expansion, whereas BKP and the PEEK coiled implant do 
not; (5) with respect to bilateral load support, SpineJack[supreg] 
provides bilateral load support whereas BKP and the PEEK coiled implant 
do not; and (6) with respect to lift pressure of >500 N, 
SpineJack[supreg] provides lift pressure of >500 N whereas BKP and the 
PEEK coiled implant do not. The applicant summarized that the 
SpineJack[supreg] system is uniquely constructed and utilizes a 
different mechanism of action than BKP, which is the gold standard of 
treatment for osteoporotic VCFs, and that the construction and 
mechanism of action of the SpineJack[supreg] system is further 
differentiated when compared with the PEEK coiled implant.
    With respect to the second criterion, whether a product is assigned 
to the same or a different MS-DRG, the applicant did not specify 
whether it believed cases involving the SpineJack[supreg] system would 
be assigned to the same MS-DRG as existing technology. However, we note 
that the MS-DRGs the applicant included in its cost analysis were the 
same MS-DRGs to which cases involving BKP procedures are typically 
assigned.
    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 did 
not specifically address whether the technology meets this criterion. 
However, the applicant generally

[[Page 32658]]

summarized the disease state that the technology treats as osteoporotic 
VCFs, and described other treatment options for osteoporotic VCFs as 
including VP, BKP and the PEEK coiled implant.
    In summary, the applicant asserted that the SpineJack[supreg] 
system is not substantially similar to any existing technology because 
it utilizes a different mechanism of action, when compared to existing 
technologies, to achieve a therapeutic outcome.
    We are inviting public comments on whether the SpineJack[supreg] 
system is substantially similar to other currently available 
technologies and whether the SpineJack[supreg] system 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. The applicant searched the FY 2018 MedPAR file for inpatient 
hospital claims that reported the following ICD-10-PCS procedure codes: 
0PS43ZZ (Reposition thoracic vertebra, percutaneous approach) in 
combination with 0PU43JZ (Supplement thoracic vertebra with synthetic 
substitute, percutaneous approach) and 0QS03ZZ (Reposition lumbar 
vertebra, percutaneous approach) in combination with 0QU03JZ 
(Supplement lumbar vertebra with synthetic substitute, percutaneous 
approach). According to the applicant, the results included cases 
involving BKP procedures.
    This resulted in 15,352 cases spanning approximately 130 MS-DRGs, 
with approximately 77 percent of those cases (n=11,841) mapping to the 
following top 6 MS-DRGs:
[GRAPHIC] [TIFF OMITTED] TP29MY20.133

    The applicant performed two separate analyses with regard to the 
cost criterion, one based on 100 percent of the claims reporting the 
specified ICD-10-PCS procedure codes, and the second based on the 77 
percent of claims mapping to the top six MS-DRGs.
    The applicant used the following methodology for both analyses. The 
applicant first removed the charges for the prior technology being 
replaced by SpineJack[supreg]. The applicant explained that it 
estimated charges associated with the prior technology as 50 percent of 
the charges associated with the category Medical Surgical Supply Charge 
Amount (which included revenue centers 027x). The applicant stated that 
use of the SpineJack[supreg] system would replace some but not all of 
the device charges included in these claims, as some currently used 
medical and surgical supplies and devices would still be required for 
patients during their hospital stay, even after substituting 
SpineJack[supreg] for BKP and other surgical interventions. The 
applicant stated that it was unable to determine a more specific 
percentage for the appropriate amount of prior medical and surgical 
supply charges to remove from the relevant patient claims, but asserted 
that removing 50 percent of the charges was a conservative approach for 
calculation purposes. The applicant then standardized the charges and 
inflated the charges from FY 2018 to FY 2020. The applicant reported 
using an inflation factor of 11.1 percent, as published in the FY 2020 
IPPS final rule (84 FR 42629).
    The applicant then calculated and added the charges for the 
SpineJack[supreg] technology by taking the estimated per patient cost 
of the device, and converting it to a charge by dividing the costs by 
the national average CCR (cost-to-charge ratio) of 0.299 for 
implantable devices from the FY 2020 IPPS/LTCH PPS final rule (84 FR 
42179).
    In the analysis based on 100 percent of claims, the applicant 
computed a final inflated average case-weighted standardized charge per 
case of $108,760, as compared to an average case-weighted threshold 
amount of $77,395. In the analysis based on 77 percent of claims from 
only the top six MS-DRGs, the applicant computed a final inflated 
average case-weighted standardized charge per case of $92,904, as 
compared to an average case-weighted threshold amount of $72,273.
    Because the final inflated average case-weighted standardized 
charge per case exceeded the average case-weighted threshold amount 
under both analyses described previously, the applicant asserted that 
the technology meets the cost criterion. We are inviting public 
comments on whether the SpineJack[supreg] system meets the cost 
criterion.
    With regard to the substantial clinical improvement criterion, the 
applicant asserted that the treatment of osteoporotic vertebral 
compression fracture (VCF) patients with the SpineJack[supreg] system 
represents a substantial clinical improvement over existing 
technologies because clinical research supports that it reduces future 
interventions, hospitalizations, and physician visits through a 
decrease in adjacent level fractures (ALFs), which the applicant 
asserted are clinically significant adverse events associated with 
osteoporotic VCF. The applicant also asserted that treatment with the 
SpineJack[supreg] system greatly reduces pain scores and pain 
medication use when compared to BKP, which the applicant stated is the 
current gold standard in vertebral augmentation (VA) treatment. The 
applicant submitted eight studies to support that its technology 
represents a substantial clinical improvement over existing 
technologies.
    The applicant explained that the SpineJack[supreg] system has been 
available for the treatment of patients with osteoporotic VCFs for over 
10 years in Europe. The applicant explained that, as a result, the 
SpineJack[supreg] implant has been extensively studied, and claims from 
smaller studies are supported by the results from a recent, larger 
prospective, randomized study known as the SAKOS (SpineJack[supreg] 
versus Kyphoplasty in Osteoporotic Patients) study. The applicant cited 
the SAKOS study \347\ in support of multiple clinical

[[Page 32659]]

improvement claims. The applicant explained that the SAKOS study was 
the pivotal trial conducted in support of the FDA 510(k) clearance for 
the SpineJack[supreg] system and that the intent of the study was to 
compare the safety and effectiveness of the SpineJack[supreg] system 
with the KyphX Xpander Inflatable Bone Tamp (BKP) for treatment of 
patients with painful osteoporotic VCFs in order to establish a non-
inferiority finding for use of the SpineJack[supreg] system versus 
balloon kyphoplasty procedure (BKP).
---------------------------------------------------------------------------

    \347\ Noriega, D., et al., ``A prospective, international, 
randomized, noninferiority study comparing an implantable titanium 
vertebral augmentation device versus balloon kyphoplasty in the 
reduction of vertebral compression fractures (SAKOS study),'' The 
Spine Journal, 2019, vol. 19(11), pp. 1782-1795.
---------------------------------------------------------------------------

    The SAKOS study is a prospective, international, randomized, non-
inferiority study comparing a titanium implantable vertebral 
augmentation device (TIVAD), the SpineJack[supreg] system, versus BKP 
in the reduction of vertebral compression fractures with a 12-month 
follow-up. The primary endpoint was a 12-month responder rate based on 
a composite of three components: (1) Reduction in VCF fracture-related 
pain at 12 months from baseline by >20 mm as measured by a 100-mm 
Visual Analog Scale (VAS) measure, (2) maintenance or functional 
improvement of the Oswestry Disability Index (ODI) score at 12 months 
from baseline, and (3) absence of device-related adverse events or 
symptomatic cement extravasation requiring surgical reintervention or 
retreatment at the index level. If the primary composite endpoint was 
successful, a fourth component (absence of ALF) was added to the three 
primary components for further analysis. If the analysis of this 
additional composite endpoint was successful, then midline target 
height restoration at 6 and 12 months was assessed. According to the 
applicant, freedom from ALFs and midline VB height restoration were two 
additional superiority measures that were tested. According to the 
SAKOS study, secondary clinical outcomes included changes from baseline 
in back pain intensity, ODI score, EuroQol 5-domain (EQ-5D) index score 
(to evaluate quality of life), EQ-VAS score, ambulatory status, 
analgesic consumption, and length of hospital stay. Radiographic 
endpoints included restoration of vertebral body height (mm), and Cobb 
angle at each follow-up visit. Adverse events (AEs) were recorded 
throughout the study period. The applicant explained that researchers 
did not blind the treating physicians or patients, so each group was 
aware of the treatment allocation prior to the procedure; however, the 
three independent radiologists that performed the radiographic reviews 
were blinded to the personal data of the patients, study timepoints and 
results of the study.
    The SAKOS study recruited patients from 13 hospitals across 5 
European countries and randomized 152 patients with osteoporotic 
vertebral compression fractures (OVCFs) (1:1) to either 
SpineJack[supreg] or BKP procedures. Specifically, patients were 
considered eligible for inclusion if they met a number of criteria, 
including (1) at least 50 years of age, (2) had radiographic evidence 
of one or two painful VCF between T7 and L4, aged less than 3 month, 
due to osteoporosis, (3) fracture(s) that showed loss of height in the 
anterior, middle, or posterior third of the VB >=15% but <=40%, and (4) 
patient failed conservative medical therapy, defined as either having a 
VAS back pain score of >=50 mm at 6 weeks after initiation of fracture 
care or a VAS pain score of >=70% mm at 2 weeks after initiation of 
fracture care. Eleven of the originally recruited patients were 
subsequently excluded from surgery (9 randomized to SpineJack[supreg] 
and 2 to BKP). A total of 141 patients underwent surgery, and 126 
patients completed the 12-month follow-up period (61 TIVAD and 65 BKP). 
The applicant contended that despite the SAKOS study being completed 
outside the U.S., results are applicable to the Medicare patient 
population, noting that 82 percent (116 of 141) of the patients in the 
SAKOS trial that received treatment (SpineJack[supreg] system or BKP) 
were age 65 or older. The applicant explained further that the FDA 
evaluated the applicability of the SAKOS clinical data to the U.S. 
population and FDA concluded that although the SAKOS study was 
performed in Europe, the final study demographics were very similar to 
what has been reported in the literature for U.S.-based studies of BKP. 
The applicant also explained that FDA determined that the data was 
acceptable for the SpineJack[supreg] system 510(k) clearance including 
two clinical superiority claims versus BKP.
    The SAKOS study reported that analysis on the intent to treat 
population using the observed case method resulted in a 12-month 
responder rate of 89.8 percent and 87.3 percent, for SpineJack[supreg] 
and BKP respectively (p=0.0016). The additional composite endpoint 
analyzed in observed cases resulted in a higher responder rate for 
SpineJack[supreg] compared to BKP at both 6 months (88.1% vs. 60.9%; 
p<0.0001) and 12 months (79.7% vs. 59.3%; p<0.0001). Midline VB height 
restoration, tested for superiority using a t test with one-sided 2.5 
percent alpha in the ITT population, was greater with SpineJack[supreg] 
than BKP at 6 months (1.142.61 mm vs 0.312.22 
mm; p=0.0246) and at 12 months (1.312.58 mm vs. 0.102.23 mm; p=0.0035), with similar results in the per protocol (PP) 
population.
    Also, according to the SAKOS study, decrease in pain intensity 
versus baseline was more pronounced in the SpineJack[supreg] group 
compared to the BKP group at 1 month (p=0.029) and 6 months (p=0.021). 
At 12 months, the difference in pain intensity was no longer 
statistically significant between the groups, and pain intensity at 5 
days post-surgery was not statistically different between the groups. 
The SAKOS study publication also reported that at each timepoint, the 
percentage of patients with reduction in pain intensity >20 mm was 
>=90% in the SpineJack[supreg] group and >=80% in the BKP group, with a 
statistically significant difference in favor of SpineJack[supreg] at 1 
month post-procedure (93.8% vs 81.4%; p=0.03). The study also 
reported--(1) no statistically significant difference in disability 
(ODI score) between groups during the follow-up period, although there 
was a numerically greater improvement in the SpineJack[supreg] group at 
most time points; (2) at each time point, the percentage of patients 
with maintenance or improvement in functional capacity was at or close 
to 100 percent; and (3) in both groups, a clear and progressive 
improvement in quality of life was observed throughout the 1-year 
follow-up period without any statistically significant between-group 
differences.
    In the SAKOS study, both groups had similar proportions of VCFs 
with cement extravasation outside the treated VB (47.3% for TIVAD, 
41.0% for BKP; p=0.436). No symptoms of cement leakage were reported. 
The SAKOS study also reported that the BKP group had a rate of adjacent 
fractures more than double the SpineJack[supreg] group (27.3% vs. 
12.9%; p=0.043). The SAKOS study also reported that the BKP group had a 
rate of non-adjacent subsequent thoracic fractures nearly 3 times 
higher than the SpineJack[supreg] group (21.9% vs. 7.4%) (a p-value was 
not reported for this result). The most common AEs reported over the 
study period were backpain (11.8 percent with SpineJack[supreg], 9.6 
percent with BKP), new lumbar vertebral fractures (11.8 percent with 
SpineJack[supreg], 12.3 percent with BKP), and new thoracic vertebral 
fractures (7.4 percent with SpineJack[supreg], 21.9 percent with BKP). 
The most frequent SAEs were lumbar vertebral fractures (8.8 percent 
with SpineJack[supreg]; 6.8 percent with BKP) and thoracic vertebral 
fractures (5.9 percent with SpineJack[supreg], 9.6 percent with BKP). 
We

[[Page 32660]]

also note that the length of hospital stay (in days) for osteoporotic 
VCF patients treated in the SAKOS trial was 3.8  3.6 days 
for the SpineJack[supreg] group and 3.3 2.4 days for the 
BKP group (p=0.926, Wilcoxon test).
    The applicant also submitted seven additional studies, which are 
described in more detail in this section, related to the applicant's 
specific assertions regarding substantial clinical improvement.
    As stated previously, the applicant asserted that the 
SpineJack[supreg] system represents a substantial clinical improvement 
over existing technologies because it will reduce future interventions, 
hospitalizations, and physician visits through a decrease in ALFs. The 
applicant explained that ALFs are considered clinically significant 
adverse events associated with osteoporotic VCFs, citing studies by 
Lindsay et al.\348\ and Ross et al.\349\ The applicant explained that 
these studies reported, respectively, that having one or more VCFs 
(irrespective of bone density) led to a 5-fold increase in the 
patient's risk of developing another vertebral fracture, and the 
presence of two or more VCFs at baseline increased the risk of ALF by 
12-fold. The applicant asserted that analysis of the additional 
composite endpoint in the SAKOS study demonstrated statistical 
superiority of the SpineJack[supreg] system over BKP (p<0.0001) for 
freedom from ALFs at both 6 months (88.1 percent vs. 60.9 percent) and 
12 months (79.7 percent vs. 59.3 percent) post-procedure. The applicant 
noted that the results were similar on both the intent to treat and PP 
patient populations. In addition, the applicant asserted the 
SpineJack[supreg] system represents a substantial clinical improvement 
because in the SAKOS study, compared to patients treated with the 
SpineJack[supreg] system, BKP-treated patients had more than double the 
rate of ALFs (27.3 percent vs. 12.9 percent; p=0.043) and almost triple 
the rate of non-adjacent thoracic VCFs (21.9 percent vs. 7.4 percent).
---------------------------------------------------------------------------

    \348\ Lindsay R. et al., ``Risk of new vertebral fracture in the 
year following a fracture,'' Journal of the American Medical 
Association, 2001, vol. 285(3), pp. 320-323.
    \349\ Ross P. et al., Pre-existing fractures and bone mass 
predict vertebral fracture incidence in women. Annals of Internal 
Medicine. 1991, vol. 114(11), pp. 919-923.
---------------------------------------------------------------------------

    The applicant also asserted superiority with respect to mid-
vertebral body height restoration with the SpineJack[supreg] system. 
The applicant explained that historical treatments of osteoporotic VCFs 
have focused on anterior VB height restoration and kyphotic Cobb angle 
correction; however, research indicates that the restoration of middle 
VB height may be as important as Cobb angle correction in the 
prevention of ALFs.\350\ According to the applicant, the depression of 
the mid-vertebral endplate leads to decreased mechanics of the spinal 
column by transferring the person's weight to the anterior wall of the 
level adjacent to the fracture, and as a result the anterior wall is 
the most common location for ALFs. The applicant further asserted that 
by restoring the entire fracture, including mid-VB height, the 
vertebral disc above the superior vertebral endplate is re-pressurized 
and transfers the load evenly, preventing ALFs.\351\ The applicant 
stated that the SpineJack[supreg] system showed superiority over BKP 
with regard to midline VB height restoration at both 6 and 12 months, 
pointing to the SAKOS study results in the intent to treat population 
at 6 months (1.142.61 mm vs 0.312.22 mm; 
p=0.0246) and 12 months (1.312.58 mm vs. 0.102.23 mm; p=0.0035) post-procedure. The applicant noted that 
similar results were also observed in the PP population (134 patients 
in the intent-to-treat population without any major protocol 
deviations).
---------------------------------------------------------------------------

    \350\ Lin J et al. Better height restoration, greater kyphosis 
correction, and fewer refractures of cemented vertebrae by using an 
intravertebral reduction device: A 1-year follow-up study. World 
Neurosurgery. 2016; 90:391-396.
    \351\ Tzermiadianos M., et al., ``Altered disc pressure profile 
after an osteoporotic vertebral fracture is a risk factor for 
adjacent vertebral body fracture,'' European Spine Journal, 2008, 
vol. 17(11), pp. 1522-1530.
---------------------------------------------------------------------------

    The applicant also provided two prospective studies, a 
retrospective study, and two cadaveric studies in support of its 
assertions regarding superior VB height restoration. The applicant 
stated that in a prospective comparative study by Noriega D., et 
al.,\352\ VB height restoration outcomes utilizing the 
SpineJack[supreg] system were durable out to 3 years. This study was a 
safety and clinical performance pilot that randomized 30 patients with 
painful osteoporotic vertebral compression fractures to 
SpineJack[supreg] (n=15) or BKP (n=15).\353\ Twenty-eight patients 
completed the 3-year study (14 in each group). The clinical endpoints 
of analgesic consumption, back pain intensity, ODI, and quality of life 
were recorded preoperatively and through 36-months post-surgery.\354\ 
Spine X-rays were also taken 48 hours prior to the procedure and at 5 
days, 6, 12, and 36 months post-surgery.\355\ The applicant explained 
that over the 3-year follow-up period, VB height restoration and 
kyphosis correction was better compared to BKP, specifically that VB 
height restoration and kyphotic correction was still evident at 36 
months with a greater mean correction of anterior VB height (10  13% vs 2  8% for BKP, p=0.007) and midline VB height 
(10  11% vs 3  7% for BKP, p=0.034), while 
there was a larger correction of the VB angle (-4.97[deg]  
5.06[deg] vs 0.42[deg]  3.43[deg]; p=0.003) for the 
SpineJack[supreg] group. The applicant stated that this study shows 
superiority with regards to VB height restoration.
---------------------------------------------------------------------------

    \352\ Noriega D., et al., ``Long-term safety and clinical 
performance of kyphoplasty and SpineJack procedures in the treatment 
of osteoporotic vertebral compression fractures: a pilot, 
monocentric, investigator-initiated study,'' Osteoporosis 
International, 2019, vol. 30, pp. 637-645.
    \353\ Ibid.
    \354\ Ibid.
    \355\ Ibid.
---------------------------------------------------------------------------

    The applicant asserted that Arabmotlagh M., et al., also supported 
superiority with regard to VB height restoration. Arabmotlagh M., et 
al. reported an observational case series (with no comparison group) of 
SpineJack[supreg]. They enrolled 42 patients with osteoporotic 
vertebral compression fracture of the thoracolumbar, who were 
considered for kyphoplasty, 31 of whom completed the clinical and 
radiological evaluations up to 12 months after the procedure.\356\ 
According to materials provided by the applicant, the purpose of the 
study was to evaluate the efficacy of kyphoplasty with the 
SpineJack[supreg] system to correct the kyphotic deformity and to 
analyze parameters affecting the restoration and maintenance of spinal 
alignment. The applicant explained that the mean VB height calculated 
prior to fracture was 2.8 cm (standard deviation (SD) of 0.47), which 
decreased to 1.5 cm (SD of 0.59) after the fracture. According to the 
applicant, following the procedure performed with the SpineJack[supreg] 
device, the VB height significantly increased to 1.9 cm (SD of 0.64; 
p<0.01), but was reduced to 1.8 cm (SD of 0.61; p<0.01) at 12 months 
post-procedure. We note that according to Arabmotlagh M., et al., these 
results were specifically for mean anterior VB height. The study does 
not appear to report results for midline VB height.\357\ The applicant 
also stated that the mean kyphotic angle (KA) calculated prior to 
fracture was -1[deg] (SD of 5.8), which

[[Page 32661]]

increased to 13.4[deg] (SD of 8.1) after the fracture. The applicant 
also stated that following the procedure performed with the 
SpineJack[supreg] device, KA significantly decreased to 10.8[deg] (SD 
of 9.1; p<0.01); however, KA correction was lost at 12 months post-
procedure with an increase to 13.3[deg] (SD of 9.5; p<0.01).
---------------------------------------------------------------------------

    \356\ Arabmotlagh M., et al., ``Radiological Evaluation of 
Kyphoplasty With an Intravertebral Expander After Osteoporotic 
Vertebral Fracture,'' Journal of Orthopaedic Research, 2018. Doi: 
10.1002.jor.24180.
    \357\ Arabmotlagh M., et al., ``Radiological Evaluation of 
Kyphoplasty With an Intravertebral Expander After Osteoporotic 
Vertebral Fracture,'' Journal of Orthopaedic Research, 2018. Doi: 
10.1002.jor.24180.
---------------------------------------------------------------------------

    The applicant provided a Lin et al., retrospective study of 75 
patients that compared radiologic and clinical outcomes of kyphoplasty 
with the SpineJack[supreg] system to vertebroplasty (VP) in treating 
osteoporotic vertebral compression fractures to support its assertions 
regarding superiority with regard to midline VB height 
restoration.\358\ The applicant stated that the radiologic outcomes 
from this study were: (1) The mean KA and mean KA restoration was more 
efficient after SpineJack[supreg] than VP at all time points (up to 1 
year), except for mean KA observed postoperatively at 1 week; and (2) 
the mean middle VB heights and mean VB height restoration was more 
favorable after SpineJack[supreg] than VP.\359\ We note that this study 
did not compare the SpineJack[supreg] system to BKP, which the 
applicant stated is the gold-standard in vertebral augmentation.
---------------------------------------------------------------------------

    \358\ Lin J., et al., ``Better Height Restoration, Greater 
Kyphosis Correction, and Fewer Refractures of Cemented Vertebrae by 
Using an Intravertebral Reduction Device: a 1-Year Follow-up 
Study,'' World Neurosurg. 2016, vol. 60, pp. 391-396.
    \359\ Ibid.
---------------------------------------------------------------------------

    In the two cadaveric studies, Kruger A., et al. (2013) and Kruger 
A., et al. (2015), wedge compression fractures were created in human 
cadaveric vertebrae by a material testing machine and the axial load 
was increased until the height of the anterior edge of the VB was 
reduced by 40 percent.\360\ The VBs were fixed in a clamp and loaded 
with 100 N in a custom made device. In Kruger A., et al. (2013), 
vertebral heights were measured at the anterior wall as well as in the 
center of the vertebral bodies in the medial sagittal plane in 36 human 
cadaveric vertebrae pre- and post-fracture as well as after treatment 
and loading in (27 vertebrae were treated with SpineJack[supreg] with 
different cement volumes (maximum, intermediate, and no cement), and 9 
vertebrae were treated with BKP). In Kruger A., et al. (2015), 
anterior, central, and posterior height as well as the Beck index were 
measured in 24 vertebral bodies pre-fracture and post-fracture as well 
as after treatment (twelve treated with SpineJack[supreg] and twelve 
treated with BKP). The applicant asserted that Kruger A., et al. (2013) 
showed superiority on VB height restoration and height maintenance, and 
summarized that: (1) Height restoration was significantly better for 
the SpineJack[supreg] group compared to BKP; (2) height maintenance was 
dependent on the cement volume used; and (3) the group with the 
SpineJack[supreg] without cement nevertheless showed better results in 
height maintenance, yet the statistical significance could not be 
demonstrated.\361\ The applicant asserted that Kruger A., et al. (2015) 
showed superiority on VB height restoration, because the height 
restoration was significantly better in the SpineJack[supreg] group 
compared with the BKP group. The applicant explained that the clinical 
implications include a better restoration of the sagittal balance of 
the spine and a reduction of the kyphotic deformity, which may relate 
to clinical outcome and the biological healing process.\362\
---------------------------------------------------------------------------

    \360\ Kruger A., et al., ``Height restoration and maintenance 
after treating unstable osteoporotic vertebral compression fractures 
by cement augmentation is dependent on the cement volume used,'' 
Clinical Biomechanics, 2013, vol. 28, pp. 725-730; and Kruger A., et 
al., ``Height restoration of osteoporotic vertebral compression 
fractures using different intervertebral reduction devices: a 
cadaveric study,'' The Spine Journal, 2015, vol. 15, pp. 1092-1098.
    \361\ Ibid.
    \362\ Ibid.
---------------------------------------------------------------------------

    The applicant also asserted that use of the SpineJack[supreg] 
system represents a substantial clinical improvement with respect to 
pain relief. According to the applicant, pain is the first and most 
prominent symptom associated with osteoporotic VCFs, which drives many 
elderly patients to seek hospital treatment and negatively impacts on 
their quality of life. The applicant provided the SAKOS randomized 
controlled study, a prospective consecutive observational study, and a 
retrospective case series to support its assertions regarding pain 
relief with the SpineJack[supreg] system. The applicant cited the SAKOS 
trial for statistically significant greater pain relief achieved at 1 
month and 6 months after surgery with the SpineJack[supreg] system. The 
applicant summarized that in the SAKOS trial (1) progressive 
improvement in pain relief was observed over the follow-up period in 
the SpineJack[supreg] system group only; (2) the decrease in pain 
intensity versus baseline was more pronounced in the SpineJack[supreg] 
system group compared to the BKP group at 1 month (p=0.029) and 6 
months (p=0.021); and (3) at each time point, the percentage of 
patients with reduced pain intensity >20 mm was >=90 percent in the 
SpineJack[supreg] system group and >=80 percent in the BKP group, with 
a statistically significant difference in favor of the 
SpineJack[supreg] system at 1 month post-procedure (93.8% vs 81.5%; 
p=0.030). The applicant also noted that although continued pain score 
improvements were seen out to1 year for patients treated with the 
SpineJack[supreg] system, the difference between the treatment groups 
did not meet statistical significance (p=0.061). The applicant also 
explained that in the SAKOS study, at 5 days after surgery, there were 
significantly fewer patients taking central agent medications in the 
SpineJack[supreg] implant-treated group as compared to those in the 
BKP-treated group (SJ 7.4% vs. BKP 21.9%, p=0.015). According to the 
applicant, central analgesic agents included medications such as non-
steroidal anti-inflammatory drugs (NSAIDS), salicylates, or opioid 
analgesics.
    The applicant also cited a prospective consecutive observational 
study by Noriega D., et al. for statistically significant pain relief 
immediately after surgery and at both 6 and 12 months. Noriega D., et 
al. was a European multicenter, single-arm registry study that aimed to 
confirm the safety and clinical performance of the SpineJack[supreg] 
system for the treatment of vertebral compression fractures of 
traumatic origin (no comparison procedure).\363\ The study enrolled 103 
patients (median age: 61.6 years) with 108 VCFs due to trauma (n=81), 
or traumatic VCF with associated osteoporosis (n=22) who had a 
SpineJack[supreg] procedure. Twenty-three patients withdrew from the 
study before the 12-month visit. The study reported a significant 
improvement in back pain at 48 hours after SpineJack[supreg] procedure, 
with the mean VAS pain score decreasing from 6.6  2.6 cm at 
baseline to 1.41.3 cm (mean change: -5.22.7 cm; 
p<0.001) (median relative decrease in pain intensity of 81.5 percent) 
for the total study population. Noriega D., et al. also reported that 
the improvement was maintained over the 12-month follow-up period and 
similar results were observed with both pure traumatic VCF and 
traumatic VCF in patients with osteoporosis. The traumatic VCF with 
osteoporosis sub-group had a mean change of -5.5 (SD=1.9) (median 
relative change of 81.0%) (p<0.001) at 48 hours post-surgery (n=22), 
and -5.7 (SD=2.3) mean change (90.3% median relative change) (p<0.001) 
at 12 months (n=16). The applicant stated that this study supported a 
claim of statistically significant pain relief immediately after 
surgery and at both 6 and 12 months. The applicant summarized that (1) 
pain

[[Page 32662]]

relief and improvements in pain scores were statistically significant 
immediately after treatment (48-72 hours) and at 6 and 12 months 
following surgery (p<0.001); and (2) the mean improvement between 
baseline and at 48-72 hours after the procedure (n=31) was -4.6 (2.6) 
(p<0.001), while the mean improvement between baseline and at the 12-
month follow-up (n=22) was -6.0 (3.4) (p<0.001). We note that Noriega 
D., et al. did not report results for 6 months (although it does 
include results for 3 months versus baseline) and does not include the 
results of mean improvement stated by the applicant.\364\ It is also 
unclear if the applicant intended to rely on the overall results of the 
study or the subgroup of traumatic VCF with osteoporosis.
---------------------------------------------------------------------------

    \363\ Noriega D., et al., ``Clinical performance and safety of 
108 SpineJack implantations: 1-year results of a prospective 
multicentre single arm registry study.'' BioMed Research 
International. 2015, 173872.
    \364\ Ibid.
---------------------------------------------------------------------------

    The applicant also cited a retrospective case series, Renaud C., et 
al., for statistically significant pain relief after surgery with the 
SpineJack[supreg] system. Renaud C., et al., included 77 patients with 
a mean age of 60.9 years and 83 VCFs (51 due to trauma and 32 to 
osteoporosis) treated with 164 SpineJack[supreg] devices (no comparison 
procedure).\365\ The applicant summarized that--(1) pain relief was 
statistically significant (p<0.001), with a pain score decrease from 
7.9 pre-operatively to 1.8 at 1 month after the procedure; (2) the pain 
score improvement was 77 percent at hospital discharge and gradually 
increased to 86 percent after 1 year following surgery; and (3) the 
study outcomes demonstrated that the SpineJack[supreg] system provided 
both immediate and long-lasting pain relief.
---------------------------------------------------------------------------

    \365\ Renaud C., ``Treatment of vertebral compression fractures 
with the cranio-caudal expandable implant SpineJack: Technical note 
and outcomes in 77 consecutive patients.'' Orthopaedics & 
Traumatology: Surgery & Research, 2015, vol. 101, pp. 857-859.
---------------------------------------------------------------------------

    We note that the results of the SAKOS trial do not appear to have 
been corroborated in any other randomized controlled study. 
Additionally, although the applicant stated that BKP is the gold 
standard in VA, there appears to be a lack of data comparing the 
SpineJack[supreg] system to other existing technology, such as the PEEK 
coiled implant (Kiva[supreg] system), particularly since the PEEK 
coiled system was considered the predicate device for the SpineJack 
510(k). Furthermore, there appears to be a lack of data comparing the 
SpineJack[supreg] system to conservative medical therapy. We note there 
is an active study posted on clinicaltrials.gov comparing 
SpineJack[supreg] system to conservative orthopedic management 
consisting of brace and pain medication in acute stable traumatic 
vertebral fractures in subjects aged 18 to 60 years old. The 
clinicaltrials.gov entry indicates that findings should be forthcoming 
in 2020. Additionally, we note that the recent systematic reviews of 
the management of vertebral compression fracture (Buchbinder et al. for 
Cochrane (2018), Ebeling et al. (2019) for the American Society for 
Bone and Mineral Research (ASBMR)), do not support vertebral 
augmentation procedures due to lack of evidence compared to 
conservative medical management.\366\ The ASBMR recommended more 
rigorous study of treatment options including ``larger sample sizes, 
inclusion of a placebo control and more data on serious AEs (adverse 
events).''
---------------------------------------------------------------------------

    \366\ Buchbinder R., Johnston R.V., Rischin K.J., Homik J., 
Jones C.A., Golmohammadi K., Kallmes D.F., ``Percutaneous 
vertebroplasty for osteoporotic vertebral compression fracture,'' 
Cochrane Database Syst Rev. 2018 Apr 4 and Nov 6. PMID: 29618171; 
Ebeling P.R., Akesson K., Bauer D.C., Buchbinder R., Eastell R., 
Fink H.A., Giangregorio L., Guanabens N., Kado D., Kallmes D., 
Katzman W., Rodriguez A., Wermers R., Wilson H.A., Bouxsein M.L., 
``The Efficacy and Safety of Vertebral Augmentation: A Second ASBMR 
Task Force Report.'' J Bone Miner Res., 2019, vol. 34(1), pp. 3-21.
---------------------------------------------------------------------------

    We are inviting public comment on whether the SpineJack[supreg] 
system meets the substantial clinical improvement criterion.
    We did not receive any written comments in response to the New 
Technology Town Hall meeting notice published in the Federal Register 
regarding the substantial clinical improvement criterion for the 
SpineJack[supreg] system or at the New Technology Town Hall meeting.
m. TECENTRIQ[supreg] (Atezolizumab)
    Genentech, Inc. submitted an application for new technology add-on 
payments for TECENTRIQ[supreg] for FY 2021. According to the applicant, 
TECENTRIQ[supreg] is a programmed death-ligand 1 (PD-L1) blocking 
antibody with four different oncology indications, including one in 
combination with carboplatin and etoposide, for the first-line 
treatment of adult patients with extensive-stage small cell lung cancer 
(ES-SCLC).\367\ The applicant states that programmed death-ligand 1 
(PD-L1) is a protein expressed on the surface of cancer and immune 
cells, which allows them to inactivate the T-cells of the patient's 
immune system that would otherwise kill them. The applicant states 
TECENTRIQ[supreg] blocks the PD-L1 protein, rendering the cancer cells 
susceptible to attack.368 369 TECENTRIQ[supreg] has multiple 
indications. The applicant has applied for the new technology add-on 
payment for TECENTRIQ[supreg] for its indication for ES-SCLC only.
---------------------------------------------------------------------------

    \367\ TECENTRIQ (atezolizumab) [prescribing information]. San 
Francisco, CA: Genentech, Inc., 2019.
    \368\ Chen, D.S., Irving, B.A., Hodi, F.S., ``Molecular 
Pathways: Next-Generation Immunotherapy--Inhibiting Programmed 
Death-Ligand 1 and Programmed Death-1,'' Clinical Cancer Research, 
2012, 18(24), pp. 6580-6587, doi:10.1158/1078-0432.ccr-12-1362.
    \369\ IMFINZI[supreg] (durvalumab) [Prescribing Information]. 
Wilmington, DE; AstraZeneca Pharmaceuticals LP, 2019.
---------------------------------------------------------------------------

    The applicant states TECENTRIQ[supreg] was initially approved by 
FDA on May 18, 2016, for treatment of patients with locally advanced or 
metastatic urothelial carcinoma,\370\ and subsequently for patients 
with metastatic non-small cell lung cancer (NSCLC) who have disease 
progression during or following platinum-containing chemotherapy on 
October 18, 2016; \371\ for the first-line treatment of patients with 
metastatic non-squamous NSCLC with no EGFR or ALK genomic tumor 
aberrations on December 6, 2018; \372\ and for metastatic triple 
negative breast cancer on March 8, 2019.\373\
---------------------------------------------------------------------------

    \370\ U.S. Department of Health and Human Services. BLA 
Accelerated Approval. https://www.accessdata.fda.gov/drugsatfda_docs/appletter/2016/761034Orig1s000ltr.pdf. Accessed 
August 9, 2019.
    \371\ U.S. Department of Health and Human Services. BLA 
Approval. https://www.accessdata.fda.gov/drugsatfda_docs/appletter/2016/761041Orig1s000ltr.pdf. Accessed August 9, 2019.
    \372\ U.S. Department of Health and Human Services. Supplement 
Approval. https://www.accessdata.fda.gov/drugsatfda_docs/appletter/2018/761034Orig1s009ltr_REPLACEMENT.pdf. Accessed August 9, 2019.
    \373\ U.S. Department of Health and Human Services. Accelerated 
Approval. https://www.accessdata.fda.gov/drugsatfda_docs/appletter/2019/761034Orig1s018ltr.pdf. Accessed August 9, 2019.
---------------------------------------------------------------------------

    TECENTRIQ[supreg] received FDA approval on March 18, 2019 in 
combination with carboplatin and etoposide for the first-line treatment 
of adult patients with ES-SCLC. The applicant states that 
TECENTRIQ[supreg] is the first cancer immunotherapy to be approved in 
the first-line treatment of ES-SCLC.\374\ The applicant stated that the 
National Comprehensive Cancer Network (NCCN) recommends 
TECENTRIQ[supreg] + carboplatin + etoposide as the only category 1 
preferred initial treatment for patients with ES-SCLC.\375\
---------------------------------------------------------------------------

    \374\ U.S. Department of Health and Human Services. Supplemental 
Approval. https://www.accessdata.fda.gov/drugsatfda_docs/appletter/2019/761034Orig1s019ltr.pdf. Accessed August 9, 2019.
    \375\ National Comprehensive Cancer Network. NCCN Clinical 
Practice Guidelines in Oncology. Small Cell Lung Cancer Version 
2.2019. https://www.nccn.org/professionals/physician_gls/pdf/sclc.pdf. Accessed August 16, 2019.

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

[[Page 32663]]

    The applicant states that TECENTRIQ[supreg] is formulated into a 
single-dose vial for intravenous injection.\376\ It further states that 
it is usually given in the physician office or hospital outpatient 
setting--as is the case for most treatments for solid tumors. The 
applicant explained that sometimes ES-SCLC patients are diagnosed in 
the inpatient setting and are treated there due to their immediate need 
for treatment. For subsequent doses for ES-SCLC patients, the applicant 
states TECENTRIQ[supreg] is generally given in the physician office or 
hospital outpatient setting, as it is when used in any of its other 
indications.
---------------------------------------------------------------------------

    \376\ TECENTRIQ (atezolizumab) [prescribing information]. San 
Francisco, CA: Genentech, Inc., 2019.
---------------------------------------------------------------------------

    Per the applicant, lung cancer is the second most commonly 
diagnosed cancer and the leading cause of cancer-related death among 
men and women in the United States.\377\ SCLC is a high-grade 
neuroendocrine tumor comprising small cells with minimal cytoplasm, 
having poorly defined cell borders, and either being absent a nucleoli 
or having an unremarkable nucleoli.378 379 The most 
aggressive of all lung cancers, it accounts for about 10-15 percent of 
lung cancer cases.\380\ Key characteristics of SCLC include its rapid 
doubling time and the early development of widespread 
metastases.381 382 About 72 percent of SCLC cases are 
diagnosed at the extensive stage, which is associated with a 5-year 
survival rate of only 2.9 percent.383 384
---------------------------------------------------------------------------

    \377\ American Cancer Society. Lung Cancer Prevention and Early 
Detection. American Cancer Society. https://www.cancer.org/cancer/lung-cancer/prevention-and-early-detection.html. Accessed October 3, 
2019.
    \378\ Meerbeeck, J.P.V., Fennell, D.A., Ruysscher, D.K.D, 
``Small-cell Lung Cancer,'' The Lancet, 2011, 378(9804), pp.1741-
1755, doi:10.1016/s0140-6736(11):60165-7.
    \379\ Kalemkerian, G., ``Small Cell Lung Cancer,'' Seminars in 
Respiratory and Critical Care Medicine, 2016, 37(05) pp.783-796, 
doi:10.1055/s-0036-1592116.
    \380\ WebMD, LLC. Types of Lung Cancer. https://www.webmd.com/lung-cancer/lung-cancer-types#1. Accessed August 15, 2019.
    \381\ Harris, K., Khachaturova, I., Azab, B., et al., ``Small 
Cell Lung Cancer Doubling Time and its Effect on Clinical 
Presentation: A Concise Review,'' Sage Journals, 2012, 6, pp.199-
203, doi:10.4137/CMO.S9633.
    \382\ Pietanza, M.C., Averett, L., Minna, J., Rudin, C.M., 
``Small Cell Lung Cancer: Will Recent Progress Lead to Improved 
Outcomes?,'' Clinical Cancer Research, 2015, (21), pp. 2244-2255, 
doi: 10.1158/1078-0432.CCR-14-2958.
    \383\ American Lung Association. Trends in Lung Cancer Morbidity 
and Mortality. https://www.lung.org/assets/documents/research/lc-trend-report.pdf. Accessed August 15, 2019.
    \384\ Noone, A.M., Howlader, N., Krapcho, M., et al., SEER 
Cancer Statistics Review, 1975-2015, based on November 2017 SEER 
data submission, posted to the SEER website, April 2018. Bethesda, 
MD: National Cancer Institute. 2018; https://seer.cancer.gov/csr/1975_2015/results_merged/sect_15_lung_bronchus.pdf. Accessed 
September 23, 2019.
---------------------------------------------------------------------------

    The applicant states that the current standard-of-care treatment 
for ES-SCLC is a combination of etoposide, which is FDA-approved in 
SCLC only in combination with cisplatin, and carboplatin, which is used 
in preference to cisplatin for toxicity reasons, despite being off-
label.\385\ Irinotecan, a topoisomerase inhibitor indicated in colon 
and rectum cancers only, is sometimes used in place of 
etoposide.386 387 Etoposide causes the induction of 
deoxyribonucleic acid (DNA) strand breaks by an interaction with DNA-
topoisomerase II or the formation of free radicals, leading to cell 
cycle arrest (primarily at the G2 stage of the cell cycle), and cell 
death.\388\ Carboplatin, although associated with a greater risk of 
myelosuppression, is often substituted for cisplatin in order to 
decrease the risks of emesis, neuropathy, and nephropathy.\389\ Both 
carboplatin and cisplatin impart cytotoxicity by binding to DNA, which 
inhibits the process of DNA replication.\390\
---------------------------------------------------------------------------

    \385\ UpToDate, Inc. ES-Small Cell Lung Cancer: Initial 
Management. https://www.uptodate.com/contents/extensive-stage-small-cell-lung-cancer-initial-management. Accessed July 26, 2019.
    \386\ CAMPOSTAR (irinotecan) [prescribing information]. New 
York, NY: Pfizer, Inc., 2019.
    \387\ National Comprehensive Cancer Network. NCCN Clinical 
Practice Guidelines in Oncology. Small Cell Lung Cancer Version 
1.2019. https://www.nccn.org/professionals/physician_gls/pdf/sclc.pdf. Accessed July 26, 2019.
    \388\ ETOPOSIDE (etoposide phosphate) [prescribing information]. 
Deerfield, IL: Baxter Healthcare, Corp., 2017.
    \389\ National Comprehensive Cancer Network. NCCN Clinical 
Practice Guidelines in Oncology. Small Cell Lung Cancer Version 
2.2019. https://www.nccn.org/professionals/physician_gls/pdf/sclc.pdf. Accessed October 3, 2019.
    \390\ Sousa, G.F.D., Wlodarczyk, S.R., Monteiro, G., 
``Carboplatin: Molecular Mechanisms of Action Associated with 
Chemoresistance,'' Brazilian Journal of Pharmaceutical Sciences, 
2014, 4(50), pp. 693-701, doi:10.1590/S1984-82502014000400004.
---------------------------------------------------------------------------

    According to the applicant, despite standard-of-care chemotherapy 
regimens using etoposide and carboplatin, the majority of patients with 
ES-SCLC will experience recurrence within 1 year. Median progression-
free survival (PFS) and overall survival (OS) rates are 2 months and 10 
months, respectively, after initial chemotherapy.391 392 393
---------------------------------------------------------------------------

    \391\ Kalemkerian, G., ``Small Cell Lung Cancer,'' Seminars in 
Respiratory and Critical Care Medicine, 2016, 37(05):783-796. 
doi:10.1055/s-0036-1592116.
    \392\ Gadgeel, S.M., Pennell, N.A., Fidler, M.J., et al., 
``Phase II Study of Maintenance Pembrolizumab in Patients with ES-
Small Cell Lung Cancer (SCLC),'' Journal of Thoracic Oncology, 2018, 
13(9), pp. 1393-1399. doi:10.1016/j.jtho.2018.05.002.
    \393\ Rossi, A., ``Relapsed Small-Cell Lung Cancer: Platinum Re-
Challenge Or Not,'' Journal of Thoracic Disease, 2016, 8(9), pp. 
2360-2364, doi:10.21037/jtd.2016.09.28.
---------------------------------------------------------------------------

    According to the applicant, progress in the treatment of ES-SCLC 
has been limited. Over the past 40 years, the 2-year OS has increased 
from 3.4 percent to 5.6 percent, and the median OS has remained at 
about 10 months since the 1980s.394 395 396 One paper noted 
that more than 40 phase III trials evaluating other regimens in SCLC 
have failed since 1970.\397\ The applicant stated that this situation 
is perhaps best illustrated by reference to the National Institutes of 
Health's database of clinical trials. The appendix of this document 
presents the results of clinical trials of putative pharmacology 
therapies for SCLC with statuses of ``terminated'' (phase 2 and phase 
3) and ``completed'' (phase 3 only).398 399
---------------------------------------------------------------------------

    \394\ Kalemkerian, G., ``Small Cell Lung Cancer,'' Seminars in 
Respiratory and Critical Care Medicine, 2016, 37(05), pp. 783-796, 
doi:10.1055/s-0036-1592116.
    \395\ Evans, W.K., Shepherd, F.A., Feld, R., Osoba, D., Dang, 
P., Deboer, G., ``VP-16 and Cisplatin as First-Line Therapy for 
Small-Cell Lung Cancer,'' Journal of Clinical Oncology, 1985, 3(11), 
pp. 1471-1477, doi:10.1200/jco.1985.3.11.1471.
    \396\ Boni, C., Cocconi, G., Bisagni, G., Ceci, G., Peracchia, 
G., Cisplatin and Etoposide (VP-16) as a Single Regimen for Small 
Cell Lung Cancer. A phase II trial,'' Cancer, 1989, 63(4), pp. 638-
642, doi:10.1002/1097-0142(19890215)63:4>638:aid-
cncr2820630406>3.0.co;2-8.
    \397\ Byers, L.A., Rudin, C.M., ``Small Cell Lung Cancer: Where 
Do We Go from Here?,'' Cancer, 2014, 121(5), pp. 664-672, 
doi:10.1002/cncr.29098.
    \398\ U.S. Department of Health and Human Services. Terminated 
Studies [bond] Small Cell Lung Cancer Extensive Stage. https://clinicaltrials.gov/ct2/results?cond=Small+Cell+Lung+Cancer+Extensive+Stage&Search=Apply&recrs=h&age_v=&gndr=&type=&rslt=. Accessed August 15, 2019.
    \399\ U.S. Department of Health and Human Services. Completed 
Studies [bond] Small Cell Lung Cancer Extensive Stage. https://clinicaltrials.gov/ct2/results?cond=Small+Cell+Lung+Cancer+Extensive+Stage&recrs=e&age_v=&gndr=&type=&rslt=&phase=2. Accessed August 15, 2019.
---------------------------------------------------------------------------

    The applicant asserts that there is no ICD-10-PCS code which 
uniquely identifies the administration of TECENTRIQ[supreg] in ES-SCLC 
inpatient cases. The applicant submitted a request for a unique ICD-10-
PCS code for TECENTRIQ[supreg] to be effective October 1, 2020.
    As stated previously, if a technology meets all three of the 
substantial similarity criteria, it would be considered substantially 
similar to an existing technology and, therefore, would not be 
considered ``new'' for purposes of new technology add-on payments. The 
applicant asserts that TECENTRIQ[supreg] does not meet any of the three 
criteria and therefore, TECENTRIQ[supreg] is new.

[[Page 32664]]

    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 asserts that the mechanism of action of TECENTRIQ[supreg] in 
ES-SCLC is not the same as or similar to an existing technology. The 
applicant describes TECENTRIQ[supreg] as a programmed death-ligand 1 
(PD-L1) blocking antibody, and as the first and only blocking antibody 
to target the PD-L1/PD-1 pathway that is FDA-approved for the treatment 
of ES-SCLC. The applicant explains that PD-L1 is a protein expressed on 
the surface of cancer cells, which allows them to inactivate the T-
cells of the patient's immune system which would normally attack the 
cancer cells. The applicant asserts that TECENTRIQ[supreg] blocks the 
PD-L1 protein, rendering the cancer cells susceptible to attack.\400\ 
The applicant indicates that the current standard-of-care drugs 
etoposide, carboplatin, and cisplatin impart their cytotoxic effects by 
interfering with the processes of DNA replication.401 402 
Therefore, the applicant states the mechanism of action of 
TECENTRIQ[supreg] is unique and distinct from other available forms of 
treatment for ES-SCLC.
---------------------------------------------------------------------------

    \400\ Chen, D.S., Irving, B.A., Hodi, F.S., ``Molecular 
Pathways: Next-Generation Immunotherapy--Inhibiting Programmed 
Death-Ligand 1 and Programmed Death-1,'' Clinical Cancer Research, 
2012, 18(24), pp. 6580-6587. doi:10.1158/1078-0432.ccr-12-1362.
    \401\ ETOPOPHOS (etoposide phosphate) [prescribing information]. 
Deerfield, IL: Baxter Healthcare, Co., 2017.
    \402\ Sousa, G.F.D., Wlodarczyk S.R., Monteiro G., 
``Carboplatin: Molecular Mechanisms of Action Associated with 
Chemoresistance,'' Brazilian Journal of Pharmaceutical Sciences, 
2014, 4(50), pp. 693-701, doi:10.1590/S1984-82502014000400004.
---------------------------------------------------------------------------

    With regard to the second criterion, whether a product is assigned 
to the same or a different MS-DRG, the applicant referenced the FY 2016 
IPPS/LTCH PPS Final Rule (80 FR 49445) to support that this criterion 
is not met in cases where the subject technology is treating a disease 
for which the current standard-of-care involves non-FDA-approved 
therapies that are also associated with different MS-DRGs. As 
previously noted, the applicant stated that the current standard-of-
care treatment for ES-SCLC is a combination of etoposide, which is FDA-
approved in SCLC only in combination with cisplatin, and carboplatin, 
which is used in preference to cisplatin for toxicity reasons, despite 
being off-label.\403\ They also point out that irinotecan, a 
topoisomerase inhibitor indicated in colon and rectum cancers, is 
sometimes used in place of etoposide.404 405
---------------------------------------------------------------------------

    \403\ UpToDate, Inc. ES-small cell lung cancer: Initial 
management. https://www.uptodate.com/contents/extensive-stage-small-cell-lung-cancer-initial-management. Accessed October 3, 2019.
    \404\ CAMPOSTAR (irinotecan) [prescribing information]. New 
York, NY: Pfizer, Inc., 2019.
    \405\ National Comprehensive Cancer Network. NCCN Clinical 
Practice Guidelines in Oncology. Small Cell Lung Cancer Version 
2.2019. https://www.nccn.org/professionals/physician_gls/pdf/sclc.pdf. Accessed October 3, 2019.
---------------------------------------------------------------------------

    The applicant also stated that the MS-DRG payment system cannot 
differentiate between patients with NSCLC and ES-SCLC and noted that 
MS-DRGs 180 (Respiratory Neoplasms with MCC) and 181 (Respiratory 
Neoplasms with CC) are applicable to both diseases. The applicant also 
noted that category C34 (Malignant neoplasm of bronchus and lung) of 
the ICD-10-CM diagnosis coding classification system can be used to 
identify NSCLC and SCLC cases but does not differentiate between them. 
As a result, the applicant believes both TECENTRIQ[supreg] and an 
existing technology (such as one used to treat NSCLC) may be assigned 
to either of these MS-DRGs, even though, as previously noted, the NSCLC 
and SCLC patient populations are different.
    With regard to the third substantial similarity criterion, the 
applicant states the use of TECENTRIQ[supreg] in ES-SCLC does not 
involve the treatment of the same or a similar type of disease and the 
same or similar patient population when compared to an existing 
technology.
    The applicant notes this criterion was developed by CMS 
specifically to accommodate situations where an NTAP is sought for a 
new indication of a drug previously indicated for a different patient 
population. The applicant noted that CMS stated the following in the FY 
2010 IPPS final rule (74 FR 43813): ``If, prior to the FDA approval for 
the new indication, the technology has not been used to treat Medicare 
patients for purposes consistent with the new indication, the relevant 
MS-DRGs may not reflect the cost of the technology. Consequently, 
Medicare beneficiaries may not have adequate access to the technology 
when used for purposes consistent with the new indication. Allowing the 
new technology add-on payment for the technology when used for the new 
indication would address this concern. For these reasons, we believe 
that treating an existing technology as ``new'' when approved by the 
FDA for a new indication may be warranted under certain 
circumstances.''
    The applicant believes that this is the case for TECENTRIQ[supreg] 
and that there is no evidence of TECENTRIQ[supreg] utilization in 
inpatient ES-SCLC cases, in either the 2017 or 2018 Medicare Standard 
Analytical Files (SAF). The applicant asserts that therefore, the 
relevant MS-DRGs do not reflect the cost of TECENTRIQ[supreg]. 
Therefore, the applicant believes Medicare beneficiaries may not have 
adequate access to TECENTRIQ[supreg] when it is used to treat ES-SCLC 
patients as described previously.
    Additionally, the applicant explained that although SCLC and NSCLC 
share a MS-DRG, they are different diseases with different patient 
populations, and pointed to differences between SCLC and NSCLC in terms 
of their staging, percentage of patients with distant stage disease at 
the time of diagnosis, classification, levels of PD-L1 expression, 
pharmacologic treatments, and 5-year relative survival rates. The 
applicant further explained that these diseases are not mutually 
exclusive; a minority of patients, 5-28 percent depending on the 
specimen types used, are said to have combined SCLC (C-SCLC), which is 
defined by the World Health Organization as SCLC combined with 
additional components that consist of any of the histological types of 
NSCLC.\406\ Therefore, the applicant asserts the use of 
TECENTRIQ[supreg] in cases of ES-SCLC does not involve treatment of the 
same or a similar type of disease, in the same or a similar patient 
population, when compared to an existing technology, and therefore 
TECENTRIQ[supreg] meets the newness criterion.
---------------------------------------------------------------------------

    \406\ Qin, J., Lu, H., ``Combined Small-Cell Lung Carcinoma,'' 
OncoTargets and Therapy, 2018, Volume 11, pp. 3505-3511, 
doi:10.2147/ott.s159057.
---------------------------------------------------------------------------

    We note that we received an application for new technology add-on 
payments for FY 2021 for IMFINZI[supreg] when used in combination with 
etoposide and either carboplatin or cisplatin for the first-line 
treatment of patients with extensive-stage small cell lung cancer (ES-
SCLC). At the time of the development of this proposed rule, 
IMFINZI[supreg] has not yet received FDA approval for this indication. 
Both IMFINZI[supreg] and TECENTRIQ[supreg] seem to be intended for 
similar patient populations and would involve the treatment of the same 
conditions; patients with locally advanced or metastatic urothelial 
carcinoma and patients with SCLC. As noted above, we are interested in 
information on how these two technologies may differ from each other 
regarding the substantial similarity criteria and newness criterion, to 
inform our analysis of whether IMFINZI[supreg] and TECENTRIQ[supreg] 
are substantially similar to each other and therefore should be

[[Page 32665]]

considered as a single application for purposes of new technology add-
on payments.
    We are inviting public comments on whether TECENTRIQ[supreg] is 
substantially similar to an existing technology and whether it meets 
the newness criterion.
    With regard to the cost criterion, the applicant conducted the 
following analysis to demonstrate that the technology meets the cost 
criterion. To identify cases that may be eligible for 
TECENTRIQ[supreg], the applicant searched the FY 2018 MedPAR LDS file 
for claims reporting an ICD-10-CM code from category C34 and considered 
only cases where the diagnosis codes were in the primary or admitting 
position to differentiate ES-SCLC from limited-stage SCLC. Cases 
classified with one or more of 48 surgical lung procedure codes were 
not considered to differentiate ES-SCLC from NSCLC. This resulted in 
33,404 cases, which the applicant indicated constitute what it defines 
as an ES-SCLC case through the reconciliation of clinical presentation, 
applicable ICD-10-CM and ICD-10-PCS codes, and MedPAR data fields, 
which mapped to 264 MS-DRGs.
    Using these 33,404 cases, the applicant then calculated the 
unstandardized average charges per case for each MS-DRG. The applicant 
determined that it did not need to remove any charges because 
TECENTRIQ[supreg] is administered as a combination therapy with 
carboplatin and etoposide to treat ES-SCLC.
    The applicant then standardized the charges and inflated the 
charges by 1.11100 or 11.10 percent, the same inflation factor used by 
CMS to update the outlier threshold in the FY 2020 IPPS/LTCH PPS final 
rule (84 FR 42629). The applicant then added the estimated cost of an 
ES-SCLC TECENTRIQ[supreg] administration to the MedPAR cases. The 
applicant then added the charges for TECENTRIQ[supreg] by converting 
the costs to a charge by dividing the cost by what the applicant 
described as a conservative cost-to-charge ratio of 0.5.
    Based on the FY 2020 IPPS/LTCH PPS final rule correction notice 
data file thresholds, the average case-weighted threshold amount was 
$65,738. In the applicant's analysis, the final inflated average case-
weighted standardized charge per case was $88,561. Because the final 
inflated average case-weighted standardized charge per case exceeds the 
average case-weighted threshold amount, the applicant maintained that 
the technology meets the cost criterion.
    The applicant also provided a sensitivity analysis using this same 
methodology but considered only the MS-DRGs representing 1 percent of 
case volume, producing a list of 10 MS-DRGs that cumulatively represent 
88.31 percent of case volume, or 29,500 cases. Based on the FY 2020 
IPPS/LTCH PPS final rule correction notice data file thresholds, the 
average case-weighted threshold amount was $56,987. In the applicant's 
analysis, the final inflated average case-weighted standardized charge 
per case was $88,404. Because the final inflated average case-weighted 
standardized charge per case exceeds the average case-weighted 
threshold amount, the applicant maintained that the technology meets 
the cost criterion.
    As noted previously, we received an application for new technology 
add-on payments for FY 2021 for IMFINZI[supreg]. Both IMFINZI[supreg] 
and TECENTRIQ[supreg] seem to be intended for similar patients. The 
ICD-10-CM diagnosis codes and MS-DRGs in the cost analysis for 
IMFINZI[supreg] differ from those used in the cost analysis for 
TECENTRIQ[supreg]. Specifically, as noted previously, the applicant for 
TECENTRIQ[supreg] searched for claims with ICD-10-CM diagnosis codes 
from category C34 while the applicant for IMFINZI[supreg] searched for 
ICD-10-CM diagnosis codes from category C34 in combination with Z51.11 
or Z51.12. As noted previously, we are concerned as to why the 
diagnosis codes would differ between the cost analysis for 
IMFINZI[supreg] and for TECENTRIQ[supreg] as one analysis may lend more 
accuracy to the calculation depending on which is more reflective of 
the applicable patient population). We are inviting public comment on 
whether TECENTRIQ[supreg] meets the cost criterion.
    With regard to substantial clinical improvement, the applicant 
asserts that TECENTRIQ[supreg] plus standard-of-care represents a 
substantial clinical improvement over existing technologies because it 
offers a treatment option for a patient population unresponsive to, or 
ineligible for currently available treatments. The applicant also 
believes that TECENTRIQ[supreg] represents a substantial clinical 
improvement because the technology demonstrates statistically 
significant improvement in overall survival, statistically significant 
improvement in progression-free survival, as well as improved HRQoL 
(Health-related quality of life, which is an individual's or a group's 
perceived physical and mental health over time) \407\ and reduced 
symptomology.
---------------------------------------------------------------------------

    \407\ https://www.cdc.gov/hrqol/index.htm. Accessed December 27, 
2019.
---------------------------------------------------------------------------

    According to the applicant, the use of TECENTRIQ[supreg] in cases 
of ES-SCLC was evaluated in IMpower133, a phase III (efficacy) and 
phase I (safety), double-blind, placebo-controlled, randomized, 
multicenter study designed to compare the efficacy and safety of 
TECENTRIQ[supreg] vs. placebo in combination with carboplatin and 
etoposide in patients with ES-SCLC who did not receive prior systemic 
therapy.\408\ Over 40 percent of the population of the IMpower 133 
clinical trial were of Medicare age.\409\
---------------------------------------------------------------------------

    \408\ Horn, .L, Mansfield, A.S., Szcz[eogon]sna, A., et al., 
``First-Line Atezolizumab plus Chemotherapy in Extensive Stage 
Small-Cell Lung Cancer,'' New England Journal of Medicine, 2018, 
379(23), pp. 2220-2229, doi:10.1056/nejmoa1809064.
    \409\ Ibid.
---------------------------------------------------------------------------

    Key inclusion criteria were as follows: histologically or 
cytologically confirmed ES-SCLC as defined by the VA Lung Study Group 
staging system; measurable ES-SCLC according to RECIST version 1.1; 
ECOG PS of 0-1; no prior systemic treatment for ES-SCLC; and treated 
asymptomatic CNS metastases. Key exclusion criteria were as follows: 
history of autoimmune disease and prior treatment with CD137 agonists 
or immune checkpoint inhibitors.
    A total of 403 patients were enrolled. Patients were stratified by 
gender, ECOG PS (0 or 1), and the presence of brain metastases. 
Baseline characteristics were comparable across both treatment arms. 
The following table summarizing baseline patient characteristics 
indicates that more than 40 percent of the patients in both treatment 
arms were of Medicare age.

[[Page 32666]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.134

    At the time of data cutoff (April 24, 2018), the median follow-up 
was 13.9 months. The applicant states that patients treated with 
TECENTRIQ[supreg] + carboplatin + etoposide experienced a significantly 
longer OS and PFS compared with patients treated with placebo + 
carboplatin + etoposide in the ITT population. The 1-year OS with 
TECENTRIQ[supreg] + carboplatin + etoposide, compared with the placebo 
+ carboplatin + etoposide rate, was approximately 13 percent higher; 
the 1-year PFS was approximately 7 percent higher, as shown in the 
following table that summarizes Landmark Overall Survival and 
Progression-free Survival Rates (Data Cutoff: April 24, 2018).
[GRAPHIC] [TIFF OMITTED] TP29MY20.135

    The incidence of treatment-related AEs was similar in both 
treatment arms. The following table provides information about the 
safety profiles (Data Cutoff: April 24, 2018) (safety population)--
IMpower133. The most common treatment-related Grade \3/4\ AEs for 
TECENTRIQ[supreg] + carboplatin + etoposide and for placebo + 
carboplatin + etoposide was neutropenia (22.7 percent vs. 24.5 percent, 
respectively), anemia (14.1 percent vs. 12.2 percent), and decreased 
neutrophil count (14.1 percent vs. 16.8 percent). Treatment-related 
deaths occurred in three patients in the TECENTRIQ[supreg] group (due 
to neutropenia, pneumonia, and unspecified cause) and three patients in 
the placebo group (due to pneumonia, septic shock, and cardiopulmonary 
failure).

[[Page 32667]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.136

    More patients in the TECENTRIQ[supreg] group than in the placebo 
group experienced immune-related AEs, with rash and hypothyroidism 
being the most common. The following table summarizes immune-related 
AEs occurring in >=5 patients in any treatment arm (data cutoff: April 
24, 2018) (safety population).
[GRAPHIC] [TIFF OMITTED] TP29MY20.137

    The median treatment duration of TECENTRIQ[supreg] was 4.7 months 
(range: 0-1), and the median number of TECENTRIQ[supreg] doses 
administered was 7 (range: 1-30). The median dose intensity, total 
cumulative dose, and median number of chemotherapy doses (four doses of 
carboplatin, 12 doses of etoposide) were similar in the two treatment 
groups.
    The addition of TECENTRIQ[supreg] to carboplatin + etoposide 
demonstrated a statistically significant improvement in OS and PFS 
compared with placebo + carboplatin + etoposide for the first-line 
treatment of ES-SCLC. Overall, the safety profiles of TECENTRIQ[supreg] 
+ carboplatin + etoposide and placebo + carboplatin + etoposide were 
comparable to the safety profiles of each individual agent; no new 
safety signals were identified with the combinations.
    The applicant asserts that TECENTRIQ[supreg] plus standard-of-care 
therapy represents a substantial clinical improvement over existing 
technologies because it offers a treatment option for a patient 
population unresponsive to or ineligible for currently available 
treatments. The applicant also asserted that TECENTRIQ[supreg] 
represents a significant clinical improvement over existing 
technologies because the technology produces a statistically 
significant improvement in overall survival, a statistically 
significant improvement in progression-free survival, as well as 
improved HRQoL and reduced symptomology.
    We are concerned that the survival benefit of the addition of 
TECENTRIQ[supreg] was a median duration of only 2 months over standard 
therapy and the improvement on the median progression free survival was 
less than one month. We are also concerned that the short survival and 
progression free survival may not be clinically significant. 
Additionally, we are concerned that the participants did not have a 
clinically significant improvement in their quality of life given the 
number of AEs in the TECENTRIQ[supreg] treatment arm combined with the 
number of treatments given in that arm.
    We are inviting public comment on whether TECENTRIQ[supreg] meets 
the substantial clinical improvement criterion.
    We did not receive any written comments in response to the New 
Technology Town Hall meeting notice published in the Federal Register 
regarding the substantial clinical improvement criterion for 
TECENTRIQ[supreg] or at the New Technology Town Hall meeting.
o. WavelinQTM (4F) EndoAVF System
    Becton Dickinson & Company submitted an application for new 
technology add-on payments for the WavelinQTM (4F) EndoAVF 
System for FY 2021. According to the applicant, the predicate device, 
the WavelinQTM (6F) EndoAVF System received FDA marketing 
authorization on June 22, 2018 for the indication of the creation

[[Page 32668]]

of an arteriovenous (AV) fistula using concomitant ulnar artery and 
ulnar vein or concomitant radial artery and radial vein in patients 
with minimum artery and vein diameters of 2.0 mm at the fistula 
creation site who have chronic kidney disease and need hemodialysis. On 
February 6, 2019 the FDA cleared the WavelinQTM (4F) EndoAVF 
System via its 510(k) (premarket notification) pathway for an expanded 
access indication with a smaller 4Fr catheter. The WavelinQ 4F EndoAVF 
System is indicated for the creation of an AV fistula using concomitant 
ulnar artery and ulnar vein or concomitant radial artery and radial 
vein in patients with minimum artery and vein diameters of 2.0 mm at 
the fistula creation site who have chronic kidney disease and need 
hemodialysis. It is our understanding that the WavelinQTM 
(4F) EndoAVF System replaces the the WavelinQTM (6F) EndoAVF 
System. The applicant noted that it is applying for new technology add 
on payments for the WavelinQTM (4F) EndoAVF System and not 
the WavelinQTM (6F) EndoAVF System. The applicant also noted 
that the WavelinQTM (4F) EndoAVF System has been cleared to 
treat both the radial arteries and veins and the ulnar arteries and 
veins. Per the applicant, the only difference between the two 
technologies and their respective approvals is the size of the 
catheters (6F vs. 4F) and the expanded indication to treat the radial 
arteries and veins for the WavelinQTM (4F) EndoAVF System.
    Hemodialysis, a form of treatment for kidney failure patients, is a 
procedure that removes wastes, salts, and fluid from a patient's blood 
when the kidneys can no longer perform these functions. To receive 
dialysis, patients require a vascular access, such as an arteriovenous 
(AV) fistula, to connect to the dialysis machine.
    The applicant asserts that Endovascular AV fistula creation with 
the WavelinQTM (4F) EndoAVF System is achieved using 
flexible magnetic-guided arterial and venous catheters that utilize 
radiofrequency energy and includes vascular embolization of the 
brachial vein, fistulogram, angiography (to fluoroscopically guide 
placement of the arterial magnetic catheter), and venography (to 
fluoroscopically guide placement and alignment of the venous magnetic 
radiofrequency [RF] catheter, ultrasound, and final fistulogram to 
document AV fistula creation).
    The applicant asserts that the following ICD-10-CM diagnosis codes 
are applicable to the WavelinQTM (4F) EndoAVF System: N18.4 
(Chronic kidney disease, stage 4), N18.5 (Chronic kidney disease, stage 
5) and N18.6 (End stage renal disease). The applicant also asserts that 
the following ICD-10-PCS procedure codes can identify the 
WavelinQTM (4F) EndoAVF System: 03193ZF (Bypass right ulnar 
artery to lower arm vein, percutaneous approach), 031A3ZF (Bypass left 
ulnar artery to lower arm vein, percutaneous approach), 031B3ZF (Bypass 
right radial artery to lower arm vein, percutaneous approach), and 
031C3ZF (Bypass left radial artery to lower arm vein, percutaneous 
approach).
    As stated previously, if a technology meets all three of the 
substantial similarity criteria, it would be considered substantially 
similar to an existing technology and, therefore, 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 the WavelinQTM (4F) EndoAVF System 
uses a different mechanism of action than any commercially available 
technology on the market for hemodialysis fistula creation. The 
applicant states the WavelinQTM (4F) EndoAVF System is not 
an open surgical approach, and that this is the first differentiating 
factor from previous methods used to create an arteriovenous fistula. 
The applicant also explains that WavelinQTM (4F) EndoAVF 
System utilizes flexible magnetic-guided arterial and venous catheters 
that utilize radiofrequency energy to create a communicating channel 
between the arterial and venous system via an endovascular approach. 
Additionally, the applicant explains that as part of the procedure, the 
WavelinQTM (4F) EndoAVF System also requires vascular 
embolization of the brachial vein, fistulogram, angiography (to 
fluoroscopically guide placement of the arterial magnetic catheter), 
and venography (to fluoroscopically guide placement and alignment of 
the venous magnetic RF catheter, ultrasound, and final fistulogram to 
document AV fistula creation). The applicant asserts that in summary, 
the endovascular creation of an AV fistula using radiofrequency energy 
delivered through magnetic-guided catheters is a unique mechanism of 
action.
    The applicant indicates the Ellypsis[supreg] Vascular Access System 
(Avenu Medical) has recently been granted marketing authorization by 
the FDA (January 25, 2019). The applicant asserts that while 
Ellipsys[supreg] also supports an endovascular method of creating an AV 
fistula, there are several important points of differentiation between 
the two devices and their corresponding procedures. According to the 
applicant, there are different mechanisms of action, procedural 
processes, and anatomical locations of fistula creation as follows:
     Fistula creation; WavelinQTM utilizes 
Radiofrequency ablation; Ellipsys[supreg] utilizes thermal resistance 
(heat).
     Embolization: WavelinQTM requires coil 
embolization of the brachial vein at the time of endoAVF creation, 
Ellipsys[supreg] does not.
     Guidance: WavelinQTM utilizes magnetic 
catheters to guide and align the location of the endoAVF creation site 
and Ellipsys[supreg] does not have a mechanism for aligning the fistula 
creation site.
     Fistula of blood vessels: WavelinQTM offers two 
options for fistula creation compared to Ellipsys[supreg]:
    ++ First, the WavelinQTM can create a fistula from the 
ulnar artery to the ulnar vein; according to the applicant, this is an 
unused vascular bed for traditional surgical fistula options which does 
not interfere with necessary blood flow for hemodialysis purposes, thus 
preserving all future surgical AV fistula options such as 
radiocephalic, brachiocephalic, and braciobasilic fistulas.
    ++ Second, the WavelinQ can create a fistula between the 
concomitant radial artery and radial vein. This method eliminates the 
ability to perform a future radiocephalic fistula.
    ++ In comparison, the Ellipsys[supreg] device is only able to 
create a fistula from the proximal radial artery to the perforating 
vein, thus eliminating any future use of a radiocephalic fistula.
     Access methods: WavelinQTM utilizes the 
arterial system and venous system and Ellipsys[supreg] utilizes only 
the venous system.
     Imaging: there are different methods of visualization in 
that WavelinQTM uses ultrasound and fluoroscopy, whereas 
Ellipsys[supreg] only uses ultrasound.
     Subsequent procedures: Ellipsys[supreg] requires a 
secondary balloon angioplasty procedure at a later date, while 
WavelinQTM does not.
     Procedure Times and Complexity: eEndoAVF creation with 
WavelinQTM is an 85-minute procedure, whereas endoAVF 
creation with Ellipsys[supreg] is a 23-minute procedure, which the 
applicant states represents a marked difference in procedure 
complexities.
    With regard to the second criterion, whether a product is assigned 
to the same or a different MS-DRG, the applicant asserted that its MS-
DRG analysis showed that cases using the WavelinQTM (4F) 
EndoAVF System will most often be mapped to MS-DRG 264

[[Page 32669]]

(Other Circulatory System O.R. Procedures), per the assignment of 
recently created ICD-10-PCS codes for endovascular fistula creation. 
The applicant anticipates that cases using the Ellipsys[supreg] 
Vascular Access System will also be frequently mapped to this MS-DRG as 
MS-DRG 264 is the most common MS-DRG for patients with surgical AV 
fistula creations. As such, the applicant does not see a difference in 
MS-DRG assignment between WavelinQTM (4F) EndoAVF procedures 
and traditional surgical AV fistula creation procedures.
    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 when compared to an 
existing technology, the applicant states the WavelinQTM 
(4F) EndoAVF System is indicated for the creation of an arteriovenous 
fistula using concomitant ulnar artery and ulnar vein or concomitant 
radial artery and radial vein in patients with minimum artery and vein 
diameters of 2.0 mm at the fistula creation site who have chronic 
kidney disease and need hemodialysis. The applicant further explains 
that the diagnoses associated with this treatment and the patient 
population are similar to those treated by existing procedures and 
technologies that are commercially available, such as surgical AV 
fistula creation and the Ellipsys[supreg] Vascular Access System.
    As mentioned above, the WavelinQTM (6F) EndoAVF System 
received FDA approval on June 22, 2018 for use in the ulnar arteries 
and veins. The WavelinQTM (4F) EndoAVF System is an expanded 
access of the WavelinQTM (6F) EndoAVF System and received 
FDA approval on February 6, 2019 for use in the radial arteries and 
veins as well as the ulnar arteries and veins. It seems that for 
purposes of use in the ulnar arteries and veins, the 
WavelinQTM (4F) EndoAVF System would be considered 
substantially similar to the WavelinQTM (6F) EndoAVF System 
as there are only minor differences (the size of the catheters) between 
the two devices as explained previously. As a result, we believe the 
newness period for the use in the ulnar arteries and veins would begin 
with the FDA approval of the WavelinQTM (6F) EndoAVF System, 
which occurred on June 22, 2018, rather than the FDA approval of the 
WavelinQTM (4F) EndoAVF System, which occurred on February 
6, 2019. Finally, because the WavelinQTM (4F) EndoAVF System 
received FDA approval on February 6, 2019 for use in the radial 
arteries and veins, it seems the newness period for the use of the 
device in the radial arteries and veins would begin on February 6, 
2019.
    As summarized previously, the manufacturer explained why it 
believes the WavelinQTM (4F) EndoAVF System is not 
substantially similar to the Ellipsys[supreg], specifically with regard 
to mechanism of action. We welcome additional comments on whether the 
WavelinQTM (4F) EndoAVF System and the Ellipsys[supreg] are 
substantially similar to each other.
    We are inviting public comments on whether the 
WavelinQTM (4F) EndoAVF System is substantially similar to 
existing technologies and whether it meets the newness criterion.
    With regard to the cost criterion, the applicant conducted the 
following analysis to demonstrate that the technology meets the cost 
criterion. The applicant searched the FY 2018 MedPAR for claims 
reporting an ICD-10-CM diagnosis code of N18.4, N18.5 or N18.6 to 
identify cases that may be eligible for the WavelinQTM (4F) 
EndoAVF System. The applicant limited its analysis to the following 
five most common MS-DRGs that the cases mapped to, which accounted for 
66 percent of all cases: MS-DRG 252 (Other Vascular Procedures with 
MCC), 264 (Other Circulatory System O.R. Procedures), 673 (Other Kidney 
and Urinary Tract Procedures with MCC), 674 (Other Kidney and Urinary 
Tract Procedures with CC) and 981 (Extensive O.R. Procedure Unrelated 
to Principal Diagnosis with MCC). This resulted in 2,472 cases across 
these five MS-DRGs.
    The applicant first removed supply charges with a revenue code of 
027X and also removed charges for the operating room. The applicant 
then standardized the charges. The applicant noted that in order to 
provide a conservative estimate it did not inflate the charges. The 
applicant then added charges for the new technology as well as 
procedure related charges which included operating room charges.
    Based on the FY 2020 IPPS/LTCH PPS final rule correction notice 
data file thresholds, the average case-weighted threshold amount was 
$83,372. In the applicant's analysis, the final inflated average case-
weighted standardized charge per case was $121,749. Because the final 
inflated average case-weighted standardized charge per case exceeds the 
average case-weighted threshold amount, the applicant maintained that 
the technology meets the cost criterion.
    We are inviting public comments on whether the 
WavelinQTM (4F) EndoAVF System meets the cost criterion.
    With regard to substantial clinical improvement, the applicant 
asserts that the WavelinQTM (4F) EndoAVF System represents a 
substantial clinical improvement over existing technologies because it 
offers a treatment option for a patient population unresponsive to or 
ineligible for currently available treatments. The applicant also 
believes that WavelinQTM (4F) EndoAVF System represents a 
substantial clinical improvement over existing technologies because the 
WavelinQTM (4F) EndoAVF System significantly improves 
clinical outcomes for patients requiring hemodialysis in comparison to 
arteriovenous surgical fistula creation and the Ellipsys[supreg] 
Vascular Access System; offers higher patient satisfaction; provides a 
beneficial resolution to disease process treatment; and provides 
additional vascular access options for dialysis.
    Surgical arteriovenous fistulae are the recommended type of 
vascular access for hemodialysis.\410\ Despite initiatives to increase 
AVF use, fistulas are still underutilized with only 17 percent of 
patients initiating dialysis with an AVF and 67 percent of patients 
still using a central venous catheter (CVC) at 3 months after dialysis 
initiation.\411\ Failure rates (fail to mature and become usable) for 
surgical AVF range from 20-60 percent.412 413 414 415 416 
AVFs also take a long time to mature--approximately 132 days.\417\ 
Furthermore, >83 percent of AVF patients need at least one intervention 
in the first year,\418\ typically receiving 1.5 to 3.3 additional 
interventions per year to mature and maintain 
patency.419 420 421 422 423
---------------------------------------------------------------------------

    \410\ National Kidney Foundation Disease Outcomes Quality 
Initiative (NKF-KDOQI). ``KDOQI Clinical practice guideline for 
vascular access, American Journal of Kidney Diseases, 2006, 48 
(suppl 1), S176-S276.
    \411\ USRDS Annual Report, 2017.
    \412\ Asif, et al., ``Early arteriovenous fistula failure: a 
logical proposal for when and how to intervene,'' Clinical Journal 
of American Society of Nephrology, 2006, 1: pp. 332-339.
    \413\ Dember, et al., ``Effect of clopidogrel on early failure 
of arteriovenous fistulas for hemodialysis: a randomized controlled 
trial,'' JAMA, 2008, 299, pp. 2164-2171.
    \414\ Al-Jaishi, et al., ``Patency rates of the arteriovenous 
fistula for hemodialysis: a systematic review and meta- analysis,'' 
American Journal of Kidney Diseases, 2014, 63, pp. 464-478.
    \415\ USRDS Annual Report, 2017.
    \416\ Thamer, et al., ``Medicare costs associated with 
arteriovenous fistulas,'' American Journal of Kidney Diseases, 
72(1), pp. 10- 8. Published online March 28, 2018.
    \417\ USRDS Annual Report, 2017.
    \418\ Thamer, et al., ``Medicare costs associated with 
arteriovenous fistulas,'' American Journal of Kidney Diseases, 
72(1), pp. 10- 18. Published online March 28, 2018.
    \419\ Lee, et al., ``Tradeoffs in vascular access selection in 
elderly patients initiating hemodialysis with a catheter,'' American 
Journal of Kidney Diseases, 2018.
    \420\ Yang, et al., ``Comparison of post-creation procedures and 
costs between surgical and an endovascular approach to arteriovenous 
fistula creation,'' The Journal of Vascular Access, 2017, 18, pp. 8-
14.
    \421\ Arnold, et al., ``Evaluation of hemodialysis arteriovenous 
fistula interventions and associated costs: Comparison between 
surgical and endovascular AV fistula,'' Journal of Vascular and 
Interventional Radiology 2018, pp. 1-9.
    \422\ Buickians, et al., ``The natural history of autologous 
fistulas as first-time dialysis access in the KDOQI era,'' Journal 
of Vascular Surgery,'' 2008, 47, pp. 415-421, discussion 20-1.
    \423\ Falk, et al., ``Maintenance and salvage of arteriovenous 
fistulas,'' Journal of Vascular Interventional Radiology, 2006, 17, 
pp. 807-813.

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

[[Page 32670]]

    According to the applicant, in contrast, results of AVF created 
using the WavelinQTM EndoAVF System have shown that endoAV 
fistulas have better results than surgical AVF. The applicant states 
that these results include higher patency with fewer post-creation 
interventions and higher fistula maturation as compared to the surgical 
AVF results reported in the literature. For example, a recent meta-
analysis included four clinical studies with pooled efficacy and safety 
data from 157 patients using the WavelinQTM EndoAVF 
System.\424\ According to the applicant, the results include high 
procedure success of 96.8 percent and higher cannulation success than 
surgical AVF--82.4 percent of patients were successfully used for 
dialysis by 6 months. Also, the applicant asserts that the results 
include higher patency than surgical AVF, demonstrated by 74.8 percent 
primary patency (unobstruction without additional intervention) at 12 
months, 79.0 percent secondary patency (unobstruction) at 12 months, 
and 98.12 percent functional patency (durability post-cannulation) at 
12 months. The FLEX study (using the WavelinQTM (6F) EndoAVF 
System) reported a procedure success rate of 97 percent and that 96 
percent of endoAVFs were used for dialysis and remained patent after 6 
months.\425\
---------------------------------------------------------------------------

    \424\ BD WavelinQ Instructions for Use, BAW1469200 Rev. 0 02/19.
    \425\ Rajan, et al., ``Percutaneous creation of an arteriovenous 
fistula for hemodialysis access,'' Journal of Vascular Intervenous 
Radiology, 2015, 26, pp. 484-490.
---------------------------------------------------------------------------

    The applicant indicates that a second study, the Novel Endovascular 
Access Trial (NEAT), which was a statistically powered, prospective, 
multi-center study of 60 evaluable patients and 20 roll-ins using the 
WavelinQTM (6F) EndoAVF System, confirmed previous results 
with high procedure and cannulation success of 98 percent and 67 
percent (within 12 months), respectively. Additionally, the study 
demonstrated a low thrombosis rate of 10.5 percent, low intervention 
rate of 0.46 per pt-year, and high 12-month primary and secondary 
patency of 69 percent and 84 percent, respectively.\426\
---------------------------------------------------------------------------

    \426\ Lok, et al., ``Endovascular proximal forearm arteriovenous 
fistula for hemodialysis access: Results of the prospective, 
multicenter novel endovascular access trial (NEAT),'' American 
Journal of Kidney Diseases, 2017, 70, pp. 486-497.
---------------------------------------------------------------------------

    The applicant states that additional analyses comparing endoAVF 
(using the WavelinQTM (6F) EndoAVF System) to surgical AVF 
showed that patients with an endoAVF had fewer secondary interventions 
in the first year as compared to patients with a surgical AVF, 
resulting in overall cost savings to payers. According to the 
applicant, 67 percent of endoAVF patients were free from intervention 
after 1 year compared to only 18 percent of surgical AVF 
patients.427 428
---------------------------------------------------------------------------

    \427\ Yang, et al., ``Comparison of post-creation procedures and 
costs between surgical and an endovascular approach to arteriovenous 
fistula creation,'' The Journal of Vascular Access, 2017, 18, pp. 8-
14.
    \428\ Arnold, et al., ``Evaluation of hemodialysis arteriovenous 
fistula interventions and associated costs: Comparison between 
surgical and endovascular AV fistula,'' Journal of Vascular 
Intervenous Radiology, 2018, pp. 1-9.
---------------------------------------------------------------------------

    The applicant also indicates a third study, the EASE study, which 
included 32 patients and evaluated the safety and efficacy of the 
WavelinQTM (4F) EndoAVF System. The applicant states that 
results from EASE were consistent with previous studies, demonstrating 
100 percent procedure success with a low adverse event rate, 1/32 (3.1 
percent). At 6 months, 86 percent of patients were successfully 
cannulated for dialysis using the WavelinQTM (4F) EndoAVF 
System.\429\
---------------------------------------------------------------------------

    \429\ Berland, et al., Endovascular Creation of an Arteriovenous 
Fistula with a Next Generation 4Fr Device Design for Hemodialysis 
Access: Clinical Experience from the EASE Study.
---------------------------------------------------------------------------

    Additionally, the applicant noted that a fourth study, the endoAVF 
EU Study (using the WavelinQTM (4F) EndoAVF System), is 
still enrolling. Outcomes for the first 32 patients were tabulated and 
included in the meta-analysis and showed consistent results to previous 
studies.\430\
---------------------------------------------------------------------------

    \430\ Rajan, et al., ``Percutaneous creation of an arteriovenous 
fistula for hemodialysis access,'' Journal of Vascular Intervenous 
Radiology, 2015, 26, pp. 484-490.
---------------------------------------------------------------------------

    The applicant asserts the FLEX, NEAT, EASE, and endoAVF EU Studies 
support that the WavelinQTM (4F) EndoAVF System results in 
much lower maintenance and morbidity than the traditional surgical AVF 
in end-stage renal failure patients, with intervention rates for 
endoAVF ranging from 0.21-0.6 per pt-year and fistula maturation rates 
up to 86 percent at 6 months.431 432 433
---------------------------------------------------------------------------

    \431\ Lee, et al., ``Tradeoffs in vascular access selection in 
elderly patients initiating hemodialysis with a catheter,'' American 
Journal of Kidney Diseases, 2018.
    \432\ Harms, et al., ``Outcomes of arteriovenous fistulas and 
grafts with or without intervention prior to successful use,'' 
Journal of Vascular Surgery,'' 2016, 64(1), pp. 155-162.
    \433\ Berland et al., Endovascular Creation of an Arteriovenous 
Fistula with a Next Generation 4Fr Device Design for Hemodialysis 
Access: Clinical Experience from the EASE Study.
---------------------------------------------------------------------------

    The applicant also asserts the reduction in interventions with the 
WavelinQTM (4F) EndoAVF System is a result of the unique 
procedure that minimizes vessel trauma. According to the applicant, the 
system creates a fistula by using radiofrequency to vaporize tissue 
between the artery and concomitant vein with minimal vessel trauma or 
manipulation of the vessels, potentially lessening the stimulus for 
negative remodeling that leads to frequent interventions.
    The applicant states WavelinQTM (4F) EndoAVF System 
offers higher patient satisfaction and beneficial resolution to disease 
process treatment compared to surgical AVF. According to the applicant 
the team Lok, C et al. was interested in patient acceptance of an 
endoAVF (based on the WavelinQTM (6F) EndoAVF System) 
because up to 30 percent of patients refuse a surgically created AV 
fistula according to the reported literature.434 435 
Therefore, the team collected data on patient satisfaction using a 
validated patient questionnaire to learn more about the patient 
experience with this new technology. The applicant asserts that results 
indicate patients are very satisfied with their endoAVF and would not 
change to another type of access.
---------------------------------------------------------------------------

    \434\ Lok, C. et al., ``Patient perceptions of a new non-
surgical approach to arteriovenous fistula creation and use for 
hemodialysis,'' Nephrology Dialysis Transplantation, 2017, 32 
(Supplement 3) iii329-iii343.
    \435\ Casey, et al., ``Patients' perspectives on hemodialysis 
vascular access: A systematic review of qualitative studies,'' 
American Journal of Kidney Diseases, 2014, vol. 64, pp. 937-953.
---------------------------------------------------------------------------

    The applicant explained some of the clinical and patient benefits 
of the WavelinQTM (4F) EndoAVF System. The applicant 
asserts, for example, that endoAVF allows the patient to avoid open 
surgery, scarring, and arm disfigurement, which is important to many 
patients. The applicant further asserts that the endoAVF procedure 
improves the process of administering hemodialysis as the endoAVF 
matures faster compared to a surgical AVF, allowing the patient to more 
quickly transition away from a central venous catheter, which the 
applicant states has

[[Page 32671]]

a high rate of complication including infection. In addition, the 
applicant states that WavelinQTM (4F) EndoAVF requires less 
follow-on maintenance such that patients are not in and out of the 
hospital for additional interventions to maintain the primary patency 
of the fistula.436 437 The applicant states that this has 
the potential to increase patient acceptance of an AVF as surgical 
fatigue is cited as the primary reason patients elect a permanent CVC 
over a surgical AVF.\438\ The applicant also suggests the 
WavelinQTM (4F) EndoAVF System provides additional vascular 
access options for dialysis in comparison to surgical AVF and the 
Ellipsys[supreg] Vascular Access System.439 440
---------------------------------------------------------------------------

    \436\ Yang, et al., ``Comparison of post-creation procedures and 
costs between surgical and an endovascular approach to arteriovenous 
fistula creation,'' The Journal of Vascular Access, 2017, 18, pp. 8-
14.
    \437\ Arnold, et al., ``Evaluation of hemodialysis arteriovenous 
fistula interventions and associated costs: Comparison between 
surgical and endovascular AV fistula,'' Journal of Vascular 
Intervenous Radiology, 2018, pp. 1-9.
    \438\ Chaudhry, et al., ``Seeing eye to eye: The key to reducing 
catheter use,'' The Journal of Vascular Access, 2011, 12, pp. 120-
126.
    \439\ BD WavelinQ Instructions for Use, BAW1469200 Rev. 0 02/19.
    \440\ Avenue Medical Ellypsis Instructions for Use, LB015-002 
Rev B, Released 11/2018.
---------------------------------------------------------------------------

    The applicant asserts the WavelinQTM (4F) EndoAVF System 
creates additional options for establishing arteriovenous access, that 
is another anatomic site for creating a fistula that neither 
traditional surgical AVFs nor the Ellipsys[supreg] Vascular Access 
System can offer. According to the applicant, patients are given an 
extra location in the mid-arm for a fistula because the 
WavelinQTM (4F) EndoAVF System uses vessels deep in the arm 
that are not used in surgical fistula creation and are only accessible 
endovascularly via the unique mechanism of WavelinQTM 
consisting of action using magnetically guided arterial and venous 
catheters. The applicant suggests this additional access creation site 
extends the potential time a patient can undergo dialysis with an 
autogenous fistula before exhausting vessels and requiring an AV graft 
or CVC.
    The applicant asserts the WavelinQTM (4F) EndoAVF System 
is indicated for the creation of an arteriovenous fistula using 
concomitant ulnar artery and ulnar vein or concomitant radial artery 
and radial vein in patients with minimum artery and vein diameters of 
2.0 mm at the fistula creation site who have chronic kidney disease and 
need hemodialysis. According to the applicant, the ulnar artery to 
ulnar vein fistula is unique to the WavelinQTM (4F) EndoAVF 
System in comparison to both traditional surgical fistula creation and 
the Ellipsys[supreg] Vascular Access System. The applicant states that 
it enables the preservation of all future surgical AVF options such as 
a radiocephalic, brachiocephalic and brachiobasilic fistula as it 
utilizes an entirely different vascular bed for both arterial and 
venous blood flow.
    With regard to the information previously summarized, we are 
concerned that there is no study directly comparing 
WavelinQTM (4F) Endo AVF System to surgical AVF or 
Ellipsys[supreg] Vascular Access System; rather, the studies provided 
compare historical data for surgical AVF to data on the results of AVF 
created using both the WavelinQTM Endo AVF (6F) and (4F) 
systems. We are also concerned as to whether the data demonstrates if 
the WavelinQTM (4F) EndoAVF System significantly improves 
clinical outcomes for patients requiring hemodialysis in comparison to 
surgical AVF and the Ellipsys[supreg] Vascular Access System due to the 
limited number of participants in the clinical trials, and whether the 
results are generalizable to the entire Medicare population due to the 
limited number of participants.
    We are inviting public comments on whether the 
WavelinQTM (4F) EndoAVF System meets the substantial 
clinical improvement criterion.
    We received a written public comment from the applicant in response 
to the New Technology Add-on Payment Town Hall meeting regarding the 
application of WavelinQTM (4F) EndoAVF System for new 
technology add-on payments.
    Comment: The applicant addressed a question posed at the town hall 
meeting regarding how the WavelinQTM (4F) EndoAVF System is 
different from the Ellipsys[supreg] Vascular Access System. The 
applicant stated that the WavelinQTM utilizes a different 
method for fistula creation, radiofrequency ablation, whereas the 
Ellipsys[supreg] utilizes thermal resistance (heat). The applicant 
further stated that the WavelinQTM requires coil 
embolization of the brachial vein at the time of endoAVF creation while 
the Ellipsys[supreg] does not. The applicant stated that the 
WavelinQTM utilizes magnetic catheters to guide and align 
the location of the endoAVF creation site, and that the 
Ellipsys[supreg] does not have a mechanism for aligning the fistula 
creation site. The applicant stated that the WavelinQTM 
offers two options for fistula creation. The applicant stated that the 
WavelinQTM (4F) EndoAVF can create a fistula from the ulnar 
artery to the ulnar vein. According to the applicant this is an unused 
vascular bed for traditional surgical fistula options which does not 
interfere with necessary blood flow for hemodialysis purposes, thus 
preserving all future surgical AV fistula options such as 
radiocephalic, brachiocephalic and braciobasilic fistulas. Second, it 
can create a fistula between the concomitant radial artery and radial 
vein. Per the applicant, this method of fistula creation eliminates the 
ability to perform a future radiocephalic fistula as an option in the 
future.
    The applicant further stated that in comparison, Ellipsys[supreg] 
is only able to create a fistula from the proximal radial artery to the 
perforating vein, thus eliminating any future use of a radiocephalic 
fistula. The applicant asserts that the access methods are different--
WavelinQTM utilizes the arterial system and venous system 
and that the Ellipsys[supreg] utilizes only the venous system. The 
applicant asserts that the methods of visualization are also different. 
The WavelinQTM uses ultrasound and fluoroscopy, whereas the 
Ellipsys[supreg] only uses ultrasound. With regard to subsequent 
procedures, Ellipsys[supreg] requires a secondary balloon angioplasty 
procedure at a later date, while WavelinQTM does not. The 
applicant asserts that procedure times and complexity are also 
different--endoAVF creation with WavelinQTM is an ~85-minute 
procedure, whereas endoAVF creation with Ellipsys[supreg] is a ~23-
minute procedure, which the applicant states represents a marked 
difference in procedure complexities.
    The applicant also addressed a question regarding available 
randomized, controlled studies comparing the WavelinQTM (4F) 
EndoAVF System to surgical AVFs. The applicant stated that as mentioned 
during the Town Hall, while there are no current head to head RCTs 
comparing the two fistula types, there are two published retrospective 
studies that utilize a Propensity Score Matching Analysis to compare 
WavelinQTM data from the NEAT study with two separate data 
sources for AVF patients.
    The applicant stated that the first study was conducted by Yang, et 
al. and was published in the Journal of Vascular Access in 2017. This 
study compared AVF post-creation procedures and their associated costs 
for patients with surgical AV fistulas to patients with fistulas 
created using WavelinQTM. A random 5 percent sample from 
Medicare's Standard Analytic Files was extracted and used in comparison 
to patients from the NEAT study. Patients were matched 1:1 using 
propensity score matching of baseline demographic and clinical 
characteristics. Patient follow up data from inpatient, outpatient, and 
physician claims were

[[Page 32672]]

used to identify post-creation procedures and to estimate average 
procedure costs. Of 3764 Medicare surgical AVF patients, 60 
successfully matched 1:1 with patients from the NEAT study. Key results 
were as follows:
     Post-creation procedural event rate was 3.43 per patient 
year and 0.59 per patient year (p<0.05) for surgical and 
WavelinQTM fistulas, respectively.
     Average first year post-AVF creation costs per patient-
year for patients who received a WavelinQTM fistula were 
$11,240 USD lower than costs for a surgical fistula.
    The second study was conducted by Arnold, et al. and was published 
in the Journal of Vascular Interventional Radiology in 2018. This study 
compared the rate of AVF interventions in both incident and prevalent 
end-stage kidney disease patients, their associated costs and 
intervention-free survival between patients with surgically created 
AVFs vs. patients with an endoAVF created using WavelinQTM. 
Data from the USRDS was abstracted and matched 1:1 with patients from 
the NEAT study using propensity score matching. Post fistula creation 
event rates, intervention-free survival, and costs were compared 
between patients with surgically created fistulas and patients with a 
WavelinQTM fistula. The applicant stated that key results 
were as follows:
     In incident patients, post-creation event rates were 7.22 
per patient year and 0.74 per patient year (p<0.0001) for surgical and 
WavelinQTM fistulas, respectively.
     In prevalent patients, post-creation event rates were 4.10 
per patient year and 0.46 per patient year (p<0.0001) for surgical and 
WavelinQTM fistulas, respectively.
     Expenditures for post-creation interventions were $16,494 
and $13,389 less in incident and prevalent patients with a 
WavelinQTM fistula, respectively.
    The applicant also provided written comments addressing the 
availability of data from the EU post market study. The applicant 
stated that while there are no plans at this time to publish the EU 
post market study in a medical journal, the data have been made 
available to the public via WavelinQ's Instructions for Use (IFU). The 
applicant also provided a PDF copy of the most recent IFU which 
contained a summary of the study safety and effectiveness measures.
    Response: We appreciate the applicant's comments. We will take 
these comments into consideration when deciding whether to approve new 
technology add-on payments for WavelinQTM.
o. ZulressoTM
    Sage Therapeutics submitted an application for new technology add-
on payments for ZULRESSOTM for FY 2021. 
ZULRESSOTM (brexanalone) is a neuroactive steroid gamma-
aminobutyric acid (GABA)A receptor positive modulator 
indicated for the treatment of postpartum depression (PPD) in adults 
administered via a continuous intravenous infusion.
    According to the applicant, PPD is a major depressive episode that 
occurs following delivery, though onset of symptoms may occur during 
pregnancy. Per the applicant, mothers with PPD may present with a 
variety of symptoms, which must be present most of the time for 2 weeks 
or more in order for PPD to be diagnosed. These depressive symptoms may 
persist throughout and beyond the first postnatal year if PPD is left 
untreated. As described by the applicant, these symptoms may include 
trouble bonding with, and doubt in ability to care for, their baby; 
thoughts of self-harm or harm to baby; feelings of worry, anxiety, 
sadness, moodiness, irritability, and/or restlessness; crying more 
often or without apparent reason; experiencing anger or rage; sleep 
disturbances; changes in appetite; difficulty concentrating; and 
withdrawal from friends and family. According to the applicant, PPD may 
affect the mother's ability to function with potential considerable 
risks such as self-harm, and PPD may also be associated with suicidal 
ideation.
    The applicant stated that PPD is one of the most common 
complications during and after pregnancy, affecting more than 400,000 
women in the United States. The applicant noted that women diagnosed 
with PPD who are disabled may be otherwise eligible for Medicare, and 
some may be eligible for Medicaid as well. While the studies summarized 
did not specifically target Medicare patients, the applicant believes 
that these results can be generalized to Medicare patients diagnosed 
with PPD.
    The applicant stated that the precise cause of PPD is unknown, 
though there are multiple hypotheses about the mechanism of disease of 
PPD. The applicant reported that levels of allopregnanolone, the 
predominant metabolite of progesterone, increase during pregnancy and 
decrease substantially after childbirth. Per the applicant, preclinical 
evidence indicated that rapid changes in levels of allopregnanolone 
confer dramatic behavioral changes and may trigger PPD in some 
women.\441\
---------------------------------------------------------------------------

    \441\ Kanes, SJ, Colquhoun, H, Doherty, J, Raines, S, Hoffmann, 
E, Rubinow, DR, Meltzer-Brody, S. ``Open-label, proof-of-concept 
study of brexanolone in the treatment of severe postpartum 
depression,'' Human Psychopharmacology: Clinical & Experimental, 
2017, Vol. 32(2).
---------------------------------------------------------------------------

    As reported in a study submitted by the applicant, the GABAergic 
deficit hypothesis of depression states that a deficit of GABAergic 
transmission in defined neural circuits is causal for depression. 
According to the study, conversely, an enhancement of GABA 
transmission, including that triggered by selective serotonin reuptake 
inhibitors or ketamine, has antidepressant effects. The study reported 
that ZULRESSOTM, an intravenous formulation of the 
endogenous neurosteroid allopregnanolone, showed clinically significant 
antidepressant activity in postpartum depression. According to the 
study, by allosterically enhancing GABAA receptor function, 
the antidepressant activity of allopregnanolone is attributed to an 
increase in GABAergic inhibition. In addition, allopregnanolone may 
stabilize normal mood by decreasing the activity of stress-responsive 
dentate granule cells and thereby sustain resilience behavior. The 
researchers concluded that therefore, allopregnanolone may augment and 
extend its antidepressant activity by fostering resilience.\442\
---------------------------------------------------------------------------

    \442\ L[uuml]scher, B, M[ouml]hler, H, ``Brexanolone, a 
neurosteroid antidepressant, vindicates the GABAergic deficit 
hypothesis of depression and may foster resilience,'' F1000Research, 
2019, vol. 751.
---------------------------------------------------------------------------

    The applicant stated that prior to FDA approval of 
ZULRESSOTM, there were no medicines specifically indicated 
for PPD. The applicant indicated that the regimens historically 
employed for the treatment of patients who have been diagnosed with PPD 
have generally consisted of medications typically used for major 
depression or other mood disorders. As described by the applicant, 
these pharmacological therapies include--
     Selective serotonin reuptake inhibitors (SSRIs), such as 
sertraline, fluoxetine, and paroxetine, which selectively block the 
reuptake of serotonin;
     Serotonin and norepinephrine reuptake inhibitors (SNRIs) 
such as venlafaxine, duloxetine, and milnacipran, which selectively 
block the reuptake of serotonin and norepinephrine;
     Monoamine oxidase inhibitors (MAOIs) such as phenelzine, 
which cause an accumulation of amine neurotransmitters and are not 
commonly used, owing to the adverse reactions with concomitant 
medications and various food groups; and

[[Page 32673]]

     Tricyclic antidepressants (TCAs), like nortriptyline, 
which are antimuscarinic drugs that block the reuptake of both 
serotonin and norepinephrine and have variable sedative properties.
    The applicant indicated that non-pharmacological treatments, such 
as psychotherapies, including cognitive behavioral therapy, 
psychosocial community-based intervention, and dynamic therapy have 
also been used to treat PPD.
    Based on market research conducted by the applicant, the applicant 
asserted that current treatment options for patients who have been 
diagnosed with PPD present potential challenges for patients such as: 
Long wait times for an appointment and difficulties scheduling follow-
up appointments with providers; insurance coverage challenges; delays 
or interruptions in treatment; changes in medications or doses (which 
may or may not be effective): And the lengths of the treatment plan 
being longer than expected.
    With respect to the newness criterion, the FDA granted 
ZULRESSOTM Priority Review and Breakthrough Therapy 
designations, and on March 19, 2019, approved ZULRESSOTM for 
the treatment of PPD in adult women. On June 17, 2019, the Drug 
Enforcement Administration (DEA) placed ZULRESSOTM into 
Schedule IV of the Controlled Substances Act (84 FR 27938 through 
27943), after which it became commercially available. Currently, there 
are no ICD-10-PCS procedure codes to uniquely identify procedures 
involving ZULRESSOTM. We note that the applicant has 
submitted a request for approval for two unique ICD-10-PCS codes for 
the administration of ZULRESSOTM beginning in FY 2021.
    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 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, ZULRESSOTM does not use the same 
or a similar mechanism of action when compared to existing treatments. 
The applicant indicated that prior to the approval of 
ZULRESSOTM, certain antidepressants were prescribed for the 
treatment of PPD; however, these antidepressants are not specifically 
indicated for PPD. In addition, the applicant asserted that 
ZULRESSOTM does not use the same or a similar mechanism of 
action as current antidepressants, including SSRIs, SNRIs, MAOIs, and 
TCAs. The applicant stated that ZULRESSOTM works differently 
because it does not directly affect monoaminergic systems, with the 
mechanism of action believed to be related to ZULRESSO'sTM 
positive allosteric modulation of GABAA receptors. 
Therefore, the applicant asserted that ZULRESSOTM utilizes a 
different mechanism of action than currently available treatment 
options.
    With respect to the second criterion, whether a product is assigned 
to the same or a different MS-DRG, the applicant stated that the 
antidepressants and non-pharmacological treatments historically used to 
treat PPD are traditionally used in the outpatient setting; however, 
patients with more severe symptoms of PPD who are hospitalized would 
likely have the same diagnosis (F53.0--Postpartum depression) and be 
assigned to the same MS-DRG as ZULRESSOTM patients, MS-DRG 
881 (Depressive Neuroses).
    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 use of ZULRESSOTM for treating PPD would 
involve treatment of a similar patient population as compared to other 
therapies historically used to treat PPD. However, the applicant noted 
that there are no other treatments or technologies that are 
specifically indicated for the treatment of PPD.
    As summarized previously, the applicant maintains that 
ZULRESSOTM meets the newness criterion and is not 
substantially similar to existing technologies because it has a unique 
mechanism of action for treating PPD and is the only therapy 
specifically indicated for the treatment of PPD. We are inviting public 
comments on whether ZULRESSOTM is substantially similar to 
any existing technologies and whether ZULRESSOTM meets the 
newness criterion.
    With regard to the cost criterion, the applicant used the FY 2018 
MedPAR Hospital Limited Data Set (LDS) to determine the MS-DRGs to 
which cases representing potential patient hospitalizations that may be 
eligible for treatment involving ZULRESSOTM may be assigned. 
The applicant identified these potential cases as those with a 
principal or secondary diagnosis code of F53 (Puerperal psychosis), 
excluding MA cases and claims submitted only for GME payment. The 
applicant noted that ICD-10-CM code F53.0 (Postpartum depression) 
became effective October 1, 2018, and was not found on any FY 2018 
inpatient claims. The applicant identified 76 cases reporting ICD-10-CM 
diagnosis code F53 spanning 26 different MS-DRGs, with approximately 58 
percent of these potential cases mapping to the following 3 MS-DRGs, 
out of which approximately 49 percent of those potential cases mapped 
to the top 2 MS-DRGs:
[GRAPHIC] [TIFF OMITTED] TP29MY20.138

    The applicant did not remove charges for the prior technology or 
the technology being replaced because the historical treatment 
regimens, such as oral anti-depressants, do not need to be stopped 
during treatment with ZULRESSOTM. The applicant also noted 
that ZULRESSOTM is the first and only FDA-approved treatment 
specifically indicated for PPD so there are no prior technology charges 
to remove. The applicant then standardized the FY 2018 charges using 
the FY 2018 impact file and inflated the charges to FY 2020 using the 
2-year inflation factor of 11.1 percent (1.11100) published in the FY 
2020 IPPS/LTCH PPS final rule (see 84 FR 42629). The applicant then 
added charges for ZULRESSOTM, based on the average per 
discharge cost of ZULRESSOTM inflated by the inverse of the 
national average CCR for pharmacy costs of 0.189. The applicant 
calculated a final average case-weighted standardized charge per case 
of $225,056. Based on the FY 2020 IPPS/LTCH PPS final rule correction 
notice

[[Page 32674]]

data file thresholds, the applicant calculated an average case-weighted 
threshold amount of $33,012. The applicant stated that 
ZULRESSOTM exceeded the average-case-weighted threshold 
amount and, therefore, meets the cost criterion.
    As noted previously, the 76 cases reporting ICD-10-CM diagnosis 
code F53 span 26 different MS-DRGs, with very few observations in most 
of these MS-DRGs. We note that a sub-analysis of the top 2 MS-DRGs--
which represent 49 percent of the cases--would still exceed the 
threshold. We also note that a sub-analysis assigning 100 percent of 
the cases to the highest paying of these 26 MS-DRGs would also still 
exceed the threshold.
    We are concerned with the limited number of cases in the sample the 
applicant analyzed. However, we acknowledge the difficulty in obtaining 
cost data for a condition that has low prevalence in the Medicare 
population. We are inviting public comments on whether 
ZULRESSOTM meets the cost criterion.
    With regard to substantial clinical improvement, the applicant 
asserted that, because there is no other treatment option specifically 
approved by the FDA to treat PPD, ZULRESSOTM represents a 
substantial clinical improvement over existing technologies. In support 
of this statement, the applicant submitted the FDA approval letter and 
news release indicating that the approval of ZULRESSOTM 
marks the first time a drug has been specifically approved to treat 
PPD.\443\ The applicant also asserted that ZULRESSOTM 
represents a substantial clinical improvement because the technology 
significantly reduces depressive symptoms and improves patients' 
functioning. The applicant submitted three studies to support its 
assertion that ZULRESSOTM represents a substantial clinical 
improvement over existing technologies by improving depressive symptoms 
and patients' functioning.
---------------------------------------------------------------------------

    \443\ Food and Drug Administration, ``FDA approves first 
treatment for post-partum depression,'' https://www.fda.gov/news-events/press-announcements/fda-approves-first-treatment-post-partum-depression.
---------------------------------------------------------------------------

    The first study submitted (202A) was a Phase II, multicenter, 
randomized, double-blind, parallel-group, placebo-controlled clinical 
trial with 30-day follow-up in women diagnosed with severe PPD. 
Patients with severe PPD (n=21) were randomized to receive a single, 
continuous infusion of ZULRESSOTM or placebo for 60 hours. 
The primary endpoint was the change from baseline in the 17-item 
Hamilton Depression Rating Scale (HAM-D) total score at the end of the 
60-hour treatment period, compared to placebo. At the end of the 60-
hour infusion, the least-squared (LS) mean reduction in HAM-D total 
score from baseline was 21.0 points in the ZULRESSOTM group 
compared with 8.8 points in the placebo group. The researchers 
concluded that in women with severe PPD, infusion of 
ZULRESSOTM resulted in a significant and clinically 
meaningful reduction in HAM-D total score, compared with placebo.\444\
---------------------------------------------------------------------------

    \444\ Kanes, S., Colquhoun, H., Gunduz-Bruce, H., Raines, S., 
Arnold, R., Schacterle, A., Doherty, J., Epperson, C.N., 
Deligiannidis, K.M., Riesenberg, R., Hoffmann, E., Rubinow, D., 
Jonas, J., Paul, S., Meltzer-Brody, S., ``Brexanolone (SAGE-547 
injection) in post-partum depression: a randomised controlled 
trial.'' The Lancet. 2017,vol. 390(10093), pp. 480-489.
---------------------------------------------------------------------------

    The second and third studies submitted (202B and 202C) were Phase 
III, multicenter, randomized, double-blind, parallel-group, placebo-
controlled clinical trials with 30 day follow-up conducted at 30 
clinical research centers and specialized psychiatric units in the 
United States. The studies included women between the ages of 18-45 
years, 6 months postpartum or less at screening, with PPD and a 
qualifying score on the HAM-D. In both studies, patients were randomly 
assigned to receive a single, continuous 60-hour infusion of 
ZULRESSOTM or matching placebo. The primary endpoint in both 
studies was the change from baseline in the 17-item HAM-D total score 
at 60 hours, compared with placebo. Study 202B consisted of patients 
who were diagnosed with severe PPD (HAM-D score >=26) who were randomly 
assigned to receive a single intravenous injection of either 
ZULRESSOTM 90 [mu]g/kg per h (BRX90), ZULRESSOTM 
60 [mu]g/kg per hour (BRX60), or matching placebo for 60 hours. Study 
202C consisted of patients who were diagnosed with moderate PPD (HAM-D 
score of 20 to 25) who were randomly assigned to BRX90 or matching 
placebo for 60 hours. Three hundred and seventy-five women were 
simultaneously screened across both studies, of whom 138 were randomly 
assigned to receive either BRX90 (n=45), BRX60 (n=47), or placebo 
(n=46) in Study 202B, and 108 were randomly assigned to receive BRX90 
(n=54) or placebo (n=54) in Study 202C. In study 202B, at hour 60, the 
LS mean reduction in HAM-D total score from baseline was 19.5 points in 
the BRX60 group and 17.7 points in the BRX90 group, compared with 14.0 
points in the placebo group. In Study 202C, at hour 60, the LS mean 
reduction in HAM-D total score from baseline was 14.6 points in the 
BRX90 group compared with 12.1 points for the placebo group. The 
researchers concluded that administration of ZULRESSOTM 
injection for PPD resulted in significant and clinically meaningful 
reductions in HAM-D total score at hour 60 compared with placebo, with 
rapid onset of action and durable treatment response during the study 
period of 30 days.\445\
---------------------------------------------------------------------------

    \445\ Meltzer-Brody, S., Colquhoun, H., Riesenberg, R., 
Epperson, C.N., Deligiannidis, K.M., Rubinow, D.R., Li, H., Sankoh, 
A.J., Clemson, C., Schacterle A., Jonas, J., Kanes, S., 
``Brexanolone injection in post-partum depression: two multicentre, 
double-blind, randomised, placebo-controlled, phase 3 trials,'' The 
Lancet, 2018, vol. 392(10152), pp. 1058-1070.
---------------------------------------------------------------------------

    The applicant provided data from the clinical studies cited 
previously to support that ZULRESSOTM improves patients' 
depressive symptoms as measured by a reduction in the HAM-D score at 
hour 60, and sustained at day 30. The applicant cited data from the 
Phase II study (202A) that, at the end of the 60 hour infusion, the LS 
mean reduction in HAM-D total score was significantly larger for the 
ZULRESSOTM (90 [mu]g/kg/h) group compared with the placebo 
group (21.0 vs 8.8 points, respectively). Prespecified secondary 
analyses showed a mean difference of -11.3 points between groups as 
early as 24 hours after infusion, with significant improvements also 
seen for the ZULRESSOTM group at 36, 48, 60, and 72 hours, 
as well as days 7 and 30. A greater percentage of patients in the 
ZULRESSOTM group achieved a treatment response (defined as 
>=50% reduction from baseline in HAM-D total score) compared to the 
placebo group, with a significant difference observed at hour 72 (80% 
vs. 27%) and day 7 (80% vs. 20%). At hour 60, 70 percent of patients in 
the ZULRESSOTM group and 36 percent of patients in the 
placebo group had a treatment response. A greater percentage of 
patients treated with ZULRESSOTM achieved remission (HAM-D 
total score <=7) at hour 60 compared with the placebo group (70.0% vs. 
9.1%). The difference was significant at hours 24, 48, 60, and 72, and 
days 7 and 30.\446\
---------------------------------------------------------------------------

    \446\ Kanes, S., Colquhoun, H., Gunduz-Bruce, H., Raines, S., 
Arnold, R., Schacterle, A., Doherty, J., Epperson, C.N., 
Deligiannidis, K.M., Riesenberg, R., Hoffmann, E., Rubinow, D., 
Jonas, J., Paul, S., Meltzer-Brody, S., ``Brexanolone (SAGE-547 
injection) in post-partum depression: a randomised controlled 
trial.'' The Lancet, 2017, vol. 390(10093), pp. 480-489.
---------------------------------------------------------------------------

    The applicant cited data from the Phase III multicenter study of 
patients with severe PPD (202B) that at hour 60, and sustained at day 
30, the LS mean reduction in HAM-D total score was significantly 
greater for the ZULRESSOTM groups, compared to the

[[Page 32675]]

placebo groups. At hour 60, the LS mean reduction in HAM-D total score 
was 17.7 points in the BRX90 group and 19.5 points in the BRX60 group, 
compared to 14.0 points in the placebo group. At all-time points from 
hour 24 to day 30, the percentage of patients achieving HAM-D response 
(>=50% reduction from baseline in HAM-D total score) was higher in both 
ZULRESSOTM groups compared with placebo, with statistical 
significance achieved for both ZULRESSOTM groups across 
multiple timepoints compared with placebo. The percentage of patients 
achieving HAM-D remission (total score <=7) was numerically higher in 
both ZULRESSOTM groups between 24 and 72 hours and at day 30 
compared with the placebo group.\447\
---------------------------------------------------------------------------

    \447\ Meltzer-Brody, S., Colquhoun, H., Riesenberg, R., 
Epperson, C.N., Deligiannidis, K.M., Rubinow, D.R., Li, H., Sankoh, 
A.J., Clemson, C., Schacterle A., Jonas, J., Kanes, S., 
``Brexanolone injection in post-partum depression: two multicentre, 
double-blind, randomised, placebo-controlled, phase 3 trials,'' The 
Lancet, 2018, vol. 392(10152), pp. 1058-1070.
---------------------------------------------------------------------------

    The applicant cited data from the Phase III multicenter study of 
patients with moderate PPD (202C) that at the end of the 60 hour 
infusion, the LS mean reduction in HAM-D total score was significantly 
greater in the ZULRESSOTM BRX90 group compared with the 
placebo group (14.6 vs 12.1, respectively). At all time points from 
hour 8 through day 14, the percentage of patients achieving HAM-D 
remission (total score <=7) was numerically higher for the 
ZULRESSOTM BRX90 group compared with the placebo group, with 
statistical significance achieved at multiple time points, including at 
the end of the 60 hour infusion.\448\
---------------------------------------------------------------------------

    \448\ Ibid.
---------------------------------------------------------------------------

    The applicant cited pooled data from the ZULRESSOTM 
BRX90 groups in the Phase II (202A) and Phase III (202B and 202C) 
studies showing a significant LS mean reduction in HAM-D total score 
compared with the placebo group at hour 60 (17.0 vs 12.8 points). 
Similar to the individual studies, the integrated BRX90 analysis showed 
a rapid decrease in HAM-D scores (that is, depressive symptoms) in the 
BRX90 group compared with the placebo groups, which was sustained until 
day 30. At the end of the 60 hour infusion, the LS mean reduction in 
HAM-D total score from baseline was significantly larger in the BRX90 
group than the placebo group (LS mean difference -4.1), which was also 
observed at 24 hours (LS mean difference -3.0) and was sustained at day 
30 (LS mean difference -2.6).\449\
---------------------------------------------------------------------------

    \449\ Ibid.
---------------------------------------------------------------------------

    The applicant provided data from the clinical studies cited 
previously to support that ZULRESSOTM improves patients' 
functioning scores, as measured by the Clinical Global Impressions 
Scale-Improvement (CGI-I). The applicant cited data from the Phase II 
study (202A) that the observed improvement in symptoms of postpartum 
depression following ZULRESSOTM administration was evidenced 
by the significant treatment difference observed for CGI-I response. At 
day 30, 3 (27.3%) patients in the placebo group vs. 8 (80.0%) patients 
treated with ZULRESSOTM were considered CGI-I responders 
with a score of ``1--very much improved'' or ``2--much improved.'' 
\450\
---------------------------------------------------------------------------

    \450\ Kanes, S., Colquhoun, H., Gunduz-Bruce, H., Raines, S., 
Arnold, R., Schacterle, A., Doherty, J., Epperson, C.N., 
Deligiannidis, K.M., Riesenberg, R., Hoffmann, E., Rubinow, D., 
Jonas, J., Paul, S., Meltzer-Brody, S., ``Brexanolone (SAGE-547 
injection) in post-partum depression: A randomised controlled 
trial.'' The Lancet, 2017, vol. 390(10093), pp. 480-489.
---------------------------------------------------------------------------

    The applicant cited data from the Phase III study of patients with 
severe PPD (202B) that patients' functioning scores, as measured by 
CGI-I, improved at hour 60, and sustained at day 30. The proportion of 
patients who achieved a CGI-I response (score of ``1--very much 
improved,'' or ``2--much improved'') at 60 hours was significantly 
higher in both ZULRESSOTM groups. The proportion of BRX90 
patients who achieved a CGI-I response was also significantly higher 
than the placebo group at hour 72 and day 30 and significantly higher 
in the BRX60 group compared to placebo at timepoints from hours 36 to 
72 and days 7 and 30.\451\
---------------------------------------------------------------------------

    \451\ Meltzer-Brody, S., Colquhoun, H., Riesenberg, R., 
Epperson, C.N., Deligiannidis, K.M., Rubinow, D.R., Li, H., Sankoh, 
A.J., Clemson, C., Schacterle A., Jonas, J., Kanes, S., 
``Brexanolone injection in post-partum depression: Two multicentre, 
double-blind, randomised, placebo-controlled, phase 3 trials,'' The 
Lancet, 2018, vol. 392(10152), pp. 1058-1070.
---------------------------------------------------------------------------

    The applicant cited data from the Phase III study of patients with 
moderate PPD (202C) that the proportion of patients who achieved a CGI-
I response was significantly higher for the BRX90 group compared with 
the placebo group at hour 60. These significant increases in CGI-I 
response occurred as early as 36 hours and were sustained at day 
7.\452\
---------------------------------------------------------------------------

    \452\ Ibid.
---------------------------------------------------------------------------

    The applicant provided data from the clinical studies cited 
previously to support that ZULRESSOTM improves patients' 
depressive symptoms, as measured by the Montgomery-Asberg Depression 
Rating Scale (MADRS). The applicant cited data from the Phase II study 
(202A) that ZULRESSOTM improved patients' depressive 
symptoms, as measured by the MADRS, at hour 60 and sustained at day 30. 
Through the study period, patients in the ZULRESSOTM (90 
[mu]g/kg/h) group showed significant differences in MADRS score 
compared with the placebo group (hour 24, P=0.004; hour 60, P=0.01; day 
30, P=0.01).\453\
---------------------------------------------------------------------------

    \453\ Kanes, S., Colquhoun, H., Gunduz-Bruce, H., Raines, S., 
Arnold, R., Schacterle, A., Doherty, J., Epperson, C.N., 
Deligiannidis, K.M., Riesenberg, R., Hoffmann, E., Rubinow, D., 
Jonas, J., Paul, S., Meltzer-Brody, S., ``Brexanolone (SAGE-547 
injection) in post-partum depression: A randomised controlled 
trial.'' The Lancet, 2017, vol. 390(10093), pp. 480-489.
---------------------------------------------------------------------------

    The applicant cited data from the Phase III study of patients with 
severe PPD (202B) that ZULRESSOTM improved patients' 
depressive symptoms, as measured by the MADRS, at hour 60. Numerically 
greater improvement from baseline in MADRS total score was observed for 
both ZULRESSOTM (60 [mu]g/kg/h and 90 [mu]g/kg/h) treatment 
groups compared with the placebo group at hour 60 and day 30. This 
difference was statistically significant at hour 60 for ZULRESSO 60 
[mu]g/kg/h (LS mean difference vs placebo, -6.9).\454\
---------------------------------------------------------------------------

    \454\ Meltzer-Brody, S., Colquhoun, H., Riesenberg, R., 
Epperson, C.N., Deligiannidis, K.M., Rubinow, D.R., Li, H., Sankoh, 
A.J., Clemson, C., Schacterle A., Jonas, J., Kanes, S., 
``Brexanolone injection in post-partum depression: Two multicentre, 
double-blind, randomised, placebo-controlled, phase 3 trials,'' The 
Lancet, 2018, vol. 392(10152), pp. 1058-1070.
---------------------------------------------------------------------------

    The applicant cited data from the Phase III study of patients with 
moderate PPD (202C) that ZULRESSOTM improved patients' 
depressive symptoms, as measured by the MADRS, at hour 60. There was a 
statistically significant improvement from baseline in the MADRS total 
score for the ZULRESSOTM (90 [mu]g/kg/h) group compared to 
placebo at hour 60 (LS mean difference vs. placebo, -4.9). \455\
---------------------------------------------------------------------------

    \455\ Ibid.
---------------------------------------------------------------------------

    The applicant cited data from the Phase II study (202A) cited 
previously that ZULRESSOTM improves patients' depressive 
symptoms as measured by the Bech-6 Subscale, a secondary endpoint. In 
the Phase II study (202A), significant improvement in the core 
depressive symptoms of the HAM-D Bech-6 Subscale score were observed at 
day 30 in the ZULRESSOTM (90 [mu]g/kg/h) group compared with 
the placebo group.\456\
---------------------------------------------------------------------------

    \456\ Kanes, S., Colquhoun, H., Gunduz-Bruce, H., Raines, S., 
Arnold, R., Schacterle, A., Doherty, J., Epperson, C.N., 
Deligiannidis, K.M., Riesenberg, R., Hoffmann, E., Rubinow, D., 
Jonas, J., Paul, S., Meltzer-Brody, S., ``Brexanolone (SAGE-547 
injection) in post-partum depression: A randomised controlled 
trial.'' The Lancet, 2017, vol. 390(10093), pp. 480-489.

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

[[Page 32676]]

    After reviewing the information submitted by the applicant as part 
of its FY 2021 new technology add-on payment application for 
ZULRESSOTM, we are concerned that the patients in the 
clinical trials were followed up for only 30 days, and the durability 
of the effects of ZULRESSOTM, including whether patients in 
remission relapse after 30 days, is not clear. We also note that the 
small sample sizes of the trials and the demographic characteristics of 
the patients recruited for these studies may not have included or 
sufficiently represented populations that may be at high-risk to 
develop PPD, such as women who are financially or socially vulnerable 
and individuals with pre-existing mental illness, and it is not clear 
whether the study participants had time-limited PPD that might have 
resolved with the passage of time. It is also unclear whether the 
outcomes chosen for these studies (for example, test scores) translate 
into clinically significant observable improvements in maternal 
functioning and child interactions, for example, has maternal-child 
bonding been shown to improve as a result of the infusion. We also note 
that these studies compare the effects of ZULRESSOTM to 
placebo, and not current regimens being used to treat PPD, and do not 
seem to include patients who were unresponsive to existing therapies. 
In addition, we are concerned whether results of studies of otherwise 
healthy women with PPD would be generalizable to the Medicare 
population, in which women with PPD would likely be eligible for 
Medicare based on disabilities that could potentially present 
comorbidities for which ZULRESSOTM would not be appropriate 
or effective. We also note that because of possible side effects of 
excessive sedation or sudden loss of consciousness, 
ZULRESSOTM is only available through a restricted Risk 
Evaluation and Mitigation (REMS) program, and we are concerned whether 
these or other adverse events associated with ZULRESSOTM 
would be unsafe for women with PPD in the Medicare population. We are 
inviting public comments on whether ZULRESSOTM meets the 
substantial clinical improvement criterion, including with respect to 
the concerns we have raised.
    We did not receive any written comments in response to the New 
Technology Town Hall meeting notice published in the Federal Register 
regarding the substantial clinical improvement criterion for 
ZULRESSOTM or at the New Technology Town Hall meeting.
6. Proposed FY 2021 Applications for New Technology Add-On Payments 
(Alternative Pathways)
    As discussed previously, for applications received for new 
technology add-on payments for FY 2021 and subsequent fiscal years, if 
a medical device is part of FDA's Breakthrough Devices Program or a 
product is designated by FDA as a QIDP, and received FDA marketing 
authorization, it will be considered new and not substantially similar 
to an existing technology for purposes of the new technology add-on 
payment under the IPPS, and will not need to meet the requirement that 
it represent an advance that substantially improves, relative to 
technologies previously available, the diagnosis or treatment of 
Medicare beneficiaries. These technologies must still meet the cost 
criterion.
    We received 10 applications for new technology add-on payments for 
FY 2021 under this alternative new technology add-on payment pathway. 
One applicant withdrew its application prior to the issuance of this 
proposed rule. Of the remaining nine applications, three of the 
technologies received a Breakthrough Device designation from FDA and 
six have been designated as a Qualified Infectious Disease Product 
(QIDP) by FDA. In accordance with the regulations under Sec.  
412.87(e), 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 for which the application is being considered.
    Typically, in the annual proposed rule, we provide a summary of 
each application and describe any concerns we may have regarding 
whether the technology meets a specific new technology add-on payment 
criterion. As we discussed in the FY 2020 IPPS/LTCH PPS final rule, we 
believe it is appropriate to facilitate access to these transformative 
new technologies and antimicrobials as part of the Administration's 
commitment to addressing barriers to healthcare innovation and ensuring 
Medicare beneficiaries have access to critical and life-saving new 
cures and technologies that improve beneficiary health outcomes. To 
that end, to provide additional transparency and predictability with 
respect to these technologies, in this proposed rule we are making a 
proposal to approve or disapprove each of these nine applications based 
on whether the technology meets the cost criterion. Therefore, in this 
section of this rule, we provide background information on each 
alternative pathway application and propose whether or not each 
technology would be eligible for the new technology add-on payment for 
FY 2021 based on a discussion of whether the technology meets the cost 
criterion. We refer readers to section II.H.8. of the preamble of the 
FY 2020 IPPS/LTCH PPS final rule (84 FR 42292 through 42297) for a 
complete discussion of the alternative new technology add-on payment 
pathways for these technologies.
a. Alternative Pathway for Breakthrough Devices
(1) BAROSTIM NEO[supreg] System
    CVRx submitted an application for the BAROSTIM NEO[supreg] System. 
According to the applicant, the BAROSTIM NEO[supreg] System is 
indicated for the improvement of symptoms of heart failure--quality of 
life, six-minute hall walk and functional status--for patients who 
remain symptomatic despite treatment with guideline-directed medical 
therapy, are NYHA Class III or Class II (who had a recent history of 
Class III), have a left ventricular ejection fraction <=35%, a NT-
proBNP <1600 pg/ml and excluding patients indicated for Cardiac 
Resynchronization Therapy (CRT) according to AHA/ACC/ESC guidelines.
    The BAROSTIM NEO[supreg] System received FDA approval on August 16, 
2019 and is a Breakthrough Device designated by FDA. Additionally, 
according to the applicant, the device was available on the market 
immediately upon FDA approval. Currently, the following ICD-10-PCS 
procedure codes can be used to uniquely identify the BAROSTIM 
NEO[supreg] System: 0JH60MZ (Insertion of stimulator generator into 
chest subcutaneous tissue and fascia, open approach) in combination 
with 03HK0MZ (Insertion of stimulator lead into right internal carotid 
artery, open approach) or 03HL0MZ (Insertion of stimulator lead into 
left internal carotid artery, open approach).
    With regard to the cost criterion, the applicant used the FY 2018 
MedPAR Limited Data Set (LDS) to assess the MS-DRGs to which potential 
cases representing hospitalized patients who may be eligible for 
treatment involving the BAROSTIM NEO[supreg] System would mapped. The 
applicant searched for cases with the following combination of existing 
ICD-10-PCS codes: 0JH60MZ in combination with 03HK0MZ or 03HL0MZ. The 
applicant determined its search using these procedure codes mapped to 
MS-DRGs 252, 253, and 254 (Other Vascular Procedures with MCC,

[[Page 32677]]

with CC, and without CC/MCC, respectively), resulting in 71,431 total 
claims across these three MS-DRGs.
    The applicant then removed charges for the prior technology since 
the BAROSTIM NEO[supreg] System will replace all of the current device 
charges included in the claims. The applicant explained that it removed 
all charges associated with the service category Medical/Surgical 
Supply Charge Amount, which include revenue centers 027x.
    The applicant then standardized the charges and inflated the 
charges by applying the FY 2020 IPPS/LTCH PPS final rule outlier charge 
inflation factor of 1.11100 (84 FR 42629). The applicant then added the 
charges for the new technology by converting the cost of the device to 
charges by dividing the costs by the national average cost-to-charge 
ratio of 0.299 for implantable devices from the FY2020 IPPS Final Rule 
(84 FR 42179).
    Based on the above, the applicant calculated a final average case-
weighted standardized charge per case of $194,393 and an average case-
weighted threshold of $85,559. Because the final inflated average case-
weighted standardized charge per case exceeded the average case-
weighted threshold amount, the applicant asserted that the technology 
meets the cost criterion.
    According to the applicant, since the BAROSTIM NEO[supreg] System 
is used in heart failure patients, the applicant submitted an 
additional analysis to demonstrate that the technology meets the cost 
criterion. The applicant revised its first analysis by assessing MS-DRG 
291 (Heart Failure and Shock with MCC), 292 (Heart Failure and Shock 
with CC), and 293 (Heart Failure and Shock without CC/MCC), 242 
(Permanent Cardiac Pacemaker Implant with MCC), 243 (Permanent Cardiac 
Pacemaker Implant with CC), 244 (Permanent Cardiac Pacemaker Implant 
without CC/MCC), 222 (Cardiac Defibrillator Implant with Cardiac 
Catheterization with AMI/HF/Shock with MCC), 223 (Cardiac Defibrillator 
Implant with Cardiac Catheterization with AMI/HF/Shock without MCC), 
224 (Cardiac Defibrillator Implant with Cardiac Catheterization without 
AMI/HF/Shock with MCC), 225 (Cardiac Defibrillator Implant with Cardiac 
Catheterization without AMI/HF/Shock without MCC), 226 (Cardiac 
Defibrillator Implant without Cardiac Catheterization with MCC) and 227 
(Cardiac Defibrillator Implant without Cardiac Catheterization without 
MCC) using the same aforementioned ICD-10-PCS codes. The applicant used 
the same methodology above and calculated a final inflated average 
case-weighted standardized charge per case of $161,332 and an average 
case-weighted threshold amount of $55,697. Because the final inflated 
average case-weighted standardized charge per case exceeded the average 
case-weighted threshold amount, the applicant asserted that the 
technology meets the cost criterion.
    We agree with the applicant that the BAROSTIM NEO[supreg] System 
meets the cost criterion and therefore are proposing to approve the 
BAROSTIM NEO[supreg] System for new technology add-on payments for FY 
2021. As previously noted, there is a combination of ICD-10-PCS 
procedure codes that can uniquely identify cases involving the BAROSTIM 
NEO[supreg] System.
    Based on preliminary information from the applicant at the time of 
this proposed rule, the cost of the BAROSTIM NEO[supreg] System is 
$35,000. We note that the cost information for this technology may be 
updated in the final rule based on revised or additional information 
CMS receives prior to the final rule. Under Sec.  412.88(a)(2), we 
limit new technology add-on payments to the lesser of 65 percent of the 
average cost of the technology, or 65 percent of the costs in excess of 
the MS-DRG payment for the case. As a result, we are proposing that the 
maximum new technology add-on payment for a case involving the use of 
the BAROSTIM NEO[supreg] System would be $22,750 for FY 2021.
    We are inviting public comments on whether the BAROSTIM NEO[supreg] 
System meets the cost criterion and our proposal to approve new 
technology add-on payments for the BAROSTIM NEO[supreg] System for FY 
2021.
(2) NanoKnife[supreg] System
    Angiodynamics submitted an application for new technology add-on 
payments for the NanoKnife[supreg] System for FY 2021. The applicant is 
seeking new technology-add on payments for the use of the 
NanoKnife[supreg] System with six outputs for the treatment of Stage 
III pancreatic cancer. We note that FDA has not yet granted market 
approval of the NanoKnife[supreg] System for use in the treatment of 
pancreatic cancer. We also note that the NanoKnife[supreg] System has 
been previously approved by FDA for the use for surgical ablation of 
soft tissue. Per the applicant, the Nanoknife[supreg] System is a 
medical device consisting of a dedicated generator and specialized 
electrode probes currently used for inpatient hospital ablation 
procedures for surgical treatment of soft tissue ablation procedures. 
The NanoKnife[supreg] System is considered a FDA class II device when 
indicated for soft tissue ablation.
    The applicant states that the NanoKnife[supreg] System delivers a 
series of high voltage direct current electrical pulses between at 
least two electrode probes placed within a target area of tissue. The 
electrical pulses produce an electric field which induces 
electroporation on cells within the target area. The number of 
electrodes used is dependent on the size and shape of the tumor, and 
the individual patient's clinical needs.
    Electroporation is a technique in which an electrical field is 
applied to cells in order to increase the permeability of the cell 
membranes through the formation of nanoscale defects in the lipid 
bilayer. The result is creation of nanopores in the cell membrane and 
disruption of intra-cellular homeostasis, ultimately causing cell 
death. The applicant stated that after delivering a sufficient number 
of high voltage pulses, the cells surrounded by the electrodes will be 
irreversibly damaged. This mechanism, which causes permanent cell 
damage, is referred to as Irreversible Electroporation (IRE). Per the 
applicant, benefits of IRE over other ablation methods include: (1) 
Localized ablation of targeted tissue; (2) lack of damaging heat-sink 
effect often seen with traditional thermal ablation techniques; and (3) 
preservation of critical anatomic structures in the vicinity of the 
ablation. Furthermore, according to the applicant, in studies to date, 
the NanoKnife[supreg] System has been shown to be safe and effective in 
patients presenting with unresectable tumors, who, given current 
treatment standards, have few viable treatment options.
    The NanoKnife[supreg] System with six outputs for the treatment of 
Stage III pancreatic cancer received FDA Breakthrough Device 
designation on January 18, 2018 and approval of an FDA investigational 
device exemption (IDE G180278) on March 28, 2019. We note, and as 
discussed above, that although the NanoKnife[supreg] System received 
FDA Breakthrough Device designation for treatment of pancreatic cancer, 
FDA has not yet market approved or cleared the NanoKnife[supreg] System 
for use in the treatment of pancreatic cancer. The NanoKnife[supreg] 
System is currently being used for the treatment of Stage III 
pancreatic cancer in the DIRECT clinical trial in which the first 
patient was enrolled on May 13, 2019. Completion of the clinical trial 
is

[[Page 32678]]

not expected until approximately December 2023.\457\
---------------------------------------------------------------------------

    \457\ https://clinicaltrials.gov/ct2/show/study/NCT03899636?term=NanoKnife&draw=2&rank=6.
---------------------------------------------------------------------------

    The applicant noted that earlier iterations of the 
NanoKnife[supreg] System indicated for the surgical ablation of soft 
tissue were available on the market after FDA clearances in 2008 and 
2015. According to the applicant, NanoKnife 3.0[supreg], the most 
recent iteration of the NanoKnife[supreg] System device consisting of 
improvements and advancements as compared to prior versions of the 
device, was cleared by FDA on June 19, 2019 for the surgical ablation 
of soft tissue and per the applicant became commercially available on 
the U.S. market in June 2019. Consistent with prior versions of the 
device, NanoKnife 3.0[supreg] is labeled for soft tissue ablation. We 
note that since the earlier versions of the NanoKnife[supreg] System 
have been available commercially on the U.S. market following FDA 
clearances in 2008 and 2015, these versions are not considered new. As 
mentioned above, under the first criterion, 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. Therefore, the indication associated 
with the device during that timeframe, soft tissue ablation, would not 
be relevant for purposes of the new technology add-on payment 
application for FY 2021. Only the use of the NanoKnife[supreg] System 
with six outputs for the treatment of Stage III pancreatic cancer, for 
which the applicant submitted its application for new technology-add on 
payments for FY 2021, and the FDA Breakthrough Device designation it 
received for that use, are relevant for purposes of the new technology 
add-on payment application for FY 2021.
    According to the applicant, ICD-10-PCS procedure codes 0F5G0ZF 
(Destruction of pancreas using irreversible electroporation, open 
approach), 0F5G3ZF (Destruction of pancreas using irreversible 
electroporation, percutaneous approach), and 0F5G4ZF (Destruction of 
pancreas using irreversible electroporation, percutaneous endoscopic 
approach) may be used to distinctly identify cases involving the 
NanoKnife[supreg] System because the NanoKnife[supreg] System is 
currently the only device used for irreversible electroporation in the 
United States.
    The applicant conducted the following analysis to demonstrate that 
the technology meets the cost criterion. The applicant used the FY 2018 
MedPAR Limited Data Set (LDS) to identify the MS-DRGs to which 
potential cases representing hospitalized patients who may be eligible 
for treatment involving the NanoKnife[supreg] System would be mapped. 
The applicant searched for cases reporting the following predecessor 
ICD-10-PCS codes: 0F5G0ZZ (Destruction of pancreas, open approach), 
0F5G3ZZ (Destruction of pancreas, percutaneous approach) and 0F5G4ZZ 
(Destruction of pancreas, percutaneous endoscopic approach). According 
to the applicant, this resulted in 40 cases mapped to MS-DRGs 405, 406, 
and 407 (Pancreas, Liver and Shunt Procedures with MCC, with CC, and 
without CC/MCC, respectively). The applicant noted that cases eligible 
for use of the NanoKnife[supreg] System would likely map to MS-DRGs 
628, 629, or 630 (Other Endocrine, Nutritional and Metabolic O.R. 
procedures with MCC, with CC, and without CC/MCC, respectively) as well 
but none of the 40 cases above mapped to these MS-DRGs. However, the 
applicant stated that had there been cases assigned to MS-DRGs 628, 
629, or 630, these would have been selected as well. The applicant also 
noted that cases where the open approach Whipple procedure (ICD-10-PCS 
code 0FBG0ZZ (Excision of pancreas, open approach)) was coded were 
removed, as according to the applicant it is unlikely this procedure 
would be performed in conjunction with IRE because the Whipple 
procedure is an extensive surgical procedure that may not be necessary 
with IRE. The applicant only disclosed the percentage of cases assigned 
to MS-DRG 406 because, according to the applicant, the number of cases 
assigned to MS-DRGs 405 and 407 was less than 12 for each MS-DRG, 
making the exact percentage for these two MS-DRGs unavailable.
    The applicant examined associated charges per MS-DRG. According to 
the applicant, since the 40 cases mapped to MS-DRGs 405, 406 and 407 
could include charges for various technologies for destruction of 
pancreatic tumors, and in order to exclude charges for prior 
technology, the applicant removed all charges billed to the medical 
supplies cost center for MS-DRGs 405, 406 and 407, as this cost center 
could include charges associated with use of various predecessor 
technologies for destruction of pancreatic tumors. The applicant noted 
it did not remove charges related to the predecessor technology as it 
believes that remaining charges associated with the cases would stay 
the same. According to the applicant, related charges consist of 
operating room, routine, intensive care, drug, radiology and Computed 
Tomography charges. The applicant then standardized the charges for 
each case and inflated each case's charges by applying the FY 2020 
IPPS/LTCH PPS final rule outlier charge inflation factor of 1.11100 (84 
FR 42629). The applicant then added the charges for the 
Nanoknife[supreg] System by dividing the costs of the device and 
required ancillary supplies per patient by the national average cost-
to-charge ratio of 0.299 for implantable devices from the FY 2020 IPPS 
Final Rule (84 FR 42179). The applicant calculated a final inflated 
average case-weighted standardized charge per case of $175,836 and an 
average case-weighted threshold amount of $102,842. 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 agree with the applicant that it meets the cost criterion. As 
noted previously, subject to our proposed conditional approval process 
for technologies for which an application is submitted under the 
alternative pathway for certain antimicrobial products, 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 for which 
the application is being considered. As also summarized previously, the 
applicant is seeking new technology-add on payments for the use of the 
NanoKnife[supreg] System with six outputs for the treatment of Stage 
III pancreatic cancer, and it is only that use, and the FDA 
Breakthrough Device designation it received for that use, that are 
relevant for purposes of the new technology add-on payment application 
for FY 2021. Therefore, subject to the NanoKnife[supreg] System 
receiving FDA clearance or approval for use in the treatment of Stage 
III pancreatic cancer by July 1, 2020, we are proposing to approve the 
NanoKnife[supreg] System for new technology add-on payments for FY 
2021.
    Based on preliminary information from the applicant at the time of 
this proposed rule, the cost of the NanoKnife[supreg] System is 
$11,086. We note that the cost information for this technology may be 
updated in the final rule based on revised or additional information 
CMS receives prior to the final rule. Under Sec.  412.88(a)(2), we 
limit

[[Page 32679]]

new technology add-on payments to the lesser of 65 percent of the 
average cost of the technology, or 65 percent of the costs in excess of 
the MS-DRG payment for the case. As a result, we are proposing that the 
maximum new technology add-on payment for a case involving the use of 
the NanoKnife[supreg] System would be $7,205.90 for FY 2021.
    We are inviting public comments on whether the NanoKnife[supreg] 
System meets the cost criterion and our proposal to approve new 
technology add-on payments for the NanoKnife[supreg] System for FY 
2021, subject to the NanoKnife[supreg] System receiving FDA clearance 
or approval for use in the treatment of Stage III pancreatic cancer by 
July 1, 2020.
(3) Optimizer System
    Impulse Dynamics submitted an application for The Optimizer[supreg] 
System (QFV). The Optimizer[supreg] System is intended for the 
treatment of chronic heart failure in patients with advanced symptoms 
that have normal QRS duration and are not indicated for cardiac 
resynchronization therapy.
    Per the applicant, the Optimizer System consists of three 
components. First, the Optimizer Rechargeable Implantable Pulse 
Generator (IPG) is designed for subcutaneous implant and delivers 
cardiac contractility modulation to the heart via two standard pacing 
leads attached to the right ventricular septum. Second, the Optimizer 
Mini Charger recharges the Optimizer IPG. Finally, the Omni II 
Programmer with Omni SMART Software gives a qualified healthcare 
professional the ability to program the Optimizer IPG over a large 
range of clinical settings.
    The applicant explained that the Optimizer IPG is implanted in the 
right pre-pectoral region, similar to cardiac rhythm management 
devices. According to the applicant, the procedure is performed in a 
cardiac catheterization laboratory under fluoroscopic guidance with the 
patient under light sedation. The applicant stated that since three 
intracardiac leads are used, subclavian venous access is preferred over 
access via the axillary or cephalic vein. The applicant stated that the 
Optimizer IPG is connected to the heart via two standard implantable 
pacing leads that are each placed into the right ventricular septum.
    With respect to the newness criterion, the applicant indicated that 
the FDA granted Breakthrough Device designation for the Optimizer 
System on March 21, 2019. The applicant received FDA premarket approval 
for the two-lead Optimizer System, which included placement of the two 
leads in the right ventricular septum, on October 23, 2019. The device 
was available in the market immediately following FDA approval.
    The applicant asserted that the current ICD-10-PCS codes 0JH60AZ 
(Insertion of contractility modulation device into chest subcutaneous 
tissue and fascia, open approach), 0JH63AZ (Insertion of contractility 
modulation device into chest subcutaneous tissue and fascia, 
percutaneous approach), 0JH80AZ (Insertion of contractility modulation 
device into abdomen subcutaneous tissue and fascia, open approach) and 
0JH83AZ (Insertion of contractility modulation device into abdomen 
subcutaneous tissue and fascia, percutaneous approach) identify the 
Optimizer System.
    With regard to the cost criterion, the applicant conducted an 
analysis using the FY 2018 MedPAR Limited Data Set (LDS) to demonstrate 
that the Optimizer System meets the cost criterion.
    The applicant first searched the FY 2018 MedPAR data for cases 
reporting the procedure codes listed in this section to identify 
potential cases representing hospitalized patients who may be eligible 
for treatment using the Optimizer[supreg] System. The applicant limited 
its search to MS-DRG 245 (AICD Generator Procedures), which it asserts 
is the typical MS-DRG assignment for implanting a contractility 
modulation device. The applicant identified 2,049 cases that met the 
criterion of having at least one of the following relevant ICD-10-PCS 
procedure codes:
[GRAPHIC] [TIFF OMITTED] TP29MY20.139

    The applicant determined an average unstandardized charge per case 
of $180,319. The applicant then removed all charges for prior 
technology by removing charges associated with the service categories 
Prosthetic/Orthotic (revenue center 0274), Pacemakers (revenue center 
0275) and other implantables (revenue center 0278), as the applicant 
believed the Optimizer[supreg] System will typically not be implanted 
concomitantly with other devices during the hospital admission. The 
applicant then standardized the charges and applied the FY 2020 IPPS/
LTCH PPS final rule outlier charge inflation factor of 1.11100 (84 FR 
42629) to update the charges from FY 2018 to FY 2020.
    The applicant added the charges for the new technology by dividing 
its cost per patient by the national average cost-to-charge ratio of 
0.299 for implantable devices from the FY2020 IPPS Final Rule (84 FR 
42179).
    The applicant calculated a final inflated average case-weighted 
standardized charge per case of $190,167, which it stated exceeded the 
average case-weighted threshold amount of $148,002 by $42,165.
    The applicant also conducted a subsequent analysis that only 
included

[[Page 32680]]

patients with a diagnosis of heart failure. The applicant once again 
limited its search to MS-DRG 245 and refined its sample by including 
only cases with one of the ICD-10-PCS procedure codes listed previously 
and an ICD-10-CM diagnosis code from Category I50 (Heart Failure) on 
the claim. This resulted in 1,698 cases with an average unstandardized 
charge per case of $183,243. After following the same order of 
operations as the first analysis, the final inflated average case 
weighted standardized charge per case was $192,237, which exceeded the 
average case weighted threshold amount of $148,002. Because the final 
inflated average case-weighted standardized charge per case exceeded 
the average case-weighted threshold amount under both analyses 
described previously, the applicant maintains that the technology meets 
the cost criterion.
    We agree with the applicant that the technology meets the cost 
criterion and therefore are proposing to approve the Optimizer[supreg] 
System for new technology add-on payments for FY 2021. As noted above, 
the applicant asserted that ICD-10-PCS codes 0JH60AZ, 0JH63AZ, 0JH80AZ 
and 0JH83AZ identify the Optimizer[supreg] System.
    Based on preliminary information from the applicant at the time of 
this proposed rule, the cost of the Optimizer[supreg] System is 
$23,000. We note that the cost information for this technology may be 
updated in the final rule based on revised or additional information 
CMS receives prior to the final rule. Under Sec.  412.88(a)(2), we 
limit new technology add-on payments to the lesser of 65 percent of the 
average cost of the technology, or 65 percent of the costs in excess of 
the MS-DRG payment for the case. As a result, we are proposing that the 
maximum new technology add-on payment for a case involving the use of 
the Optimizer[supreg] System would be $14,950 for FY 2021.
    We are inviting public comments on whether the Optimizer[supreg] 
System meets the cost criterion and our proposal to approve new 
technology add-on payments for the Optimizer[supreg] System for FY 
2021.
b. Alternative Pathways for Qualified Infectious Disease Products 
(QIDPs)
(1) Cefiderocol (Fetroja)
    Shionogi & Co. Ltd (Company) submitted an application for 
Cefiderocol (Fetroja), a [beta]-lactam antibiotic indicated for the 
treatment of complicated urinary tract infections (cUTI), including 
pyelonephritis, caused by the following susceptible GN pathogens: 
Escherichia coli (including with concurrent bacteremia), Klebsiella 
pneumoniae, Proteus mirabilis, Pseudomonas aeruginosa, Citrobacter 
freundii, Enterobacter cloacae, Morganella morganii, and Serratia 
marcescens. Per the applicant, Cefiderocol should be used to treat 
infections where limited or no alternative treatment options are 
available and where cefiderocol is likely to be an appropriate 
treatment option, which may include use in patients with infections 
caused by documented or highly suspected CR and/or multidrug-resistant 
GN pathogens.
    The applicant describes Cefiderocol as an injectable siderophore 
cephalosporin. The applicant asserts that the principal antibacterial/
bactericidal activity of Cefiderocol occurs with inhibiting Gram-
negative (GN) bacterial cell wall synthesis by binding to penicillin-
binding proteins. The applicant contends that Cefiderocol is unique in 
that it can enter the bacterial periplasmic space (in addition to the 
typical entry point via porin channels) as a result of its siderophore-
like property, has enhanced stability to [beta]-lactamases, and has 
activity limited to GN aerobic bacteria only.
    Per the applicant, cUTIs are the second leading cause of 
hospitalization in the elderly and have substantial morbidity and worse 
outcomes if the causative pathogens are carbapenem-resistant (CR). 
According to the applicant, bloodstream infection (BSI) is often 
associated with cUTI, known as urosepsis, with an associated mortality 
rate of 9 to 31 percent. The applicant asserts that patients who 
develop cUTI due to a CR pathogen are at greater risk for prolonged 
hospital stays and progression to a BSI or urosepsis. The applicant 
stated that CR is a growing problem in the US and around the world, 
with increasing infections due to strains that are resistant to most or 
all currently available antibiotics. The applicant further states that, 
compared to susceptible pathogens, CR pathogens cause prolonged 
hospital and intensive care unit (ICU) stays, worse discharge status, 
and greater mortality.
    Cefiderocol is designated as a Qualified Infectious Disease Product 
(QIDP) and received FDA approval on November 19, 2019. However, 
according to the applicant, Cefiderocol was not commercially available 
until February 24, 2020 due to the finalization of the materials 
associated with the commercial launch of a drug, which could not be 
completed until the final label with the FDA was determined. The 
applicant noted that there are currently no ICD-10-PCS procedure codes 
that could be used to uniquely identify the administration of 
Cefiderocol. The applicant has submitted a request for approval for a 
new ICD-10-PCS code for consideration at the March 2020 ICD-10 C&M 
Meeting.
    With regard to the cost criterion, the applicant conducted two 
analyses based on 100% and 75% of identified claims. For both 
scenarios, the applicant used the FY 2018 MedPAR Limited Data Set (LDS) 
to assess the MS-DRGs to which potential cases representing 
hospitalized patients who may be eligible for Cefiderocol treatment 
would be mapped. The applicant identified eligible cases by searching 
the FY 2018 MedPAR for cases reporting one of the following ICD-10-CM 
codes:
BILLING CODE 4120-01-P

[[Page 32681]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.140

BILLING CODE 4120-01-C
    Under the first scenario of 100 percent of cases, the applicant 
identified 1,461,784 cases mapping to 656 MS-DRGs. Under the second 
scenario of 75 percent of cases, the applicant identified 1,097,594 
cases mapping to 53 MS-DRGs. The applicant standardized the charges 
after calculating the average case-weighted unstandardized charge per 
case for both scenarios and removing 50 percent of charges associated 
with the drug revenue centers 025x, 026x, and 063x under both 
scenarios. (Per the applicant, Cefiderocol is expected to replace some 
of the drugs that would otherwise be utilized to treat these patients. 
The applicant stated that it believes 50 percent of these total charges 
to be a conservative estimate as other drugs will still be required for 
these patients during their hospital stay.) The applicant then applied 
an inflation factor of 11.1 percent, which was the two-year outlier 
charge inflation factor used in the FY 2020 IPPS/LTCH PPS final rule, 
to update the charges from FY 2018 to FY 2020. The applicant then added 
charges for Cefiderocol by dividing the total average hospital cost of 
Cefiderocol by the national average cost-to-charge ratio (0.189) for 
drugs published in the FY 2020 IPPS/LTCH PPS final rule.
    The applicant calculated a final inflated average case-weighted 
standardized charge per case of $116,131 for the first scenario and 
$106,037 for the second scenario and an average case-weighted threshold 
amount of $55,885 for the first scenario and $50,887 for the second 
scenario.

[[Page 32682]]

Because the final inflated average case-weighted standardized charge 
per case for each scenario exceeds the average case-weighted threshold 
amount for each scenario, the applicant asserted that the technology 
meets the cost criterion.
    We agree with the applicant that Cefiderocol meets the cost 
criterion and therefore are proposing to approve Cefiderocol for new 
technology add-on payments for FY 2021. As previously noted, the 
applicant has submitted a request for approval for a new ICD-10-PCS 
procedure code to uniquely identify cases of Cefiderocol. We anticipate 
additional coding information will be available for the final rule.
    In its application, the applicant stated that the cost of 
Cefiderocol is $10,559.81. We note that the cost information for this 
technology may be updated in the final rule based on revised or 
additional information CMS receives prior to the final rule. Under 
412.88(a)(2), we limit new technology add-on payments for QIDPs to the 
lesser of 75 percent of the costs of the new medical service or 
technology, or 75 percent of the amount by which the costs of the case 
exceed the MS-DRG payment. As a result, we are proposing that the 
maximum new technology add-on payment for a case involving the 
administration of Cefiderocol would be $7,919.86 for FY 2021 (that is 
75 percent of the average cost of the technology).
    We are inviting public comments on whether Cefiderocol meets the 
cost criterion and our proposal to approve new technology add-on 
payments for Cefiderocol for FY 2021.
(2) Contepo
    CONTEPOTM (fosfomycin for injection), is intended for 
treatment of complicated urinary tract infections (cUTI) and is 
designated by FDA as a QIDP. In October 2018, Nabriva Therapeutics 
submitted a New Drug Application (NDA) to the US-FDA seeking marketing 
approval of IV fosfomycin for injection (ZTI-01) for the treatment of 
patients 18 years and older with cUTI including acute pyelonephritis 
(AP) caused by designated susceptible bacteria. The applicant noted 
that once approved, CONTEPO will represent the first FDA-approved 
IVepoxide antibiotic in the United States.
    On April 30, 2019, Nabriva received a Complete Response Letter 
(CRL) from FDA for the NDA seeking marketing approval of CONTEPO 
(fosfomycin) for injection. The applicant stated that the CRL from FDA 
requests that Nabriva address issues related to facility inspections 
and manufacturing deficiencies at one of Nabriva's contract 
manufacturers prior to FDA approving the NDA. Nabriva has resubmitted 
its NDA to FDA with FDA setting a Prescription Drug User Fee Act 
(PDUFA) goal date of June 19, 2020 for the completion of its review of 
the NDA.
    The applicant applied for and received a unique ICD-10-PCS 
procedure code to identify cases involving the administration of 
CONTEPOTM in 2019. Effective October 1, 2019, 
CONTEPOTM administration can be identified by ICD-10-PCS 
procedure codes XW033K5, (Introduction of Fosfomycin anti-infective 
into peripheral vein, percutaneous approach, new technology group 5) 
and XW043K5 (Introduction of Fosfomycin anti-infective into central 
vein, percutaneous approach, new technology group 5), which the 
applicant states are unique to CONTEPO administration.
    With regard to the cost criterion, the applicant used the FY 2018 
MedPAR Limited Data Set (LDS) to assess the MS-DRGs to which potential 
cases representing hospitalized patients who may be eligible for 
treatment involving CONTEPOTM would most likely be mapped. 
According to the applicant, CONTEPOTM is anticipated to be 
indicated for the treatment of hospitalized patients who have been 
diagnosed with complicated urinary tract infections (cUTIs). The 
applicant identified 199 ICD-10-CM diagnosis code combinations that 
identify hospitalized patients who have been diagnosed with a cUTI. 
Searching the FY 2018 MedPAR data file for these ICD-10-CM diagnosis 
codes resulted in a total of 684,664 potential cases that span 570 
unique MS-DRGs, 522 of which contained more than 10 cases. The 
applicant excluded MS-DRGs with minimal volume (that is, 10 cases or 
less) from the cohort of the analysis (a total of 252 cases and 48 MS-
DRGs), and this resulted in a total of 684,412 cases across 522 MS-
DRGs.
    The applicant examined associated charges per MS-DRG and removed 
charges for potential antibiotics that may be replaced by the use of 
CONTEPOTM. Specifically, the applicant identified 5 
antibiotics currently used for the treatment of patients who have been 
diagnosed with a cUTI and calculated the cost of each of these drugs 
for administration over 14 day inpatient hospitalization. Because 
patients who have been diagnosed with a cUTI would typically only be 
treated with one of these antibiotics at a time, the applicant 
estimated an average of the 14-day cost for the 5 antibiotics. The 
applicant then converted the cost to charges by dividing the costs by 
the national average CCR of 0.189 for drugs from the FY 2020 IPPS/LTCH 
PPS final rule (84 FR 42179).
    The applicant then standardized the charges for each case and 
inflated each case's charges by applying the FY 2020 IPPS/LTCH PPS 
final rule outlier charge inflation factor of 1.11100 (84 FR 42629). 
The applicant then added the charges for the new technology by 
calculating the per-day cost per patient. The applicant noted that the 
duration of therapy of up to 14 days (patients that had a cUTI with 
concurrent bacteremia) is consistent with the prospective prescribing 
information, and that it used this 14-day duration of therapy to 
calculate total inpatient cost. The applicant then converted these 
costs to charges by dividing the costs per patient by the national 
average cost-to charge ratio of 0.189 for drugs from the FY 2020 IPPS/
LTCH PPS final rule (84 FR 42179). The applicant calculated a final 
inflated average case-weighted standardized charge per case of $75,533 
and a case weighted threshold of $55,447. Because the final inflated 
average case-weighted standardized charge per case for 
CONTEPOTM exceeded the average case-weighted threshold 
amount, the applicant maintained it meets the cost criterion.
    As summarized, the applicant used a 14-day duration of therapy to 
calculate total inpatient cost for purposes of its cost analysis. 
However, the applicant noted that the average number of days a patient 
would be administered CONTEPOTM will most likely fall 
between 10-14 days of therapy given the current guideline 
recommendations. Of these treatment days, the applicant noted that 
nearly all would occur during the inpatient hospital stay. Consistent 
with our historical practice, we believe the new technology add-on 
payment for CONTEPOTM, if approved, would be based on the 
average cost of the technology and not the maximum. For example, in the 
FY 2013 IPPS/LTCH PPS final rule (77 FR 53358), we approved new 
technology add-on payments for DIFICIDTM based on the 
average dosage of 6.2 days rather than the maximum 10 day dosage. 
Without further information from the applicant regarding the average 
number of days CONTEPOTM is administered, we believe using 
the middle ground of 12.5 days, based on the 10-14 day period indicated 
by the applicant, is appropriate for this analysis to determine the 
average number of days CONTEPOTM is administered in the 
hospital. To assess whether the technology would meet the cost 
criterion using an average cost for the

[[Page 32683]]

technology based on this 12.5-day period for CONTEPOTM 
administration, we converted the costs to charges by dividing the costs 
per patient by the national average cost-to charge ratio of 0.189 for 
drugs from the FY 2020 IPPS/LTCH PPS final rule (84 FR 42179). Based on 
data from the applicant, this resulted in a final inflated average 
case-weighted standardized charge per case of $73,548 which exceeds the 
case weighted threshold of $55,447.
    Because of the large number of cases included in this cost 
analysis, the applicant supplemented the analysis as described 
previously with additional sensitivity analyses. In these analyses, the 
previous cost analysis was repeated using only the top 75 percent of 
cases, the top 20 MS-DRGs, and the top 10 MS-DRGs. In these three 
additional sensitivity analyses, the final inflated average case-
weighted standardized charge per case for CONTEPOTM of 
$64,019, $62,486 and $61,158 exceeded the average case-weighted 
threshold amount of $51,085, $50,704 and $49,889, respectively. We note 
that the applicant did not use the thresholds from the correction 
notice to case weight the charges, however the variance is minimal with 
the final inflated average case-weighted standardized charge per case 
well in excess of the case weighted threshold amounts. Because the 
final inflated average case-weighted standardized charge per case for 
CONTEPOTM exceeded the average case-weighted threshold 
amount, the applicant asserts that CONTEPOTM meets the cost 
criterion.
    We believe that CONTEPOTM meets the cost criterion and 
therefore are proposing to approve CONTEPOTM for new 
technology add-on payments for FY 2021. As previously noted, the 
applicant has received a unique ICD-10-PCS procedure code to identify 
cases involving the administration of CONTEPOTM.
    As discussed previously, without further information from the 
applicant regarding the average number of days CONTEPOTM is 
administered, we believe using a 12.5 day duration of therapy is a 
reasonable approach for estimating the average cost of the technology. 
Based on preliminary information from the applicant at the time of this 
proposed rule, the cost of CONTEPOTM administered over 12.5 
days is $3,125. We note that the cost information for this technology 
may be updated in the final rule based on revised or additional 
information CMS receives prior to the final rule. Under 412.88(a)(2), 
we limit new technology add-on payments for QIDPs to 75 percent of the 
costs of the new medical service or technology, or 75 percent of the 
amount by which the costs of the case exceed the MS-DRG payment. As a 
result, we are proposing that the maximum new technology add-on payment 
for a case involving the administration of CONTEPOTM would 
be $2,343.75 for FY 2021 (that is 75 percent of the average cost of the 
technology).
    We are inviting public comments on whether CONTEPOTM 
meets the cost criterion and our proposal to approve new technology 
add-on payments for CONTEPOTM for FY 2021.
(3) NUZYRA[supreg] for Injection
    Paratek Pharmaceuticals submitted an application for new technology 
add-on payments for NUZYRA[supreg] (omadacycline) for Injection for FY 
2021. According to the applicant, NUZYRA[supreg] for Injection is a 
tetracycline class antibacterial indicated for the treatment of adult 
patients with the following infections caused by susceptible 
microorganisms:
     Community-acquired bacterial pneumonia (CABP) caused by 
the following susceptible microorganisms: Streptococcus pneumoniae, 
Staphylococcus aureus (methicillin-susceptible isolates), Haemophilus 
influenzae, Haemophilus parainfluenzae, Klebsiella pneumoniae, 
Legionella pneumophila, Mycoplasma pneumoniae, and Chlamydophila 
pneumoniae.
     Acute bacterial skin and skin structure infections 
(ABSSSI) caused by the following susceptible microorganisms: 
Staphylococcus aureus (methicillin susceptible and resistant isolates), 
Staphylococcus lugdunensis, Streptococcus pyogenes, Streptococcus 
anginosus grp. (includes S. anginosus, S. intermedius, and S. 
constellatus), Enterococcus faecalis, Enterobacter cloacae, and 
Klebsiella pneumoniae.
    The applicant explained that NUZYRA[supreg] for Injection is 
supplied as a lyophilized powder in a single-dose colorless glass vial, 
with each vial containing 100 mg of NUZYRA[supreg] (equivalent to 131 
mg omadacycline tosylate). 100-mg single dose vials are packaged in 
cartons of 10. The NDC number is 71715-001-02. Additionally, the 
applicant noted that while an oral formulation of NUZYRA[supreg] is 
available, NUZYRA[supreg] can also be administered through intravenous 
infusion. Providers may determine which method of administration is 
clinically appropriate for each patient. Adult patients with community-
acquired bacterial pneumonia (CABP) must receive their initial loading 
dose of NUZYRA[supreg] via intravenous infusion. The applicant 
specified that NUZYRA[supreg] for Injection should not be administered 
with any solution containing multivalent cations, for example, calcium 
and magnesium, through the same intravenous line. Co-infusion with 
other medications has not been studied. The applicant conveyed that for 
treatment of adults with CABP, the recommended dosage regimen of 
NUZYRA[supreg] for Injection is as follows (Use NUZYRA for injection 
administered by intravenous infusion for the loading dose in CABP 
patients):
[GRAPHIC] [TIFF OMITTED] TP29MY20.141

    For treatment of adults with ABSSSI, the recommended dosage regimen 
of NUZYRA[supreg] for injection is as follows (Use NUZYRA[supreg] for 
injection administered by intravenous infusion or NUZYRA[supreg] 
tablets orally administered for the loading dose in ABSSSI patients):

[[Page 32684]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.142

    Finally, the applicant indicated that no dose adjustment is 
warranted in patients with renal or hepatic impairment.
    According to the applicant, NUZYRA[supreg] for Injection was 
submitted for FDA approval under a New Drug Application (identified as 
NDA 209817). After Fast Track and Priority Review consideration, 
NUZYRA[supreg] for Injection received FDA approval on October 2, 2018. 
According to information provided by the applicant, NUZYRA[supreg] for 
Injection was designated as a QIDP and granted priority review. 
According to the applicant, NUZYRA[supreg] for Injection became 
commercially available in February 2019. The applicant explained that 
the delay in commercial availability was due to an effort to prepare 
the distribution and supply channel (pharmacies and wholesalers) and to 
prepare for a full promotional launch. The applicant noted that there 
are currently no ICD-10-PCS procedure codes that uniquely identify the 
use of NUZYRA[supreg] for Injection. However, the applicant stated in 
the absence of a unique code for NUZYRA[supreg] that providers could 
use ICD-10-PCS procedure codes 3E03329 (Introduction of other anti-
infective into peripheral vein, percutaneous approach) or 3E04329 
(Introduction of other anti-infective into central vein, percutaneous 
approach). The applicant has submitted a request for approval for a new 
ICD-10-PCS procedure code to uniquely identify NUZYRA[supreg] for 
Injection for administration in FY 2021.
    With regard to the cost criterion, the applicant used the FY 2018 
MedPAR Limited Data Set (LDS) to identify potential cases that may be 
eligible for treatment involving NUZYRA[supreg] for Injection. To 
ensure appropriate discharges were used from the dataset, the following 
edits were made:
     Claims paid by a Managed Care Organization were removed.
     Duplicated records with the same beneficiary ID, provider, 
admission data, and discharge date were removed.
     Interim claims were combined into discharge records.
     Discharges with covered charges of zero dollars and 
discharges with zero covered days were removed.
     Discharges from IPPS hospitals, as determined by the FY 
2020 IPPS Impact File and discharges with discharge dates from October 
1, 2017 to September 30, 2018 were included.
     Statistical outliers with standard charges that were 
outside of the range of +/- 3 standard deviations from the geometric 
mean standardized charge by MS-DRG were removed.
    After these edits were made, the applicant selected discharges that 
had a primary or secondary diagnosis for ABSSSI or CABP, using a wide 
list of ICD-10-PCS codes, which resulted in a total of 1,745,649 
discharges. Using these 1,745,649 discharges, 37 MS-DRGs were selected 
based on one of the following criteria:
     MS-DRGs with the highest volume of discharges with a 
primary or secondary diagnosis for ABSSSI or CABP (which represent 70 
percent of all discharges with ABSSSI or CABP).
     MS-DRGs with at least two-thirds of discharges with a 
primary or secondary diagnosis of ABSSSI or CABP.
    Using this method, the applicant identified 1,226,429 total cases 
which mapped to the following 37 unique MS-DRGs:

[[Page 32685]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.257

    Next, using the cases mapping to these selected MS-DRGs, the 
applicant removed pharmacy charges for other drugs and standardized the 
charges. Then, the applicant inflated the standardized charges from FY 
2018 to FY 2020 using a 2-year charge inflation factor of 11.1 percent, 
based on the FY 2020 IPPS/LTCH PPS final rule (84 FR 42629).
    The applicant estimated the cost of NUZYRA[supreg] for Injection 
based on an average inpatient stay of 5 days in the clinical 
trial.\458\ Some patients may be required to stay longer than 5 days, 
resulting in increased charges. Using a loading dose for day 1 and 
maintenance doses in days 2 through 5 results in use of 6 vials. Each 
vial costs $345, resulting in a total cost for the new technology of 
$2,070. The applicant estimated charges for the drug by dividing the 
cost by the national average cost-to-charge (CCR) for drugs of 0.189, 
as set forth in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42179). 
This resulted in estimated charges of $10,952. The applicant then added 
$10,952 of charges for the drug which resulted in a final inflated 
average case-weighted standardized charge per case of $58,922. The 
applicant determined an average case-weighted threshold amount of 
$53,899. 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.
---------------------------------------------------------------------------

    \458\ Doe, et al., ``Reducing mortality in disease X population: 
analysis,'' JAMA 2019, vol. 2(5), pp. 12-23.

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[[Page 32686]]

    We agree with the applicant that it meets the cost criterion and 
therefore are proposing to approve NUZYRA[supreg] for Injection for new 
technology add-on payments for FY 2021. As previously noted, the 
applicant has submitted a request for approval for a new ICD-10-PCS 
procedure code to uniquely identify cases of NUZYRA[supreg] for 
Injection. We anticipate additional coding information will be 
available for the final rule.
    Based on preliminary information from the applicant at the time of 
this proposed rule, the cost of NUZYRA[supreg] for Injection is $2,070. 
We note that the cost information for this technology may be updated in 
the final rule based on revised or additional information CMS receives 
prior to the final rule. Under Sec.  412.88(a)(2), we limit new 
technology add-on payments for QIDPs to 75 percent of the costs of the 
new medical service or technology, or 75 percent of the amount by which 
the costs of the case exceed the MS-DRG payment. As a result, we are 
proposing that the maximum new technology add-on payment for a case 
involving the use of NUZYRA[supreg] for Injection would be $1,552.50 
for FY 2021 (that is 75 percent of the average cost of the technology).
    We are inviting public comments on whether NUZYRA[supreg] for 
Injection meets the cost criterion and our proposal to approve new 
technology add-on payments for NUZYRA[supreg] for Injection for FY 
2021.
(4) RECARBRIOTM
    Merck submitted an application for new technology add-on payments 
for RECARBRIOTM for FY 2021. RECARBRIOTM is a 
fixed-dose combination of imipenem, a penem antibacterial; cilastatin, 
a renal dehydropeptidase inhibitor; and relebactam, a novel [beta]-
lactamase inhibitor (BLI). According to the applicant, 
RECARBRIOTM is intended for the treatment of complicated 
urinary tract infections (cUTI) and complicated intra-abdominal 
infections (cIAI) for patients 18 years of age and older. 
RECARBRIOTM is administered via intravenous infusion.
    The applicant explained that the recommended dose of 
RECARBRIOTM is 1.25 grams administered by intravenous 
infusion over 30 minutes every 6 hours in patients 18 years of age and 
older with creatinine clearance (CLcr) 90 mL/min or greater. According 
to the applicant, the recommended treatment course suggests that a 
patient will receive 1 vial per dose and 4 doses per day. Per 
RECARBRIOTM's prescribing information, the recommended 
duration of treatment with RECARBRIOTM is 4 days to 14 days.
    According to information provided by the applicant, 
RECARBRIOTM received FDA approval on July 16, 2019 and is 
designated by FDA as a Qualified Infectious Disease Product (QIDP). 
According to the applicant, RECARBRIOTM became commercially 
available on the U.S. market on January 6, 2020. The applicant stated 
that the delay in commercial availability was due to manufacturing 
considerations. According to the applicant, RECARBRIOTM can 
be identified with ICD-10-PCS codes XW033U5 (Introduction of imipenem-
cilastatin-relebactam anti-infective into peripheral vein, percutaneous 
approach, new technology group 5) or XW043U5 (Introduction of imipenem-
cilastatin-relebactam anti-infective into central vein, percutaneous 
approach, new technology group 5).
    To demonstrate that the technology meets the cost criterion, the 
applicant searched the FY 2018 MedPAR Limited Data Set (LDS) for cases 
reporting ICD-10-CM diagnosis codes for either cUTI or cIAI with ICD-
10-PCS codes XW033U5 (Introduction of imipenem-cilastatin-relebactam 
anti-infective into peripheral vein, percutaneous approach, new 
technology group 5 or XW043U5 (Introduction of imipenem-cilastatin-
relebactam anti-infective into central vein, percutaneous approach, new 
technology group 5) to identify the MS-DRGs to which potential cases 
representing hospitalized patients who may be eligible for treatment 
involving RECABRIOTM would be mapped. The applicant 
identified a total 25,379 cases which were mapped to 453 unique MS-
DRGs. There were 299 MS-DRGs with minimal frequencies (fewer than 11 
cases), with a total of 1,140 cases associated with such low-volume MS-
DRGs. After excluding the cases that were mapped to these low-volume 
MS-DRGs, the applicant identified 24,239 cases that were mapped to 153 
unique MS-DRGs. The applicant examined associated charges per MS-DRG 
and removed all pharmacy charges that will be replaced through the use 
of RECARBRIOTM. The applicant standardized the charges and 
inflated the charges by applying the FY 2020 IPPS/LTCH PPS final rule 
outlier charge inflation factor of 1.11100 (84 FR 42629). The applicant 
estimated an average cost of RECARBRIOTM for the treatment 
of cUTI or cIAI in the inpatient setting based on the recommended dose 
of 1.25 grams (imipenem 500 mg, cilastatin 500 mg, relebactam 250 mg) 
administered by intravenous infusion over 30 minutes every 6 hours in 
patients 18 years of age and older with creatinine clearance (CLcr) 90 
mL/min or greater. As stated above, according to the applicant, the 
recommended treatment course suggests that a patient will receive 1 
vial per dose, 4 doses per day within a recommended treatment duration 
of 4 to 14 days. To determine the cost per patient, the applicant 
stated it used the FY 2018 MedPAR analysis of total cases representing 
hospitalized patients who may be eligible for treatment involving 
RECARBRIOTM to identify a percentage of total cases per 
indication: cUTI equaled 88.6 percent of cases and cIAI equaled 11.4 
percent. According to the applicant, it next identified the average 
length of stay per indication: cUTI 6.4 days and cIAI 9.7 days. 
According to the applicant, it also assumed that 70 percent of patients 
would receive RECARBRIOTM beginning on the fourth day after 
admission while the remaining 30 percent of these patients would 
receive RECARBRIOTM beginning on the second day of their 
hospitalization. According to the applicant, it multiplied the daily 
dose cost by the two scenarios for each cUTI and cIAI indication to 
determine the cost per stay for each indication by days of drug use. 
According to the applicant, next it multiplied the cost per stay for 
each indication by the share of cases by days in use (70/30 percent 
split) to determine the weighted cost for days in use estimation. 
According to the applicant, it summed the 70/30 percent case breakdown 
(weighted cost) for patients initiating on day 2 and 4 to determine the 
average cost per indication for cUTI and cIAI. Finally, according to 
the applicant, it multiplied the average cost per indication by the 
percent of total cases for cUTI and cIAI, then summed them to get the 
overall average cost. The applicant converted this cost to a charge by 
dividing the costs by the national average cost-to-charge ratio of 
0.189 for drugs from the FY 2020 IPPS/LTCH PPS final rule (84 FR 42179) 
and added the resulting charges to determine the final inflated average 
case-weighted standardized charge per case. The applicant calculated a 
final inflated average case-weighted standardized charge per case of 
$75,122 and an average case-weighted threshold amount of $52,216.
    The applicant also calculated an average case-weighted standardized 
charge per case for cUTI and cIAI separately using the same methodology 
previously described and determined final inflated average case-
weighted standardized charges per case of $70,765 for cUTI and $109,403 
for cIAI

[[Page 32687]]

and average case-weighted thresholds of $50,210 for cUTI and $67,531 
for cIAI. Because the final inflated average case-weighted standardized 
charge per case exceeded the average case-weighted threshold amount in 
each scenario, the applicant maintained that the technology met the 
cost criterion.
    We agree with the applicant that it meets the cost criterion and 
therefore are proposing to approve RECARBRIOTM for new 
technology add-on payments for FY 2021. As previously noted, the 
applicant stated that RECARBRIOTM can be identified by ICD-
10-PCS codes XW033U5 (Introduction of imipenem-cilastatin-relebactam 
anti-infective into peripheral vein, percutaneous approach, new 
technology group 5) or XW043U5 (Introduction of imipenem-cilastatin-
relebactam anti-infective into central vein, percutaneous approach, new 
technology group 5).
    Based on preliminary information from the applicant at the time of 
this proposed rule, the cost of RECARBRIOTM is $4,710.37 
(which is based on the cost per patient determined using the 
methodology as previously described in the analysis of the cost 
criterion). We note that the cost information for this technology may 
be updated in the final rule based on revised or additional information 
CMS receives prior to the final rule. Under 412.88(a)(2), we limit new 
technology add-on payments for QIDPs to 75 percent of the costs of the 
new medical service or technology, or 75 percent of the amount by which 
the costs of the case exceed the MS-DRG payment. As a result, we are 
proposing that the maximum new technology add-on payment for a case 
involving RECARBRIOTM would be $3,532.78 for FY 2021 (that 
is 75 percent of the average cost of the technology).
    We are inviting public comments on whether RECARBRIOTM 
meets the cost criterion and our proposal to approve new technology 
add-on payments for the RECARBRIOTM for FY 2021.
(5) XENLETA
    Nabriva Therapeutics submitted an application for XENLETA, a 
pleuromutilin antibacterial agent representing the first intravenous 
(IV) and oral treatment option from a novel class of antibiotics for 
community-acquired bacterial pneumonia (CABP). XENLETA is indicated for 
the treatment of adults with CABP caused by the following susceptible 
microorganisms: Streptococcus pneumoniae, Staphylococcus aureus 
(methicillin-susceptible isolates), Haemophilus influenzae, Legionella 
pneumophila, Mycoplasma pneumoniae, and Chlamydophila pneumoniae. Per 
the applicant, XENLETA also has in vitro activity against methicillin 
resistant Staphylococcus aureus.
    Per the applicant, pleuromutilins inhibit bacterial protein 
synthesis by binding to the A- and P-sites of the peptidyl transferase 
center (PTC) in the large ribosomal subunit of the bacterial ribosome. 
The applicant asserts that this unique binding site in the highly 
conserved core of the ribosomal PTC is specific to pleuromutilins, and 
it confers a lack of cross-resistance with other classes, as well as a 
low propensity for developing bacterial resistance.
    The applicant noted that there are two methods of administering 
XENLETA. As a tablet containing 600 mg of XENLETA, it is administered 
orally every 12 hours for a duration of 5 days. As an injection, 
XENLETA contains 150 mg of the drug and is administered every 12 hours 
by IV infusion over 60 minutes for a duration of 5 to 7 days, with the 
option to switch to XENLETA tablets administered every 12 hours to 
complete the treatment course.
    With respect to the newness criterion, the applicant indicated that 
XENLETA was approved by the FDA under the Qualified Infectious Disease 
Product (QIDP) designation, and granted fast-track designation. XENLETA 
received FDA approval on August 19, 2019 for a new drug application 
indicated for the oral and IV formulations of XENLETA for the treatment 
of CABP in adults. The applicant indicated that XENLETA was 
commercially available on the U.S. market on September 10, 2019 and the 
slight delay from approval to availability was due to the shipment of 
drug to the distribution channels.
    There are currently no ICD-10-PCS procedure codes that uniquely 
identify the use of the XENLETA. We note the applicant submitted a 
request for approval for a unique ICD-10-PCS procedure code to uniquely 
identify use of the technology beginning in FY 2021.
    With respect to the cost criterion, the applicant presented three 
scenarios varying in the assumptions regarding the form of XENLETA used 
to treat the patient and the duration of treatment. For the first 
analysis, the applicant assumed that a patient population with CABP 
received 7 days of IV treatment with XENLETA. For the second analysis, 
the applicant assumed the patient population received 3.2 days of IV 
treatment with XENLETA before switching to oral XENLETA for 3.8 days. 
For the third analysis, the applicant assumed the patient population 
received oral XENLETA for 5 days. The applicant explained that patients 
receiving XENLETA in the inpatient hospital setting would receive it 
through IV treatment. However, some patients may be switched to oral 
form during care, which was observed for some patients in clinical 
trial. While the applicant does not expect many patients to be treated 
with only oral XENLETA in the inpatient setting, they conducted a 
sensitivity analysis based on 5 days of treatment with oral XENLETA, as 
oral treatment is possible in hospital.
    Across all three analyses, the applicant first searched the FY 2018 
MedPAR Final Rule Limited Data Set for potential cases representing 
patients diagnosed with CABP and eligible for treatment with XENLETA. 
The applicant limited the cohort to cases that had an indication on the 
claim that the pneumonia was present on admission. The applicant 
searched for claims that had one of the following ICD-10-CM diagnosis 
codes as a principal or secondary diagnosis:

[[Page 32688]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.143

    The applicant identified 1,225,713 cases from the FY 2018 MedPAR 
LDS file spanning 357 MS-DRGs. The applicant then excluded cases that 
mapped to MS-DRGs with a volume of 10 cases or fewer, resulting in a 
total of 1,225,561 cases spanning 319 unique MS-DRGs. The applicant 
considered these cases to be the primary cohort of the cost analysis. 
The applicant noted that the most common MS-DRGs in the cohort are 871, 
193, 194, 291, and 190, which account for 61 percent of cases. The 
applicant presented the following table of the top 20 MS-DRGs in the 
primary cohort with more than 10 cases:

[[Page 32689]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.144

    For all three scenarios, the applicant calculated an average case-
weighted unstandardized charge per case of $73,911. The applicant then 
removed charges for the prior technology being replaced, which included 
the average charge associated with the cost of antibiotics that are the 
current standard of care. The applicant varied assumptions by scenario 
to reflect appropriate substitute treatments for the different forms of 
XENLETA, as noted previously. For each scenario, the applicant 
calculated the cost of therapy for each standard of care drug using 
dosing information, the duration of treatment, and wholesale 
acquisition costs and converted them to charges using the national 
pharmacy cost-to-charge ratio published in the FY 2020 IPPS final rule 
(84 FR 42179). After adjusting for prior technology, the applicant 
standardized the charges and applied an inflation factor of 11.1 
percent, which is the 2-year inflation factor used by CMS to calculate 
outlier threshold charges in the FY 2020 IPPS/LTCH PPS final rule (84 
FR 42629), to update the charges from FY 2018 to FY 2020. The applicant 
added charges for the new technology, which it again calculated using 
the national pharmacy cost-to-charge ratio.
    For all three scenarios, the applicant conducted a sensitivity 
analysis testing alternative assumptions regarding the charges 
associated with prior technology that could be replaced by XENLETA. The 
applicant acknowledged that it is possible for some patients with CABP 
to receive more than one antibiotic. The applicant examined the cost 
criterion for each scenario after doubling the charges associated with 
prior technology to account for multiple antibiotics. Furthermore, the 
applicant tested alterative assumptions regarding the MS-DRGs that 
cases representing patients eligible for treatment with XENLETA mapped. 
Specifically, the applicant examined the cost criterion for the top 10 
MS-DRGs, the top 20 MS-DRGs, and the top MS-DRGs that accounted for 75 
percent of cases.
    Across all three scenarios and the sensitivity analyses testing 
alternative assumptions, the applicant determined that the final 
inflated average standardized charge per case exceeded the case-
weighted threshold, with the difference ranging from $4,547 to $17,907. 
The following table summarizes the results of the applicant's cost 
analyses. The applicant maintained that XENLETA meets the cost 
criterion.

[[Page 32690]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.145

    We agree with the applicant that XENLETA meets the cost criterion 
and therefore are proposing to approve XENLETA for new technology add-
on payments for FY 2021. As previously noted, the applicant has 
submitted a request for approval for a new ICD-10-PCS procedure code to 
uniquely identify cases involving the use of XENLETA. We anticipate 
additional coding information will be available for the final rule.
    Based on preliminary information from the applicant at the time of 
this proposed rule, the cost of XENLETA is $1,701. We note that the 
cost information for this technology may be updated in the final rule 
based on revised or additional information CMS receives prior to the 
final rule. Under Sec.  412.88(a)(2), we limit new technology add-on 
payments for QIDPs to 75 percent of the costs of the new medical 
service or technology, or 75 percent of the amount by which the costs 
of the case exceed the MS-DRG payment. As a result, we are proposing 
that the maximum new technology add-on payment for a case involving the 
use of XENLETA would be $1,275.75 for FY 2021 (that is 75 percent of 
the average cost of the technology).
    We are inviting public comments on whether XENLETA meets the cost 
criterion and our proposal to approve new technology add-on payments 
for XENLETA for FY 2021.
(6) ZERBAXA[supreg]
    Merck submitted an application for new technology add-on payments 
for ZERBAXA[supreg] for FY 2021. ZERBAXA[supreg] (ceftolozane and 
tazobactam) is a combination of ceftolozane, a cephalosporin 
antibacterial, and tazobactam, a [beta]-lactamase inhibitor (BLI), 
indicated in patients 18 years or older for the treatment of the 
following infections caused by designated susceptible microorganisms:
     Complicated Intra-abdominal Infections (cIAI), used in 
combination with metronidazole;
     Complicated Urinary Tract Infections (cUTI), Including 
Pyelonephriti;
     Hospital-acquired Bacterial Pneumonia and Ventilator-
associated Bacterial Pneumonia (HABP/VABP).
    According to the applicant, the FDA initially approved 
ZERBAXA[supreg] on December 19, 2014 for the treatment of complicated 
intra-abdominal infections (cIAI) and for complicated urinary tract 
infections (cUTI) under a New Drug Application (NDA). ZERBAXA[supreg] 
was then approved on June 3, 2019 for the indication of hospital-
acquired bacterial pneumonia and ventilator-associated bacterial 
pneumonia (HABP/VABP), also under a NDA. The applicant noted that 
ZERBAXA[supreg] was designated as a Quality Infectious Disease Product 
(QIDP) as well as provided Fast Track and Priority Review consideration 
by the FDA. The applicant also indicated that ZERBAXA[supreg] was 
commercially available on the U.S. market upon FDA approval. We believe 
only the indication approved in 2019 for treatment of hospital-acquired 
bacterial pneumonia and ventilator-associated bacterial pneumonia 
(HABP/VABP) is eligible for new technology add on payments for FY 2021 
because the first indication was approved in 2014 and is therefore 
beyond the 3-year newness period.
    The applicant noted that there are currently no ICD-10-PCS 
procedure codes that could be used to uniquely identify the use of 
ZERBAXA[supreg]. However, we note that the applicant has submitted a 
request for approval for a new ICD-10-PCS procedure code to uniquely 
identify ZERBAXA[supreg] administration effective for FY 2021.
    According to the applicant, to reduce the development of drug-
resistant bacteria and maintain the effectiveness of ZERBAXA[supreg] 
and other antibacterial drugs, ZERBAXA[supreg] should be used only to 
treat or prevent infections that are proven or strongly suspected to be 
caused by susceptible bacteria. According to the applicant, when 
culture and susceptibility information are available, they should be 
considered in selecting or modifying antibacterial therapy. In the 
absence of such data, local epidemiology and susceptibility patterns 
may contribute to the empiric selection of therapy.
    The applicant explained that the recommended dosage of 
ZERBAXA[supreg] for injection when used for HABP/VABP is 3 g 
(ceftolozane 2 g and tazobactam 1 g) administered every 8 hours by 
intravenous infusion over 1 hour in patients 18 years or older and with 
a creatinine clearance (CrCl) greater than 50 mL/min. The duration of 
therapy should be guided by the severity and site of infection and the 
patient's clinical and bacteriological progress. Dose adjustment is 
required for patients with CrCl 50 mL/min or less. All doses of 
ZERBAXA[supreg] are administered over 1 hour. For patients with 
changing renal function, CrCl is monitored at least daily and dosage of 
ZERBAXA[supreg] adjusted accordingly.
    With regard to the cost criterion, the applicant used the FY 2018 
MedPAR Limited Data Set (LDS) to identify the MS-DRGs to which 
potential cases representing hospitalized patients who may be eligible 
for treatment involving

[[Page 32691]]

ZERBAXA[supreg] would be mapped. According to the applicant, 
ZERBAXA[supreg] is indicated for the treatment of hospitalized patients 
who have been diagnosed with cUTI, cIAI, VABP, or HABP conditions. The 
applicant conducted multiple analyses based on ICD-10-CM diagnosis 
codes for various scenarios involving patients diagnosed with cUTI, 
cIAI, VABP, or HABP. The applicant stated that cases representing 
patients who may be eligible to receive treatment through the 
administration of ZERBAXA[supreg] are identified with ICD-10-PCS codes 
3E03329 (Introduction of other anti-infective into peripheral vein, 
percutaneous approach) or 3E04329 (Introduction of other anti-infective 
into central vein, percutaneous approach). For the purposes of 
analyzing the cost criterion for this technology for new technology 
add-on payment for FY 2021, we are only discussing the applicant's cost 
analysis related to the HABP and VABP indications because, as we noted 
previously, the first indications (cUTI, cIAI) were approved in 2014 
and are therefore beyond the 3-year newness period. For the HABP and 
VABP scenarios, the applicant submitted the following three cost 
analysis scenarios: Cases with a HABP diagnosis only, cases with a VABP 
diagnosis only and cases with either a HABP or VABP diagnosis. For all 
three scenarios, the applicant calculated the average charges per case 
for each MS-DRG without standardizing the charges. Next, the applicant 
removed 100 percent of the drug charges from the relevant cases to 
conservatively estimate the charges for drugs that potentially may be 
replaced by or avoided through use of ZERBAXA[supreg]. After removing 
these drug charges from unstandardized average charge amounts, the 
applicant calculated the average standardized charge per case for each 
MS--DRG. Then, the applicant inflated the standardized average charges 
by 11.1 percent, which is the 2-year inflation factor used by CMS to 
calculate outlier threshold charges in the FY 2020 IPPS/LTCH PPS final 
rule (84 FR 42629), to update the charges from FY 2018 to FY 2020. The 
applicant added charges for the new technology, which it again 
calculated using the national pharmacy cost-to-charge ratio. Finally, 
the applicant calculated the final inflated average case-weighted 
standardized charge per case as well as the case-weighted threshold 
amount. The following table summarizes the results of the applicant's 
cost analyses. The applicant maintained that ZERBAXA[supreg] meets the 
cost criterion.
[GRAPHIC] [TIFF OMITTED] TP29MY20.146

    We agree with the applicant that ZERBAXA[supreg] meets the cost 
criterion and therefore are proposing to approve ZERBAXA[supreg] for 
new technology add-on payments for FY 2021. As previously noted, the 
applicant has submitted a request for approval for a new ICD-10-PCS 
procedure code to uniquely identify cases involving the use of 
ZERBAXA[supreg]. We anticipate additional coding information will be 
available for the final rule.
    Based on preliminary information from the applicant at the time of 
this proposed rule, the cost of ZERBAXA[supreg] is $2,449.31. We note 
that the cost information for this technology may be updated in the 
final rule based on revised or additional information CMS receives 
prior to the final rule. Under Sec.  412.88(a)(2), we limit new 
technology add-on payments for QIDPs to 75 percent of the costs of the 
new medical service or technology, or 75 percent of the amount by which 
the costs of the case exceed the MS-DRG payment. As a result, we are 
proposing that the maximum new technology add-on payment for a case 
involving the use of ZERBAXA[supreg] would be $1,836.98 for FY 2021 
(that is 75 percent of the average cost of the technology).
    We are inviting public comments on whether ZERBAXA[supreg] meets 
the cost criterion and our proposal to approve new technology add-on 
payments for ZERBAXA[supreg] for FY 2021.
7. Technical Revision to the New Technology Add-On Payment Regulations 
at 42 CFR 412.88
    In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42297 through 42300, 
and 42612), we finalized an increase in the new technology add-on 
payment percentage. Specifically, for a new technology other than a 
medical product designated by FDA as a QIDP, beginning with discharges 
on or after October 1, 2019, if the costs of a discharge involving a 
new technology (determined by applying 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) 65 percent of the costs of the new 
medical service or technology; or (2) 65 percent of the amount by which 
the costs of the case exceed the standard DRG payment. We also 
finalized a separate increase in the new technology add-on payment 
percentage to 75 percent for a new technology that is a medical product 
designated by FDA as a QIDP. Under this finalized policy, unless the 
discharge qualifies for an outlier payment, the additional Medicare 
payment will be limited to the full MS-DRG payment plus 65 percent (or 
75 percent for a medical product designated by FDA as a QIDP) of the 
estimated costs of the new technology or medical service. We also 
finalized revisions to paragraphs (a)(2) and (b) under Sec.  412.88 to 
reflect these changes to the calculation of the new technology add-on 
payment amount beginning in FY 2020, including the finalized percentage 
for a medical product designated by FDA as a QIDP. Specifically, the 
new technology add-on payment percentage of 65 percent for a new 
technology other than a medical product designated by FDA as a QIDP is 
set forth in Sec.  412.88(a)(2)(ii)(A). The

[[Page 32692]]

new technology add-on payment percentage of 75 percent for a medical 
product designated by FDA as a QIDP is set forth at Sec.  
412.88(a)(2)(ii)(B). However, in our revision to paragraph (a)(2)(ii), 
in setting forth the new technology add-on payment amounts for 
discharges occurring on or after October 1, 2019, we made an 
inadvertent error when referencing the separate new technology add-on 
payment percentage for QIDPs under Sec.  412.88(a)(2)(ii)(B). 
Specifically, in referencing the add-on percentage for QIDPs, Sec.  
412.88(a)(2)(ii)(A) refers to ``paragraph (a)(2)(ii)(2) of this 
section'' when the correct citation should be ``paragraph (a)(2)(ii)(B) 
of this section''. We are proposing to revise Sec.  412.88(a)(2)(ii)(A) 
to correct this technical error.
8. Technical Clarification to the Alternative Pathway for Certain 
Transformative New Devices
    As described previously, in the FY 2020 IPPS/LTCH PPS final rule, 
we finalized an alternative pathway for new technology add-on payments 
for certain transformative new devices. Under the existing regulations 
at Sec.  412.87(c), to be eligible for approval under this alternative 
pathway, the device must be part of the FDA's Breakthrough Devices 
Program and have received FDA marketing authorization.
    We have received questions from the public regarding CMS's intent 
with respect to the ``marketing authorization'' required for purposes 
of approval under the alternative pathway for certain transformative 
new devices at Sec.  412.87(c). Some of the public appear to assert 
that so long as a technology has received marketing authorization for 
any indication, even if that indication differs from the indication for 
which the technology was designated by FDA as part of the Breakthrough 
Devices Program, the technology would meet the marketing authorization 
requirement at Sec.  412.87(c). For example, consider a device that 
received FDA marketing authorization in 2019 for use in the heart. The 
same device is then designated by the FDA as part of the Breakthrough 
Devices Program for use in the liver in 2020, but has not yet received 
marketing authorization for indicated use in the liver. Some of the 
public have asserted that in such a scenario, the original marketing 
authorization for use in the heart could be used with FDA's 
Breakthrough Device indication for use in the liver to qualify under 
the alternative pathway for certain transformative new devices and 
receive new technology add-on payments for use in the liver in FY 2021. 
Because of this potential confusion, we are clarifying that, consistent 
with our existing policies for determining newness where a product has 
more than one indication, an applicant cannot combine a marketing 
authorization for an indication that differs from the technology's 
indication under the Breakthrough Device Program, and for which the 
applicant is seeking to qualify for the new technology add-on payment, 
for purposes of approval under the alternative pathway for certain 
transformative devices.
    Section 1886(d)(5)(K)(ii)(II) of the Act provides for the 
collection of data with respect to the costs of a new medical service 
or technology described in subclause (I) for a period of not less than 
2 years and not more than 3 years beginning on the date on which an 
inpatient hospital code is issued with respect to the service or 
technology. As explained in the FY 2005 IPPS final rule (69 FR 49002), 
the intent of section 1886(d)(5)(K) of the Act and regulations under 
Sec.  412.87(b)(2) is to pay for new medical services and technologies 
for the first 2 to 3 years that a product comes on the market, during 
the period when the costs of the new technology are not yet fully 
reflected in the DRG weights. Generally, we use the FDA approval (i.e., 
marketing authorization) as the indicator of the time when a technology 
begins to become available on the market and data reflecting the costs 
of the technology begin to become available for recalibration of the 
DRGs. In some specific circumstances, we have recognized a date later 
than the FDA approval as the appropriate starting point for the 2-year 
to 3-year period. The costs of the new medical service or technology, 
once paid for by Medicare for this 2-year to 3-year period, are 
accounted for in the MedPAR data that are used to recalibrate the DRG 
weights on an annual basis. Therefore, we limit the add-on payment 
window for those technologies that have passed this 2- to 3-year 
timeframe. In the September 7, 2001 final rule that established the new 
technology add-on payment regulations (66 FR 46915), we also indicated 
that an existing technology can receive new technology add on payments 
for a new use or indication. While we recognize that a technology can 
have multiple indications, each indication has its own newness period 
and must meet the new technology add on payment criteria. The 
applicable criteria will depend on whether the technology is eligible 
for an alternative new technology add-on payment pathway. However, each 
indication for the technology is evaluated separately from any other 
indication, including with respect to the start of the newness period, 
to determine whether the technology is eligible for new technology add-
on payments when used for that indication.
    Based on this policy, using the previous example, the newness 
period for the heart indication began in 2019 when the technology 
received marketing authorization from FDA for that indication, while 
the newness period for the liver indication would begin when the device 
receives marketing authorization specifically indicated for the liver. 
These are two distinct newness periods. Consistent with this policy, 
the newness period that began with the original marketing authorization 
for indicated use in the heart cannot be combined with FDA's 
Breakthrough Device indication for use in the liver for purposes of the 
marketing authorization required for approval under the alternative 
pathway to receive new technology add-on payments in FY 2021.
    To address this potential confusion, we are clarifying our policy 
that a new medical device under this alternative pathway must receive 
marketing authorization for the indication covered by the Breakthrough 
Devices Program designation and making a conforming change to the 
regulations at Sec.  412.87(c)(1). Specifically, with regard to the 
eligibility criteria for approval under the alternative pathway for 
certain transformative new devices, we are proposing to amend the 
regulations in Sec.  412.87(c)(1) to state that ``A new medical device 
is part of the FDA's Breakthrough Devices Program and has received 
marketing authorization for the indication covered by the Breakthrough 
Device designation.'' We note that we are also proposing to make 
similar amendments to the regulations at Sec.  412.87(d) for the 
alternative pathway for certain antimicrobial products, as discussed in 
section II.G.9.b. of this preamble of this proposed rule.
9. Proposed Revisions to New Technology Add-On Payments for Certain 
Antimicrobial Products
a. Background
    In the FY 2020 IPPS/LTCH PPS final rule, after consideration of 
public comments, we finalized changes to the new technology add-on 
payment policy related to certain antimicrobial products. These changes 
were finalized in recognition of the significant concerns related to 
antimicrobial resistance and its serious impact on Medicare 
beneficiaries and public health overall, and consistent with the 
Administration's commitment to

[[Page 32693]]

address issues related to antimicrobial resistance, in order to help 
secure access to antibiotics, and improve health outcomes for Medicare 
beneficiaries in a manner that is as expeditious as possible. Firstly, 
as described earlier in this section, we finalized an alternative new 
technology add-on payment pathway for a product that is designated by 
FDA as a Qualified Infectious Disease Product (QIDP). Under this 
alternative pathway, at existing Sec.  412.87(d), for applications 
received for new technology add-on payments for FY 2021 and subsequent 
fiscal years, if a technology receives FDA's QIDP designation and 
received FDA marketing authorization, it will be considered new and not 
substantially similar to an existing technology for purposes of new 
technology add-on payments and will not need to meet the requirement 
that it represent an advance that substantially improves, relative to 
technologies previously available, the diagnosis or treatment of 
Medicare beneficiaries. Under this pathway, a medical product that has 
received FDA marketing authorization and is designated by the FDA as a 
QIDP will need to meet the cost criterion under Sec.  412.87(b)(3), as 
reflected in Sec.  412.87(d)(3) (84 FR 42292 through 42297).
    In addition, beginning with FY 2020, we adopted a general increase 
in the maximum new technology add-on payment amount from 50 percent to 
65 percent; however, we adopted a higher increase to 75 percent for a 
product that is designated by FDA as a QIDP. Therefore, under existing 
Sec.  412.88(a)(2)(ii)(B), for a new technology that is a medical 
product designated by FDA as a QIDP, the new technology add-on payment 
is equal to the lesser of: (1) 75 percent of the costs of the new 
medical service or technology; or (2) 75 percent of the amount by which 
the costs of the case exceed the standard DRG payment (84 FR 42297 
through 42300).
    We stated that we believe Medicare beneficiaries may be 
disproportionately impacted by antimicrobial resistance, due in large 
part to the elderly's unique vulnerability to drug-resistant infections 
(for example, due to age-related and/or disease-related 
immunosuppression and greater pathogen exposure via catheter use). As 
such, antimicrobial resistance results in a substantial number of 
additional hospital days for Medicare beneficiaries, resulting in 
significant unnecessary health care expenditures. In November 2019, the 
CDC released its updated ``Antibiotic Resistance Threats in the United 
States'' (AR Threats Report) \459\ indicating that antibiotic-resistant 
bacteria and fungi cause more than 2.8 million infections and 35,000 
deaths in the United States each year. This report also shows that 
there were nearly twice as many annual deaths from antibiotic 
resistance as CDC originally reported in 2013, and underscores the 
continued threat of antibiotic resistance in the U.S. This recent 
information highlights the significant concerns and impacts related to 
antimicrobial resistance and emphasizes the continued importance of 
this issue both with respect to Medicare beneficiaries and public 
health overall. In this section, we discuss our proposals for FY 2021 
regarding new technology add-on payments and certain antimicrobials, 
including QIDPs.
---------------------------------------------------------------------------

    \459\ https://www.cdc.gov/drugresistance/biggest-threats.html.
---------------------------------------------------------------------------

b. Proposed Changes and Technical Clarification to the Alternative 
Pathway for Certain Antimicrobial Products
    As described previously, in the FY 2020 IPPS/LTCH PPS final rule, 
we finalized an alternative pathway for new technology add-on payments 
for certain antimicrobial products. Under the existing regulations at 
Sec.  412.87(d), to be eligible for approval under this alternative 
pathway, the antimicrobial product must be designated by the FDA as a 
QIDP and have received FDA marketing authorization. Under this 
alternative pathway, such a QIDP will be considered new and not 
substantially similar to an existing technology for purposes of new 
technology add-on payments and will not need to meet the requirement 
that it represent an advance that substantially improves, relative to 
technologies previously available, the diagnosis or treatment of 
Medicare beneficiaries.
    The FDA also has the Limited Population Pathway for Antibacterial 
and Antifungal Drugs (LPAD pathway), which encourages the development 
of safe and effective drug products that address unmet needs of 
patients with serious bacterial and fungal 
infections.460 461 Specifically, an antibacterial or 
antifungal drug approved under the LPAD pathway is used to treat a 
serious or life-threatening infection in a limited population of 
patients with unmet needs. We believe that in order to address the 
continued issues related to antimicrobial resistance discussed 
previously, as well as further help to support access to antibiotics 
and improve health outcomes for Medicare beneficiaries, it is 
appropriate to expand our policy for an alternative new technology add-
on payment pathway for a product that is designated by the FDA as a 
QIDP to include products approved as a LPAD as well. Therefore, we are 
proposing to expand our current alternative new technology add-on 
payment pathway for QIDPs to include products approved under the LPAD 
pathway as well to further address the continued issues related to 
antimicrobial resistance discussed previously. Under this proposed 
policy, for applications received for new technology add-on payments 
for FY 2022 and subsequent fiscal years, if an antimicrobial drug is 
approved by FDA under the LPAD pathway it will be considered new and 
not substantially similar to an existing technology for purposes of the 
new technology add-on payment under the IPPS, and not need to meet the 
requirement that it represent an advance that substantially improves, 
relative to technologies previously available, the diagnosis or 
treatment of Medicare beneficiaries. Under this proposal, an 
antimicrobial product that is approved by FDA under the LPAD pathway 
will need to meet the cost criterion under Sec.  412.87(b)(3).
---------------------------------------------------------------------------

    \460\ Section 506(h) of the FD&C Act, 21 U.S.C. 356(h).
    \461\ https://www.fda.gov/media/113729/download.
---------------------------------------------------------------------------

    We are proposing to revise Sec.  412.87(d)(1) to reflect this 
proposal, by adding drugs approved under FDA's LPAD pathway to the 
current alternative new technology add-on payment pathway for QIDPs at 
proposed new Sec.  412.87(d)(1)(ii), beginning with discharges 
occurring on or after October 1, 2021. We are also proposing to revise 
the title of existing Sec.  412.87(d) to refer more broadly to 
``certain antimicrobial products'' rather than specifying in this title 
the particular FDA programs for antimicrobial products (that is, QIDPs 
and LPADs) that are the subject of this alternative new technology add-
on payment pathway.
    We note, FDA may approve a drug under the LPAD pathway if it meets 
certain statutory standards for approval, as applicable, including that 
FDA receives a written request from the sponsor to approve the drug as 
a limited population drug. Sponsors seeking approval of a drug under 
the LPAD pathway are not precluded from seeking designation or approval 
under any other applicable provision for which the drug otherwise 
qualifies (for example, fast track designation, breakthrough therapy 
designation, regenerative medicine advanced therapy designation, 
accelerated approval, priority review designation). A sponsor who seeks 
approval of a drug under the LPAD pathway may also seek designation, as 
applicable, for other programs,

[[Page 32694]]

including QIDP or orphan drug designation. Although FDA may provide 
advice on potential eligibility, FDA intends to make the determination 
of whether a drug meets the criteria for the LPAD pathway at the time 
of the drug's approval. (For additional information, see https://www.fda.gov/media/113729/download.)
    As such, an applicant that has not received FDA approval and which 
has requested approval under the LPAD pathway may not know with 
certainty at the time it applies for new technology add on payments 
under the proposed expanded alternative pathway for certain 
antimicrobial products whether it will qualify for approval under that 
pathway. As noted previously in section II.G.1.c. of the preamble of 
this proposed rule, CMS will review the application based on the 
information provided by the applicant under the alternative pathway 
specified by the applicant. If the applicant drug ultimately does not 
receive approval under the LPAD pathway (but receives FDA approval 
otherwise) and is not designated as a QIDP, the technology would not be 
eligible for the alternative pathway for certain antimicrobial products 
and the applicant would need to re-apply for new technology add on 
payments under the traditional pathway at Sec.  412.87(b) for the 
following fiscal year in order to seek approval for new technology add 
on payments.
    We are also proposing to increase the maximum new technology add-on 
payment percentage for a product approved under FDA's LPAD pathway, 
from 65 percent to 75 percent, consistent with the new technology add 
on payment percentage that currently applies for a product that is 
designated by FDA as a QIDP. As previously noted, an antibacterial or 
antifungal drug approved under the LPAD pathway is used to treat a 
serious or life-threatening infection in a limited population of 
patients with unmet needs, and therefore we believe increasing the add-
on payment amount for these products would further the goal of helping 
secure access to antibiotics and improving health outcomes for Medicare 
beneficiaries to address the continued significant concerns related to 
antimicrobial resistance as discussed previously. Therefore, we are 
proposing to revise Sec.  412.88(a)(2)(ii)(B) and (b)(2) by adding 
products approved under FDA's LPAD pathway, beginning with discharges 
occurring on or after October 1, 2020.
    In addition to adding drugs approved under the FDA's LPAD pathway 
to the alternative new technology add-on payment pathway for certain 
antimicrobial products, we are clarifying our policy regarding 
marketing authorization for QIDPs. As discussed previously, we have 
received questions from the public regarding the ``marketing 
authorization'' required for purposes of approval under the alternative 
pathway for certain transformative new devices, and are therefore 
clarifying our policy regarding the marketing authorization requirement 
under this pathway and proposing conforming amendments to the 
regulations at Sec.  412.87(c)(1). We refer the reader to the previous 
discussion in section II.G.8. of this preamble of this proposed rule 
for complete details regarding this clarification.
    The current regulations at Sec.  412.87(d)(1) regarding the 
alternative pathway for new technology add-on payments for certain 
antimicrobial products also require marketing authorization for a QIDP 
to be eligible for approval under this pathway. Therefore, similar to 
the clarification regarding the transformative new devices alternative 
pathway, we are clarifying that a new medical product seeking approval 
for the new technology add-on payment under the alternative pathway for 
QIDPs must receive marketing authorization for the indication covered 
by the QIDP designation. We are proposing to amend the regulations at 
Sec.  412.87(d)(1) describing the alternative pathway for QIDPs (which, 
as amended, would appear at Sec.  412.87(d)(1)(i)) to state that ``A 
new medical product is designated by the FDA as a Qualified Infectious 
Disease Product and has received marketing authorization for the 
indication covered by the Qualified Infectious Disease Product 
designation.''
c. Proposed Change to Announcement of Determinations and Deadline for 
Consideration of New Medical Service or Technology Applications for 
Certain Antimicrobial Products
    As noted previously, in the FY 2009 IPPS final rule (73 FR 48562), 
we amended Sec.  412.87(c) (now Sec.  412.87(e) of the existing 
regulations) to specify that all 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 for which the application is 
being considered. We stated that this deadline would provide us with 
enough time to fully consider all of the new medical service or 
technology add-on payment criteria for each application and maintain 
predictability in the IPPS for the coming fiscal year. We also stated 
and further explained that we believe that July 1 of each year provides 
an appropriate balance between the necessity for adequate time to fully 
evaluate the applications, the requirement to publish the IPPS final 
rule by August 1 of each year, and the commenters' concerns that 
potential new technology applicants have some flexibility with respect 
to when their technology receives FDA approval or clearance.
    We continue to believe that our policy of requiring FDA approval or 
clearance by July 1 of the year prior to the beginning of the fiscal 
year for which the application is being considered appropriately 
balances the length of time required to fully consider all of the new 
medical service or technology add-on payment criteria for each 
application while also providing flexibility to potential new 
technology add-on payment applicants. At the same time, we also believe 
the significant ongoing concerns regarding antimicrobial resistance, 
and the need to help secure access to antibiotics for Medicare 
beneficiaries in a manner that is as expeditious as possible, may 
warrant additional flexibility with respect to applications for new 
technology add-on payments for certain antimicrobial products. Further, 
we note that under the new alternative pathway for certain 
antimicrobial products, upon FDA marketing authorization, such products 
are considered new and not substantially similar to an existing 
technology and do not need to demonstrate substantial clinical 
improvement, resulting in a difference in the amount of information and 
time required for CMS to complete its evaluation as compared to 
technologies for which it must fully consider of all of the new medical 
service or technology add-on payment criteria. For these reasons, and 
for the reasons stated previously regarding the significant ongoing 
concerns related to the public health crisis represented by 
antimicrobial resistance, consistent with the Administration's 
commitment to address issues related to antimicrobial resistance, and 
to continue to help secure access to antibiotics and improve health 
outcomes for Medicare beneficiaries in a manner that is as expeditious 
as possible, we are proposing a process by which a technology that 
meets the new technology add-on payment criteria under the alternative 
pathway for products designated as QIDPs or, as proposed previously, 
approved under FDA's LPAD pathway, would receive conditional approval 
for such payment even if the product has not been granted FDA marketing 
authorization by July 1

[[Page 32695]]

(the existing deadline by which any technology must be granted FDA 
marketing authorization in order to be eligible for a new technology 
add-on payment). (We note that for the remainder of this discussion, we 
refer to the alternative pathway at Sec.  412.87(d), which we are 
proposing would also include products approved under the LPAD pathway 
beginning with applications submitted for new technology add-on 
payments for FY 2022, as the ``alternative pathway for certain 
antimicrobial products'').
    Under our proposal, a technology eligible for the new technology 
add-on payment alternative pathway for certain antimicrobial products 
would begin receiving the new technology add-on payment effective for 
discharges the quarter after FDA marketing authorization is granted. We 
are proposing that the cutoff or deadline for this conditional approval 
would be FDA marketing authorization by July 1 of the fiscal year for 
which the applicant is applying for new technology add-on payments. We 
would consider July 1 to be the cutoff for conditional approval because 
under this proposal, if the FDA marketing authorization is received on 
or after July 1, the new technology add-on payment would not be 
effective for discharges until the beginning of the next quarter on 
October 1, which would be the start of the next fiscal year. For 
example, an eligible antimicrobial product is conditionally approved 
for the new technology add-on payment in the FY 2021 IPPS final rule. 
However, FDA marketing authorization is not granted until February 1, 
2021. The new technology add-on payment for such an antimicrobial 
product would be made for discharges that use the technology on or 
after April 1, 2021 (the beginning of the quarter after the FDA 
marketing authorization was granted). Using the same example, if the 
eligible antimicrobial product received FDA marketing authorization on 
or after July 1, 2021, no new technology add-on payments would be made 
for FY 2021, because the beginning of the next quarter would be October 
1, which is the beginning of FY 2022, the next fiscal year. As we 
discuss further, to be eligible for new technology add-on payments for 
FY 2022, the applicant would have needed to re-apply for such payments 
for FY 2022 by the applicable deadline.
    In the FY 2009 IPPS final rule (73 FR 48562), we also stated that 
applications that receive FDA approval of the medical service or 
technology after July 1 would be able to reapply for the new medical 
service or technology add-on payment the following year (at which time 
they would be given full consideration in both the IPPS proposed and 
final rules). Consistent with this policy, an applicant for an eligible 
antimicrobial product that does not receive FDA marketing authorization 
during the conditional approval period described previously would need 
to evaluate whether it believes it is necessary to re-apply for new 
technology add-on payments for the following fiscal year. For example, 
an applicant for an eligible antimicrobial product for FY 2021 that 
receives conditional approval for FY 2021 (with a conditional approval 
period of on or after July 1, 2020 and before July 1, 2021) would still 
need to submit an application for FY 2022 in order to be eligible for 
new technology add-on payments in FY 2022. The applicant would need to 
evaluate whether it believes it is necessary to re-apply for new 
technology add-on payments for the next fiscal year based on when the 
applicant anticipates receiving FDA marketing authorization. However, 
we would encourage eligible antimicrobial product applicants to reapply 
for new technology add-on payments for the next fiscal year in case 
they do not receive FDA marketing authorization prior to July 1 of the 
fiscal year for which they initially applied. We also note, as 
discussed previously, although FDA may provide advice on potential 
eligibility, FDA intends to make the determination of whether a drug 
meets the criteria for the LPAD pathway at the time of the drug's 
approval. As such, an applicant may not know with certainty at the time 
it applies for new technology add on payments under the alternative 
pathway for certain antimicrobial products whether it qualifies for 
that pathway. If the applicant drug ultimately does not receive 
approval under the LPAD pathway (but receives FDA approval otherwise) 
and is not designated as a QIDP, the applicant would not be eligible 
for approval under the alternative pathway for certain antimicrobial 
products, and therefore, even if the product received conditional 
approval under this proposal, no new technology add-on payments would 
be made for that fiscal year. As described previously, the applicant 
would need to re-apply for new technology add on payments under the 
traditional pathway at Sec.  412.87(b) for the following fiscal year if 
the applicant wishes to continue to seek approval for new technology 
add-on payments.
    We are proposing to revise Sec.  412.87(e) to reflect this proposal 
by adding a new paragraph (3) which would provide for conditional 
approval for a technology for which an application is submitted under 
the alternative pathway for certain antimicrobial products at Sec.  
412.87(d) that does not receive FDA marketing authorization by the July 
1 deadline specified in Sec.  412.87(e)(2), provided that the 
technology receives FDA marketing authorization by July 1 of the 
particular fiscal year for which the applicant applied for new 
technology add-on payments. We are also proposing related revisions to 
the paragraph (e) introductory text and to paragraph (e)(2) to reflect 
this proposed new policy.
    In addition, we are proposing to make technical clarifications to 
the regulations in paragraph (e)(2) of Sec.  412.87 by replacing the 
words ``FDA approval or clearance'' with ``FDA marketing 
authorization'' which conforms to the existing regulations in 
paragraphs (c)(1) and (d)(1) of Sec.  412.87. We believe this more 
precisely describes the current policy and does not change or modify 
the policy set forth in existing Sec.  412.87(e)(2). For example, under 
our current policy, in evaluating whether a technology is eligible for 
new technology add-on payment for a given fiscal year, we consider 
whether the technology has received marketing authorization by July 1, 
which could be any of the following: Premarket Approval (PMA); 510(k) 
clearance; the granting of a De Novo classification request; or 
approval of a New Drug Application (NDA). Therefore, we believe the 
term ``marketing authorization'' would more precisely describe the 
various types of potential FDA approvals, clearances and 
classifications that we currently consider under our new technology 
add-on payment policy.

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 proposed FY 2021 hospital wage index based 
on the statistical areas appears under section

[[Page 32696]]

III.A.2. of the preamble of this proposed rule.
    Section 1886(d)(3)(E) of the Act requires the Secretary to update 
the wage index annually and to base the update on a survey of wages and 
wage-related costs of short-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, which expires on March 31, 
2022.) This provision also requires that any updates or adjustments to 
the wage index be made in a manner that ensures that aggregate payments 
to hospitals are not affected by the change in the wage index. The 
proposed adjustment for FY 2021 is discussed in section II.B. of the 
Addendum to this proposed rule.
    As discussed in section III.I. of the preamble of this proposed 
rule, we also take into account the geographic reclassification of 
hospitals in accordance with sections 1886(d)(8)(B) and 1886(d)(10) of 
the Act when calculating IPPS payment amounts. Under section 
1886(d)(8)(D) of the Act, the Secretary is required to adjust the 
standardized amounts so as to ensure that aggregate payments under the 
IPPS after implementation of the provisions of sections 1886(d)(8)(B), 
1886(d)(8)(C), and 1886(d)(10) of the Act are equal to the aggregate 
prospective payments that would have been made absent these provisions. 
The proposed budget neutrality adjustment for FY 2021 is discussed in 
section II.A.4.b. of the Addendum to this proposed rule.
    Section 1886(d)(3)(E) of the Act also provides for the collection 
of data every 3 years on the occupational mix of employees for short-
term, acute care hospitals participating in the Medicare program, in 
order to construct an occupational mix adjustment to the wage index. A 
discussion of the occupational mix adjustment that we are proposing to 
apply to the FY 2021 wage index appears under sections III.E.3. and F. 
of the preamble of this proposed rule.
2. Proposed Core-Based Statistical Areas (CBSAs) for the FY 2021 
Hospital Wage Index
a. General
    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 in 
the June 28, 2010 Federal Register (75 FR 37246 through 37252). We 
refer readers to the FY 2015 IPPS/LTCH PPS final rule (79 FR 49951 
through 49963 and 49973 through 49982)) for a full discussion of our 
implementation of the OMB statistical 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 
provided detailed information on the update to statistical areas since 
July 15, 2015, and were 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 the FY 2019 IPPS/LTCH PPS final rule (83 FR 41362 through 41363), we 
adopted the updates set forth in OMB Bulletin No. 17-01 effective 
October 1, 2018, beginning with the FY 2019 wage index. For a complete 
discussion of the adoption of the updates set forth in OMB Bulletin No. 
17-01, we refer readers to the FY 2019 IPPS/LTCH PPS final rule. In the 
FY 2020 IPPS/LTCH PPS final rule (84 FR 42300 through 42301), we 
continued to use the OMB delineations that were adopted beginning with 
FY 2015 (based on the revised delineations issued in OMB Bulletin No. 
13-01) to calculate the area wage indexes, with updates as reflected in 
OMB Bulletin Nos. 15-01 and 17-01.
    On April 10, 2018 OMB issued OMB Bulletin No. 18-03 which 
superseded the August 15, 2017 OMB Bulletin No. 17-01. On September 14, 
2018, OMB issued OMB Bulletin No. 18-04 which superseded the April 10, 
2018 OMB Bulletin No. 18-03. Typically, interim OMB bulletins (those 
issued between decennial censuses) have only contained minor 
modifications to labor market delineations. However the April 10, 2018 
OMB Bulletin No. 18-03 and the September 14, 2018 OMB Bulletin No. 18-
04 included more modifications to the labor market areas than are 
typical for OMB bulletins issued between decennial censuses, including 
some material modifications that have a number of downstream effects, 
such as reclassification changes (as discussed later in this preamble). 
CMS was unable to complete an extensive review and verification of the 
changes made by these bulletins until after the development of the FY 
2020 IPPS/LTCH PPS proposed rule. These bulletins established revised 
delineations for Metropolitan Statistical Areas, Micropolitan 
Statistical Areas, and Combined Statistical Areas, and provided 
guidance on the use of the delineations of these statistical areas. A 
copy of OMB Bulletin No. 18-04 may be obtained at https://www.whitehouse.gov/wp-content/uploads/2018/09/Bulletin-18-04.pdf. 
According to OMB, ``[t]his bulletin provides the delineations of all 
Metropolitan Statistical Areas, Metropolitan Divisions, Micropolitan 
Statistical Areas, Combined Statistical Areas, and New England City and 
Town Areas in the United States and Puerto Rico based on the standards 
published

[[Page 32697]]

on June 28, 2010 (75 FR 37246), and Census Bureau data.'' (We note, on 
March 6, 2020 OMB issued OMB Bulletin 20-01 (available on the web at 
https://www.whitehouse.gov/wp-content/uploads/2020/03/Bulletin-20-01.pdf), and as discussed in this section of the rule was not issued in 
time for development of this proposed rule.)
    As noted previously, while OMB Bulletin No. 18-04 is not based on 
new census data, it includes some material changes to the OMB 
statistical area delineations. Specifically, under the revised OMB 
delineations, there would be some new CBSAs, urban counties that would 
become rural, rural counties that would become urban, and some existing 
CBSAs would be split apart. In addition, the revised OMB delineations 
would affect various hospital reclassifications, the out-migration 
adjustment (established by section 505 of Pub. L. 108-173), and 
treatment of hospitals located in certain rural counties (that is, 
``Lugar'' hospitals) under section 1886(d)(8)(B) of the Act. We discuss 
the revised OMB delineations and the effects of these revisions in this 
section of this rule. As previously noted, the March 6, 2020 OMB 
Bulletin 20-01 was not issued in time for development of this proposed 
rule. While we do not believe that the updates included in OMB Bulletin 
20-01 would impact our proposed changes discussed in this section of 
this rule, if appropriate, we would propose any updates from this 
bulletin in the FY 2022 IPPS/LTCH PPS proposed rule.
b. Proposed Implementation of Revised Labor Market Area Delineations
    We believe that using the revised delineations based on OMB 
Bulletin No. 18-04 will increase the integrity of the IPPS wage index 
system by creating a more accurate representation of geographic 
variations in wage levels. Therefore, we are proposing to implement the 
revised OMB delineations as described in the September 14, 2018 OMB 
Bulletin No. 18-04, effective October 1, 2020 beginning with the FY 
2021 IPPS wage index. We are proposing to use these revised 
delineations to calculate area wage indexes in a manner that is 
generally consistent with the CBSA-based methodologies. Because of the 
previously described material changes, we also are proposing a wage 
index transition applicable to hospitals that experience a significant 
decrease in their FY 2021 wage index compared to their final FY 2020 
wage index. This transition is discussed in more detail in this section 
of this rule.
i. Micropolitan Statistical Areas
    As discussed in the FY 2005 IPPS final rule (69 FR 49029 through 
49032), OMB defines a ``Micropolitan Statistical Area'' as a CBSA 
``associated with at least one urban cluster that has a population of 
at least 10,000, but less than 50,000'' (75 FR 37252). We refer to 
these areas as Micropolitan Areas. Since FY 2005, we have treated 
Micropolitian Areas as rural and include hospitals located in 
Micropolitan Areas in each State's rural wage index. We refer the 
reader to the FY 2005 IPPS final rule (69 FR 49029 through 19032) and 
the FY 2015 IPPS/LTCH PPS final rule (79 FR 49952) for a complete 
discussion regarding this policy and our rationale for treating 
Micropolitan Areas as rural. For the reasons discussed in the FY 2005 
IPPS final rule and in the FY 2015 IPPS final rule, we believe that the 
best course of action would be to continue this policy and include 
hospitals located in Micropolitan Areas in each State's rural wage 
index. Therefore, in conjunction with our proposal to implement the new 
OMB statistical area delineations beginning in FY 2021, we are 
proposing to continue to treat Micropolitan Areas as ``rural'' and to 
include Micropolitan Areas in the calculation of each state's rural 
wage index.
ii. Urban Counties That Would Become Rural Under the Revised OMB 
Delineations
    As previously discussed, we are proposing to implement the revised 
OMB statistical area delineations (based upon OMB Bulletin No. 18-04) 
beginning in FY 2021. Our analysis shows that a total of 34 counties 
(and county equivalents) and 10 hospitals that were once considered 
part of an urban CBSA would be considered to be located in a rural 
area, beginning in FY 2021, under these revised OMB delineations. The 
following chart lists the 34 urban counties that would be rural if we 
finalize our proposal to implement the revised OMB delineations.
BILLING CODE 4120-01-P

[[Page 32698]]

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[[Page 32699]]


[GRAPHIC] [TIFF OMITTED] TP29MY20.148

    We are proposing that the wage data for all hospitals located in 
the counties, as previously listed, would now be considered rural when 
calculating their respective State's rural wage index. We recognize 
that rural areas typically have lower area wage index values than urban 
areas, and hospitals located in these counties may experience a 
negative impact in their IPPS payment due to the proposed adoption of 
the revised OMB delineations. We refer readers to section III.A.2.c. of 
the preamble of this proposed rule for a discussion of our proposed 
wage index transition policy to apply a 5 percent cap in FY 2021 for 
hospitals that may experience any decrease in their final wage index 
from the prior fiscal year. We are also proposing revisions to the list 
of counties deemed urban under Section 1886(d)(8)(B) of the Act that 
will affect the hospitals located in these proposed rural counties. We 
refer readers to section III.I.3.b for further discussion.
    In addition, we note the provisions of Sec.  412.102 of the 
regulations would continue to apply with respect to determining DSH 
payments. Specifically, in the first year after a hospital loses urban 
status, the hospital will receive an adjustment to its DSH payment that 
equals two-thirds of the difference between the urban DSH payments 
applicable to the hospital before its redesignation from urban to rural 
and the rural DSH payments applicable to the hospital subsequent to its 
redesignation from urban to rural. In the second year after a hospital 
loses urban status, the hospital will receive an adjustment to its DSH 
payment that equals one third of the difference between the urban DSH 
payments applicable to the hospital before its redesignation from urban 
to rural and the rural DSH payments applicable to the hospital 
subsequent to its redesignation from urban to rural
iii. Rural Counties That Would Become Urban Under the Revised OMB 
Delineations
    As previously discussed, we are proposing to implement the revised 
OMB statistical area delineations (based upon OMB Bulletin No. 18-04) 
beginning in FY 2021. Analysis of these OMB statistical area 
delineations shows that a total of 47 counties (and county equivalents) 
and 17 hospitals that were located in rural areas would be located in 
urban areas under the revised OMB delineations. The following chart 
lists the 47 rural counties that would be urban if we finalize our 
proposal to implement the revised OMB delineations.

[[Page 32700]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.149


[[Page 32701]]


[GRAPHIC] [TIFF OMITTED] TP29MY20.150

    We are proposing that when calculating the area wage index, the 
wage data for hospitals located in these counties would be included in 
their new respective urban CBSAs. Typically, hospitals located in an 
urban area would receive a wage index value higher than or equal to 
hospitals located in their State's rural area. We refer readers to 
section III.A.2.c. of the preamble of this proposed rule for a 
discussion of our proposed wage index transition policy to apply a 5 
percent cap in FY 2021 for hospitals that may experience any decrease 
in their final wage index from the prior fiscal year.
    We also note that due to the proposed adoption of the revised OMB 
delineations, some CAHs that were previously located in rural areas may 
be located in urban areas. The regulations at Sec. Sec.  412.103(a)(6) 
and 485.610(b)(5) provide affected CAHs with a two-year transition 
period that begins from the

[[Page 32702]]

date the redesignation becomes effective. The affected CAHs must 
reclassify as rural during this transition period in order to retain 
their CAH status after the two-year transition period ends. We refer 
readers to the FY 2015 IPPS/LTCH final rule (79 FR 50162 and 50163) for 
further discussion of the two-year transition period for CAHs.
iv. Urban Counties That Would Move to a Different Urban CBSA Under the 
Revised OMB Delineations
    In addition to rural counties becoming urban and urban counties 
becoming rural, some urban counties would shift from one urban CBSA to 
another urban CBSA under our proposal to adopt the new OMB 
delineations. In other cases, adopting the revised OMB delineations 
would involve a change only in CBSA name and/or number, while the CBSA 
continues to encompass the same constituent counties. For example, CBSA 
19380 (Dayton, OH) would experience both a change to its number and its 
name, and become CBSA 19430 (Dayton-Kettering, OH), while all of its 
three constituent counties would remain the same. In other cases, only 
the name of the CBSA would be modified, and none of the currently 
assigned counties would be reassigned to a different urban CBSA. The 
following is a list of such CBSAs where we are proposing to change the 
name and/or CBSA number only.

[[Page 32703]]

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[[Page 32704]]


[GRAPHIC] [TIFF OMITTED] TP29MY20.152

    We are not discussing further in this section these proposed 
changes because they are inconsequential changes with respect to the 
IPPS wage index. However, in other cases, if we adopt the revised OMB 
delineations, counties would shift between existing and new CBSAs, 
changing the constituent makeup of the CBSAs. For example, Kendall 
County, IL would be moved from the current CBSA 16974 (Chicago-
Naperville-Arlington Height, IL) into proposed CBSA 20994 (Elgin, IL). 
The remaining counties in the current CBSA 16974 would be assigned to 
the proposed CBSA 16984 (Chicago-Naperville-Evanston, IL). The 
constituent counties of CBSA 16974 would therefore be split into two 
different urban CBSAs. There would also be a significant rearrangement 
in the constituent counties among the New York City Area Metropolitan 
Divisions. Most notably, Monmouth, Middlesex, and Ocean Counties in NJ 
would move from the current CBSA 35614 (New York-Jersey City-White 
Plains, NY-NJ) to the proposed CBSA 35154 (New Brunswick-Lakewood, NJ). 
Also, Somerset County, NJ would move from current CBSA 35084 (Newark, 
NJ-PA) to CBSA 35154. The following chart lists the urban counties that 
would move from one urban CBSA to a newly proposed or modified CBSA if 
we adopted the revised OMB delineations.

[[Page 32705]]

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[GRAPHIC] [TIFF OMITTED] TP29MY20.154

BILLING CODE 4120-01-C
    If hospitals located in these counties move from one CBSA to 
another under the revised OMB delineations, there may be impacts, both 
negative and positive, upon their specific wage index values. We refer 
readers to section III.A.2.c. of the preamble of this proposed rule for 
a discussion of our proposed wage index transition policy to apply a 5 
percent cap in FY 2021 for hospitals that may experience any decrease 
in their final wage index from the prior fiscal year. We also refer 
readers to section III.I.2.c. of the preamble of this proposed rule for 
discussion of our proposals to reassign MGCRB wage index 
reclassifications for

[[Page 32706]]

hospitals currently assigned to these modified CBSAs.
c. Proposed Transition for Hospitals Negatively Impacted
    Overall, we believe implementing the revised OMB statistical area 
delineations would result in wage index values being more 
representative of the actual costs of labor in a given area. However, 
we recognize that some hospitals would experience decreases in wage 
index values as a result of our proposed implementation of the revised 
labor market area delineations. We also realize that some hospitals 
would have higher wage index values due to our proposed implementation 
of the new labor market area delineations.
    In the past, we have proposed and finalized budget neutral 
transition policies to help mitigate negative impacts on hospitals of 
certain wage index proposals. For example, in the FY 2015 IPPS/LTCH PPS 
final rule (79 FR 49960 through 49963) when we implemented new OMB 
delineations based on the 2010 decennial census data, we finalized 
budget neutral transitions for certain situations. Specifically, in the 
FY 2015 IPPS/LTCH PPS final rule, for a period of 3 fiscal years, we 
allowed urban hospitals that became rural under the new delineations 
(and that had no form of wage index reclassification or redesignation) 
to maintain the wage index value of the CBSA in which they were 
physically located for FY 2014; and for hospitals that experienced a 
decrease in wage index values due to the change in labor market area 
definitions, we implemented a 1-year blended wage index where hospitals 
received 50 percent of their wage index based on the new OMB 
delineations that went into effect in FY 2015, and 50 percent of their 
wage index based on their FY 2014 labor market area. This blended wage 
index required us to calculate wage indexes for all hospitals using 
both old and new labor market definitions even though it only applied 
to hospitals that experienced a decrease in wage index values due to a 
change in labor market area definitions. More recently, in the FY 2020 
IPPS/LTCH PPS final rule (84 FR 42336 through 42338), we finalized a 
wage index transition to help mitigate any significant decreases in the 
wage index values of hospitals compared to their final wage index value 
from the prior fiscal year due to the combined effect of the proposed 
changes to the FY 2020 wage index. Specifically, for FY 2020, we 
implemented a 5-percent cap on any decrease in a hospital's wage index 
from the hospital's final wage index in FY 2019.
    As previously mentioned, while the revised OMB delineations in this 
latest OMB bulletin (OMB Bulletin 18-04) are not based on new census 
data, there were some material changes in the OMB delineations. Also, 
as previously mentioned, the revisions in the latest OMB bulletin are 
updates to the CBSA delineations already adopted in FY 2015 based on 
the 2010 census data. For these reasons, for FY 2021 we do not believe 
it is necessary to implement the multifaceted transitions we 
established in FY 2015 for the adoption of the new OMB delineations 
based on the new decennial census data. However, in accordance with our 
past practice of implementing transition policies to help mitigate 
negative impacts on hospitals of certain wage index proposals, we do 
believe that if we adopt the proposed revised OMB delineations, it 
would be appropriate to implement a transition policy since, as 
previously mentioned, some of these revisions are material, and may 
negatively impact payments to hospitals. For example, changes in the 
county makeup of a CBSA, by adding or removing a constituent county, 
may change the pool of hospitals contributing average hourly wage data, 
potentially resulting in lower wage index values for certain areas. 
When CMS implemented various changes to the hospital wage index in 
prior rulemaking, commenters frequently supported transition policies 
that ensured wage index values maintain a degree of year-to-year 
consistency (see comments to our FY 2015 IPPS/LTCH PPS final rule 
transition policies at 79 FR 49959 through 49961). Thus, we believe 
applying a 5-percent cap on any decrease in a hospital's wage index 
from the hospital's final wage index from the prior fiscal year, as we 
did for FY 2020, would be an appropriate transition for FY 2021 for the 
revised OMB delineations as it provides predictability in payment 
levels from FY 2020 to the upcoming FY 2021. The proposed FY 2021 5-
percent cap on wage index decreases would be applied to all hospitals 
that have any decrease in their wage indexes, mitigating significant 
negative decrease in wage index values. Given the significant portion 
of Medicare IPPS payments that are adjusted by the wage index and how 
relatively few hospitals generally see wage index declines in excess of 
5 percent, hospitals may have difficulty adapting to changes in the 
wage index of this magnitude all at once. For these reasons, for FY 
2021, we would place a 5 percent cap on any decrease in a hospital's 
wage index from the hospital's final wage index for FY 2020, such that 
a hospital's final wage index for FY 2021 would not be less than 95 
percent of its final wage index for FY 2020. This transition would 
allow the effects of our proposed adoption of the revised CBSA 
delineations to be phased in over 2 years with no estimated reduction 
in the wage index of more than 5 percent in FY 2021 (that is, no cap 
would be applied the second year). We continue to believe 5 percent is 
a reasonable level for the cap because it would effectively mitigate 
any significant decreases in the wage index for FY 2021. We also 
believe this transition would afford hospitals adequate time to fully 
assess any additional reclassification options available to them (we 
refer the reader to section III.I.2.c. of the preamble of this proposed 
rule for a complete discussion regarding the revised OMB delineations 
and their effects regarding hospital reclassification). Therefore, for 
FY 2021, we are proposing to again provide for a transition of a 5-
percent cap on any decrease in a hospital's wage index from the 
hospital's final wage index from the prior fiscal year (FY 2020). 
Consistent with the application of the 5 percent cap in FY 2020, the 
proposed FY 2021 5-percent cap on wage index decreases would be applied 
to all hospitals that have any decrease in their wage indexes, 
regardless of the circumstance causing the decline, so that a 
hospital's final wage index for FY 2021 will not be less than 95 
percent of its final wage index for FY 2020. We believe applying the 
cap on wage index decreases for all hospitals, regardless of the 
circumstance causing the decrease, allows CMS to mitigate any 
significant negative impacts of adopting the new OMB delineations in a 
manner that is readily identifiable in the wage index tables and 
promotes greater wage index predictability.
d. Proposed Transition Budget Neutrality
    For FY 2021 we are proposing to apply a budget neutrality 
adjustment to the standardized amount so that our proposed transition 
described in section III.A.2.c. is implemented in a budget neutral 
manner under our authority in section 1886(d)(5)(I) of the Act. We note 
that implementing the proposed transition wage index in a budget 
neutral manner is consistent with past practice (for example, 79 FR 
50372 and 84 FR 42338) where CMS has used its exceptions and 
adjustments authority under section 1886(d)(5)(I)(i) of the Act to 
budget neutralize transition wage index policies when such policies 
allow

[[Page 32707]]

for the application of a transitional wage index only when it benefits 
the hospital. We stated that we believed, and continue to believe, that 
it would be appropriate to ensure that such policies do not increase 
estimated aggregate Medicare payments beyond the payments that would be 
made had we never proposed these transition policies (79 FR 50372 and 
84 FR 42337 through 42338). Therefore, for FY 2021, we are proposing to 
use our exceptions and adjustments authority under section 
1886(d)(5)(I)(i) of the Act to apply a budget neutrality adjustment to 
the standardized amount so that our proposed transition (described in 
section III.A.2.c.) is implemented in a budget neutral manner.
    Specifically, we are proposing to apply a budget neutrality 
adjustment to ensure that estimated aggregate payments under our 
proposed transition (described in section III.A.2.c. of the preamble of 
this proposed rule) for hospitals that have any decrease in their wage 
indexes for FY 2021 would equal what estimated aggregate payments would 
have been without the proposed transition. To determine the associated 
budget neutrality factor, we compared estimated aggregate IPPS payments 
with and without the proposed transition.
    Based on this proposed rule data, the budget neutrality adjustment 
factor to achieve budget neutrality for the proposed transition would 
be 0.998580, which would be applied to the FY 2021 standardized amount. 
We note that this number would be updated, as appropriate, based on the 
final rule data. We refer readers to the Addendum of this final rule 
for further information regarding the budget neutrality calculations.
    We note that, consistent with past practice (69 FR 49034 and 79 FR 
49963), we are not adopting the revised OMB delineations themselves in 
a budget neutral manner. We do not believe that the revision to the 
labor market areas in and of itself constitutes an ``adjustment or 
update'' to the adjustment for area wage differences, as provided under 
section 1886(d)(3)(E) of the Act.
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. These updates have 
been 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 2021, we are continuing to use only the FIPS county codes 
for purposes of crosswalking counties to CBSAs. For FY 2021, Tables 2 
and 3 associated with this proposed rule and the County to CBSA 
Crosswalk File and Urban CBSAs and Constituent Counties for Acute Care 
Hospitals File posted on the CMS website reflect these county changes.

B. Worksheet S-3 Wage Data for the Proposed FY 2021 Wage Index

    The proposed FY 2021 wage index values are based on the data 
collected from the Medicare cost reports submitted by hospitals for 
cost reporting periods beginning in FY 2017 (the FY 2020 wage indexes 
were based on data from cost reporting periods beginning during FY 
2016).
1. Included Categories of Costs
    The proposed FY 2021 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 2020, the 
proposed wage index for FY 2021 also excludes the direct and overhead 
salaries and hours for services not subject to IPPS payment, such as 
skilled nursing facility (SNF) services, home health services, costs 
related to GME (teaching physicians and residents) and certified 
registered nurse anesthetists (CRNAs), and other subprovider components 
that are not paid under the IPPS. The proposed FY 2021 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). For FY 2020 and 
subsequent years, other wage-related costs are also excluded from the 
calculation of the wage index. As discussed in the FY 2019 IPPS/LTCH 
final rule (83 FR 41365 through 41369), other wage-related costs 
reported on Worksheet S-3, Part II, Line 18 and Worksheet S-3, Part IV, 
Line 25 and subscripts, as well as all other wage-related costs, such 
as contract labor costs, are excluded from the calculation of the wage 
index.
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

[[Page 32708]]

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.
4. Proper Documentation of Physician Time Spent in Part A 
Administrative Versus Part B Billable Activities
    In the last few years, we have received wage index data appeals 
related to MACs' disallowances of wages and hours that hospitals 
believe are associated with Part A administrative physician time, but 
the MACs believe are not properly documented as such, or are in fact, 
associated with Part B billable activities, which are not included in 
the wage index. For physicians employed by a hospital, their salaries 
and hours associated with Part A administrative time, which ARE 
included in the wage index, are reported on CMS-2552-10 Worksheet S-3, 
Part II, line 4, and the salaries and hours of hospital employed 
physicians associated with billable Part B patient care activities, 
which are NOT included in the wage index, are reported on Worksheet S-
3, Part II, line 5. Specifically, the instructions for lines 4 and 5 
state the following:
     Line 4--Enter the physician Part A administrative 
salaries, (excluding teaching physician salaries), that are included in 
line 1. Also do not include intern and resident (I & R) salary on this 
line. Report I & R salary on line 7. Subscript this line and report 
salaries for Part A teaching physicians on line 4.01.
     Line 5--Enter the total physician, physician assistant, 
nurse practitioner and clinical nurse specialist on-call salaries and 
salaries billed under Part B that are included in line 1. Under 
Medicare, these services are related to direct patient care and billed 
separately under Part B. Also include physician salaries for patient 
care services reported for rural health clinics (RHC) and FQHCs 
included on Worksheet A, column 1, lines 88 and/or 89 as applicable. Do 
not include on this line amounts that are included on lines 9 and 10 
for the SNF or excluded area salaries. Refer to CMS Pub. 15-1, sections 
2313.2.E. and 2182.3.E., for instructions related to keeping time 
studies to track time spent in Part A versus Part B activities. 
However, although section 2313.2.E.2. states that, ``A minimally 
acceptable time study must encompass at least one full week per month 
of the cost reporting period,'' the contractor makes the final 
determination on the adequacy of the records maintained. A 2-week semi-
annual (every 6 months) time study can be adequate unless the 
contractor believes that a significant change in the pattern of 
physician time is likely to occur from one quarter to the next, in 
which case, the contractor may require more frequent time studies. 
Adequate documentation must be maintained to support total hours in a 
manner that is verifiable, and to serve as a condition of payment under 
Part A.
    In addition, for physicians that are not employed by the hospital 
but are under contract, the wages and hours associated with contract 
Physician Part A administrative activities are reported on Worksheet S-
3, Part II, line 13. No salaries and hours related to Part B activities 
are allowed. Line 13 states the following:
    Line 13--Enter from your records the amount paid under contract (in 
accordance with the general instructions for contract labor) for Part A 
physician services--administrative, excluding teaching physician 
services. DO NOT include contract I & R services (to be included on 
line 7). DO NOT include the costs for Part A physician services from 
the home office allocation and/or from related organizations (to be 
reported on line 15). Do not include wages or hours associated with 
Part B services. As stated in the General Instructions for Contract 
Labor, ``the minimum requirement for supporting documentation is the 
contract itself. If the wage costs, hours, and non-labor costs are not 
clearly specified in the contract, other supporting documentation is 
required, such as a representative sample of invoices that specify the 
wage costs, hours, and non-labor costs.'' Refer to CMS Pub. 15-1, 
sections 2313.2E and 2182.3.E, for instructions related to keeping time 
studies to track time spent in Part A versus Part B activities. 
Adequate documentation must be maintained to support total hours in a 
manner that is verifiable.
    In order to accurately report the wages and hours associated with 
Part A and Part B activities on lines 4 and 5 and 13 respectively, the 
providers are required to maintain records as to the allocation of 
physicians' time between various services to keep track of the amount 
of time the physicians spend on Part A versus Part B activities. 42 CFR 
415.60(b) and CMS Pub. 15-1, chapter 21, section 2182.3.B. 
Specifically, 42 CFR 415.60(b) states, except as provided in paragraph 
(d) of the section, each provider that incurs physician compensation 
costs must allocate those costs, in proportion to the percentage of 
total time that is spent in furnishing each category of services, 
among--
     Physician services to the provider (as described in Sec.  
415.55);
     Physician services to patients (as described in Sec.  
415.102); and
     Activities of the physician, such as funded research, that 
are not paid under either Part A or Part B of Medicare.
    To facilitate the MAC's review of whether physician wages and hours 
have been reported correctly, hospitals must submit the physician 
allocation agreements to the MAC. (See CMS Pub. 15-1, Section 
2182.3.E.3. which states that allocation agreements are to be submitted 
annually as part of the cost report filing process.) In the absence of 
a written allocation agreement (such as Exhibit 1 in CMS Pub. 15-II, 
Chapter 40, Section 4004.2 and related instructions for this exhibit on 
Line 34 of Section 4004.2--that is, instructions for Form CMS-2552-10, 
Worksheet S-2, Part II, line 34), the MAC assumes that 100 percent of 
the physician compensation cost is allocated to Part B services (see 42 
CFR 415.60(f)(2)). The hospital must maintain the information used to 
complete the physician allocation agreements as directed in CMS Pub. 
15-1 section 2182.3.E. in order to track time spent in Part A versus 
Part B activities. This section specifies that the hospital may choose 
to employ the methodology described in subsection 2313.2.E for a time 
study but may not be required by the MAC to utilize that specific 
methodology. Therefore, although section 2313.2.E. states that ``a 
minimally acceptable time study must encompass at least one full week 
per month of the cost reporting period,'' the MAC makes the final 
determination on the adequacy of the records maintained for the 
allocation of physicians' compensation. A 2-week semi-annual (every 6 
months) time study can be adequate unless the MAC believes that a 
significant change in the pattern of physician time is likely to occur 
from one quarter to the next, in which case, the MAC may require more 
frequent time studies (see CMS-2552-10, Worksheet S-3, Part II line 5 
instructions). Adequate documentation must be maintained to support 
total hours in a manner that is verifiable, and to serve as a condition 
of payment under Part A, that is, total hours worked by the physicians 
must be based on actual data accumulated during the cost reporting 
period and may not be imputed (consistent with 42 CFR 413.24 and 
415.60(f)(1) and (g)). Non-allowable services that are neither Part A 
nor Part B services (for example, research,

[[Page 32709]]

teaching of residents in non-approved programs, teaching and 
supervision of medical students, writing for medical journals, 
reasonable availability services in departments/cost centers other than 
Emergency Room, etc.) are reported as non-reimbursable activities in 
the designated non-reimbursable cost centers of the Medicare cost 
report, CMS-2552-10 (for example, Worksheet A, lines 190-194, see 42 
CFR 415.60(b)(3)). Reasonable availability services for emergency rooms 
can be considered Part A in certain circumstances (see PRM-I, section 
2109.3.A. through C. for instances when emergency department physician 
availability services costs are allowable, and for the associated 
required documentation).

C. Verification of Worksheet S-3 Wage Data

    The wage data for the FY 2021 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 with expiration date March 31, 
2022) for cost reporting periods beginning on or after October 1, 2016, 
and before October 1, 2017. For wage index purposes, we refer to cost 
reports during this period as the ``FY 2017 cost report,'' the ``FY 
2017 wage data,'' or the ``FY 2017 data.'' Instructions for completing 
the wage index sections of Worksheet S-3 are included in the Provider 
Reimbursement Manual (PRM), Part 2 (Pub. 15-2), Chapter 40, Sections 
4005.2 through 4005.4. The data file used to construct the FY 2021 wage 
index includes FY 2017 data submitted to us as of February 7, 2019. 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 2021 wage index, we 
identified and excluded 84 providers with aberrant data that should not 
be included in the wage index. However, if data elements for some of 
these providers are corrected, we intend to include data from those 
providers in the final FY 2021 wage index. We also adjusted certain 
aberrant data and included these data in the proposed wage index. For 
example, in situations where a hospital did not have documentable 
salaries, wages, and hours for housekeeping and dietary services, we 
imputed estimates, in accordance with policies established in the FY 
2015 IPPS/LTCH PPS final rule (79 FR 49965 through 49967). We 
instructed MACs to complete their data verification of questionable 
data elements and to transmit any changes to the wage data no later 
than March 19, 2020.
    In constructing the proposed FY 2021 wage index, we included the 
wage data for facilities that were IPPS hospitals in FY 2017, inclusive 
of those facilities that have since terminated their participation in 
the program as hospitals, as long as those data did not fail any of our 
edits for reasonableness. We believe 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 24, 2019, 
the cut-off date for CAH exclusion from the FY 2020 wage index, and 
through and including January 24, 2020, the cut-off date for CAH 
exclusion from the FY 2021 wage index. In summary, we calculated the 
proposed wage index using the Worksheet S-3, Parts II and III wage data 
of 3,196 hospitals.
    For the proposed FY 2021 wage index, we allotted the wages and 
hours data for a multicampus hospital among the different labor market 
areas where its campuses are located using campus full-time equivalent 
(FTE) percentages as originally finalized in the FY 2012 IPPS/LTCH PPS 
final rule (76 FR 51591). Table 2, which contains the proposed FY 2021 
wage index associated with this proposed rule (available via the 
internet on the CMS website), includes separate wage data for the 
campuses of 16 multicampus hospitals. The following chart lists the 
multicampus hospitals by CSA certification number (CCN) and the FTE 
percentages on which the wages and hours of each campus were allotted 
to their respective labor market areas:
[GRAPHIC] [TIFF OMITTED] TP29MY20.155

    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 IPPS/LTCH PPS proposed and final rules 
and subsequent rules, 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.

[[Page 32710]]

D. Method for Computing the Proposed FY 2021 Unadjusted Wage Index

    The method used to compute the proposed FY 2021 wage index without 
an occupational mix adjustment follows the same methodology that we 
used to compute the wage indexes without an occupational mix adjustment 
in the FY 2020 IPPS/LTCH PPS final rule (see 84 FR 42304 through 42307, 
August 16, 2019), and we are not proposing any changes to this 
methodology. We have restated our methodology in this section of this 
rule.
    Step 1.--We gathered data from each of the non-Federal, short-term, 
acute care hospitals for which data were reported on the Worksheet S-3, 
Parts II and III of the Medicare cost report for the hospital's cost 
reporting period relevant to the proposed wage index (in this case, for 
FY 2021, these were data from cost reports for cost reporting periods 
beginning on or after October 1, 2016, and before October 1, 2017). In 
addition, we included data from some hospitals that had cost reporting 
periods beginning before October 2016 and reported a cost reporting 
period covering all of FY 2017. These data were included because no 
other data from these hospitals would be available for the cost 
reporting period as previously described, and because particular labor 
market areas might be affected due to the omission of these hospitals. 
However, we generally describe these wage data as FY 2017 data. We note 
that, if a hospital had more than one cost reporting period beginning 
during FY 2017 (for example, a hospital had two short cost reporting 
periods beginning on or after October 1, 2016, and before October 1, 
2017), we include wage data from only one of the cost reporting 
periods, the longer, in the wage index calculation. If there was more 
than one cost reporting period and the periods were equal in length, we 
included the wage data from the later period in the wage index 
calculation.
    Step 2.--Salaries.--The method used to compute a hospital's average 
hourly wage excludes certain costs that are not paid under the IPPS. 
(We note that, beginning with FY 2008 (72 FR 47315), we included what 
were then Lines 22.01, 26.01, and 27.01 of Worksheet S-3, Part II of 
CMS Form 2552-96 for overhead services in the wage index. Currently, 
these lines are lines 28, 33, and 35 on CMS Form 2552-10. However, we 
note that the wages and hours on these lines are not incorporated into 
Line 101, Column 1 of Worksheet A, which, through the electronic cost 
reporting software, flows directly to Line 1 of Worksheet S-3, Part II. 
Therefore, the first step in the wage index calculation is to compute a 
``revised'' Line 1, by adding to the Line 1 on Worksheet S-3, Part II 
(for wages and hours respectively) the amounts on Lines 28, 33, and 
35.) In calculating a hospital's Net Salaries (we note that we 
previously used the term ``average'' salaries in the FY 2012 IPPS/LTCH 
PPS final rule (76 FR 51592), but we now use the term ``net'' salaries) 
plus wage-related costs, we first compute the following: Subtract from 
Line 1 (total salaries) the GME and CRNA costs reported on CMS Form 
2552-10, Lines 2, 4.01, 7, and 7.01, the Part B salaries reported on 
Lines 3, 5 and 6, home office salaries reported on Line 8, and exclude 
salaries reported on Lines 9 and 10 (that is, direct salaries 
attributable to SNF services, home health services, and other 
subprovider components not subject to the IPPS). We also subtract from 
Line 1 the salaries for which no hours were reported. Therefore, the 
formula for Net Salaries (from Worksheet S-3, Part II) is the 
following:

((Line 1 + Line 28 + Line 33 + Line 35)-(Line 2 + Line 3 + Line 4.01 + 
Line 5 + Line 6 + Line 7 + Line 7.01 + Line 8 + Line 9 + Line 10)).

    To determine Total Salaries plus Wage-Related Costs, we add to the 
Net Salaries the costs of contract labor for direct patient care, 
certain top management, pharmacy, laboratory, and nonteaching physician 
Part A services (Lines 11, 12 and 13), home office salaries and wage-
related costs reported by the hospital on Lines 14.01, 14.02, and 15, 
and nonexcluded area wage-related costs (Lines 17, 22, 25.50, 25.51, 
and 25.52). We note that contract labor and home office salaries for 
which no corresponding hours are reported are not included. In 
addition, wage-related costs for nonteaching physician Part A employees 
(Line 22) are excluded if no corresponding salaries are reported for 
those employees on Line 4. The formula for Total Salaries plus Wage-
Related Costs (from Worksheet S-3, Part II) is the following: ((Line 1 
+ Line 28 + Line 33 + Line 35)-(Line 2 + Line 3 + Line 4.01 + Line 5 + 
Line 6 + Line 7 + Line 7.01 + Line 8 + Line 9 + Line 10)) + (Line 11 + 
Line 12 + Line 13 + Line 14.01 + 14.02 + Line 15) + (Line 17 + Line 22 
+ 25.50 + 25.51 + 25.52).
    Step 3.--Hours.--With the exception of wage-related costs, for 
which there are no associated hours, we compute total hours using the 
same methods as described for salaries in Step 2. The formula for Total 
Hours (from Worksheet S-3, Part II) is the following:

((Line 1 + Line 28 + Line 33 + Line 35)-(Line 2 + Line 3 + Line 4.01 + 
Line 5 + Line 6 + Line 7 + Line 7.01 + Line 8 + Line 9 + Line 10)) + 
(Line 11 + Line 12 + Line 13 + Line 14.01 + 14.02 + Line 15).

    Step 4.--For each hospital reporting both total overhead salaries 
and total overhead hours greater than zero, we then allocate overhead 
costs to areas of the hospital excluded from the wage index 
calculation. First, we determine the ``excluded rate'', which is the 
ratio of excluded area hours to Revised Total Hours (from Worksheet S-
3, Part II) with the following formula: (Line 9 + Line 10)/(Line 1 + 
Line 28 + Line 33 + Line 35)-(Lines 2, 3, 4.01, 5, 6, 7, 7.01, and 8 
and Lines 26 through 43). We then compute the amounts of overhead 
salaries and hours to be allocated to excluded areas by multiplying the 
above ratio by the total overhead salaries and hours reported on Lines 
26 through 43 of Worksheet S-3, Part II. Next, we compute the amounts 
of overhead wage-related costs to be allocated to excluded areas using 
three steps:
     We determine the ``overhead rate'' (from Worksheet S-3, 
Part II), which is the ratio of overhead hours (Lines 26 through 43 
minus the sum of Lines 28, 33, and 35) to revised hours excluding the 
sum of lines 28, 33, and 35 (Line 1 minus the sum of Lines 2, 3, 4.01, 
5, 6, 7, 7.01, 8, 9, 10, 28, 33, and 35). We note that, for the FY 2008 
and subsequent wage index calculations, we have been excluding the 
overhead contract labor (Lines 28, 33, and 35) from the determination 
of the ratio of overhead hours to revised hours because hospitals 
typically do not provide fringe benefits (wage-related costs) to 
contract personnel. Therefore, it is not necessary for the wage index 
calculation to exclude overhead wage-related costs for contract 
personnel. Further, if a hospital does contribute to wage-related costs 
for contracted personnel, the instructions for Lines 28, 33, and 35 
require that associated wage-related costs be combined with wages on 
the respective contract labor lines. The formula for the Overhead Rate 
(from Worksheet S-3, Part II) is the following: (Lines 26 through 43-
Lines 28, 33 and 35)/((((Line 1 + Lines 28, 33, 35)-(Lines 2, 3, 4.01, 
5, 6, 7, 7.01, 8, and 26 through 43))-(Lines 9 and 10)) + (Lines 26 
through 43-Lines 28, 33, and 35)).
     We compute overhead wage-related costs by multiplying the 
overhead hours ratio by wage-related costs reported on Part II, Lines 
17, 22, 25.50, 25.51, and 25.52.
     We multiply the computed overhead wage-related costs by 
the previously described excluded area hours ratio.

[[Page 32711]]

    Finally, we subtract the computed overhead salaries, wage-related 
costs, and hours associated with excluded areas from the total salaries 
(plus wage-related costs) and hours derived in Steps 2 and 3.
    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, 2016 through April 15, 2018, 
for private industry hospital workers from the BLS' Compensation and 
Working Conditions. We use the ECI because it reflects the price 
increase associated with total compensation (salaries plus fringes) 
rather than just the increase in salaries. In addition, the ECI 
includes managers as well as other hospital workers. This methodology 
to compute the monthly update factors uses actual quarterly ECI data 
and assures that the update factors match the actual quarterly and 
annual percent changes. We also note that, since April 2006 with the 
publication of March 2006 data, the BLS' ECI uses a different 
classification system, the North American Industrial Classification 
System (NAICS), instead of the Standard Industrial Codes (SICs), which 
no longer exist. We have consistently used the ECI as the data source 
for our wages and salaries and other price proxies in the IPPS market 
basket, and we are not proposing to make any changes to the usage of 
the ECI for FY 2021. The factors used to adjust the hospital's data are 
based on the midpoint of the cost reporting period, as indicated in 
this rule.
    Step 6.--Each hospital is assigned to its appropriate urban or 
rural labor market area before any reclassifications under section 
1886(d)(8)(B), 1886(d)(8)(E), or 1886(d)(10) of the Act. Within each 
urban or rural labor market area, we add the total adjusted salaries 
plus wage-related costs obtained in Step 5 for all hospitals in that 
area to determine the total adjusted salaries plus wage-related costs 
for the labor market area.
    Step 7.--We divide the total adjusted salaries plus wage-related 
costs obtained under Step 6 by the sum of the corresponding total hours 
(from Step 4) for all hospitals in each labor market area to determine 
an average hourly wage for the area.
    Step 8.--We add the total adjusted salaries plus wage-related costs 
obtained in Step 5 for all hospitals in the Nation and then divide the 
sum by the national sum of total hours from Step 4 to arrive at a 
national average hourly wage.
    Step 9.--For each urban or rural labor market area, we calculate 
the hospital wage index value, unadjusted for occupational mix, by 
dividing the area average hourly wage obtained in Step 7 by the 
national average hourly wage computed in Step 8.
    Step 10.--For each urban labor market area for which we do not have 
any hospital wage data (either because there are no IPPS hospitals in 
that labor market area, or there are IPPS hospitals in that area but 
their data are either too new to be reflected in the current year's 
wage index calculation, or their data are aberrant and are deleted from 
the wage index), we finalized in the FY 2020 IPPS/LTCH PPS final rule 
(84 FR 42305) that, for FY 2020 and subsequent years' wage index 
calculations, such CBSA's wage index would be equal to total urban 
salaries plus wage-related costs (from Step 5) in the State, divided by 
the total urban hours (from Step 4) in the State, divided by the 
national average hourly wage from Step 8 (see 84 FR 42305 and 42306) 
August 16, 2019). We stated that we believe that, in the absence of 
wage data for an urban labor market area, it is reasonable to use a 
statewide urban average, which is based on actual, acceptable wage data 
of hospitals in that State, rather than impute some other type of value 
using a different methodology. For calculation of the proposed FY 2021 
wage index, we note there is one urban CBSA for which we do not have 
IPPS hospital wage data. In Table 3 (which is available via the 
internet on the CMS website) which contains the proposed area wage 
indexes, we include a footnote to indicate to which CBSAs this policy 
applies. These CBSAs' wage indexes would be equal to total urban 
salaries plus wage-related costs (from Step 5) in the respective State, 
divided by the total urban hours (from Step 4) in the respective State, 
divided by the national average hourly wage (from Step 8) (see 84 FR 
42305 and 42306) August 16, 2019). Under this step, we also apply our 
policy with regard to how dollar amounts, hours, and other numerical 
values in the wage index calculations are rounded, as discussed in this 
section of this rule.
    We refer readers to section II. of the Appendix of the proposed 
rule for the policy regarding rural areas that do not have IPPS 
hospitals.
    Step 11.--Section 4410 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. The areas affected by this provision are 
identified in Table 2 listed in section VI. of the Addendum to the 
proposed rule and available via the internet on the CMS website.
    Following is our policy with regard to rounding of the wage data 
(dollar amounts, hours, and other numerical values) in the calculation 
of the unadjusted and adjusted wage index, as finalized in the FY 2020 
IPPS/LTCH final rule (84 FR 42306; August 16, 2019). For data that we 
consider to be ``raw data,'' such as the cost report data on Worksheets 
S-3, Parts II and III, and the occupational mix survey data, we use 
such data ``as is,'' and do not round any of the individual line items 
or fields. However, for any dollar amounts within the wage index 
calculations, including any type of summed wage amount, average hourly 
wages, and the national average hourly wage (both the unadjusted and 
adjusted for occupational mix), we round the dollar amounts to 2 
decimals. For any hour amounts within the wage index calculations, we 
round such hour amounts to the nearest whole number. For any numbers 
not expressed as dollars or hours within the wage index calculations, 
which could include ratios, percentages, or inflation factors, we round 
such numbers to 5 decimals. However, we continue rounding the actual 
unadjusted and adjusted wage indexes to 4 decimals, as we have done 
historically.
    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, 2016, through April 15, 
2018, for private industry hospital workers from the BLS' Compensation 
and Working Conditions. We have consistently used the ECI as the data 
source for our wages and salaries and other price proxies in the IPPS 
market basket, and we are not proposing any changes to the usage of the 
ECI for FY 2021. 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.

[[Page 32712]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.156

    For example, the midpoint of a cost reporting period beginning 
January 1, 2017, and ending December 31, 2017, is June 30, 2017. An 
adjustment factor of 1.01306 was applied to the wages of a hospital 
with such a cost reporting period.
    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, 2017, 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-related 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) and the national wage index, which is 
applied to the national labor-related share of the national 
standardized amount. Therefore, for FY 2021, there is no Puerto Rico-
specific overall average hourly wage or wage index. Based on the 
previously described methodology, the proposed unadjusted national 
average hourly wage is the following:
[GRAPHIC] [TIFF OMITTED] TP29MY20.157

E. Proposed Occupational Mix Adjustment to the FY 2021 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, FY 2020, and FY 2021 Wage Indexes
    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. As discussed in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 
19903) and final rule (82 FR 38137), we collected data in 2016 to

[[Page 32713]]

compute the occupational mix adjustment for the FY 2019, FY 2020, and 
FY 2021 wage indexes.
    The FY 2021 occupational mix adjustment is based on the calendar 
year (CY) 2016 survey. Hospitals were required to submit their 
completed 2016 surveys (Form CMS-10079, OMB number 0938-0907, 
expiration date September 31, 2022) 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 2021 desk review process, the 
MACs revised or verified data elements in hospitals' occupational mix 
surveys that resulted in certain edit failures.
2. Deadline for Submitting the 2019 Medicare Wage Index Occupational 
Mix Survey for Use Beginning With the FY 2022 Wage Index
    A new measurement of occupational mix is required for FY 2022. The 
FY 2022 occupational mix adjustment will be based on a new calendar 
year (CY) 2019 survey. The CY 2019 survey (CMS Form CMS-10079, OMB 
number 0938-0907, expiration date September 31, 2022) received OMB 
approval on October 18, 2019. The final CY 2019 Occupational Mix Survey 
Hospital Reporting Form is available on the CMS website at: https://www.cms.gov/medicaremedicare-fee-service-paymentacuteinpatientppswage-index-files/2019-occupational-mix-survey-hospital-reporting-form-cms-10079-wage-index-beginning-fy-2022. Hospitals were required to submit 
their completed 2019 surveys to their MACs (not directly to CMS), on 
the Excel hospital reporting form, by July 1, 2020 via email attachment 
or overnight delivery. CMS is granting an extension until August 3, 
2020 for hospitals nationwide that may be unable to meet the July 1, 
2020 deadline amidst the Novel Coronavirus Disease (COVID-19) national 
emergency. Hospitals should please see the CMS website at the 
previously mentioned link for information on this extension. As with 
the Worksheet S-3, Parts II and III cost report wage data, as part of 
the FY 2022 desk review process, the MACs will revise or verify data 
elements in hospitals' occupational mix surveys that result in certain 
edit failures.
3. Calculation of the Occupational Mix Adjustment for FY 2021
    For FY 2021, we are proposing to calculate the occupational mix 
adjustment factor using the same methodology that we have used since 
the FY 2012 wage index (76 FR 51582 through 51586) and to apply the 
occupational mix adjustment to 100 percent of the FY 2021 wage index. 
In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42308), we modified our 
methodology with regard to how dollar amounts, hours, and other 
numerical values in the unadjusted and adjusted wage index calculation 
are rounded, in order to ensure consistency in the calculation. 
According to the policy finalized in the FY 2020 IPPS/LTCH PPS final 
rule (84 FR 42308 and 42309), for data that we consider to be ``raw 
data,'' such as the cost report data on Worksheets S-3, Parts II and 
III, and the occupational mix survey data, we continue to use these 
data ``as is'', and not round any of the individual line items or 
fields. However, for any dollar amounts within the wage index 
calculations, including any type of summed wage amount, average hourly 
wages, and the national average hourly wage (both the unadjusted and 
adjusted for occupational mix), we round such dollar amounts to 2 
decimals. We round any hour amounts within the wage index calculations 
to the nearest whole number. We round any numbers not expressed as 
dollars or hours in the wage index calculations, which could include 
ratios, percentages, or inflation factors, to 5 decimals. However, we 
continue rounding the actual unadjusted and adjusted wage indexes to 4 
decimals, as we have done historically.
    Similar to the method we use for the calculation of the wage index 
without occupational mix, salaries and hours for a multicampus hospital 
are allotted among the different labor market areas where its campuses 
are located. Table 2 associated with this proposed rule (which is 
available via the internet on the CMS website), which contains the 
proposed FY 2021 occupational mix adjusted wage index, includes 
separate wage data for the campuses of multicampus hospitals. We refer 
readers to section III.C. of the preamble of this proposed rule for a 
chart listing the multicampus hospitals and the FTE percentages used to 
allot their occupational mix data.
    Because the statute requires that the Secretary measure the 
earnings and paid hours of employment by occupational category not less 
than once every 3 years, all hospitals that are subject to payments 
under the IPPS, or any hospital that would be subject to the IPPS if 
not granted a waiver, must complete the occupational mix survey, unless 
the hospital has no associated cost report wage data that are included 
in the FY 2021 wage index. For the proposed FY 2021 wage index, we are 
using the Worksheet S-3, Parts II and III wage data of 3,196 hospitals, 
and we are using the occupational mix surveys of 3,113 hospitals for 
which we also have Worksheet S-3 wage data, which represented a 
``response'' rate of 97 percent (3,113/3,196). For the proposed FY 2021 
wage index, we are applying proxy data for noncompliant hospitals, new 
hospitals, or hospitals that submitted erroneous or aberrant data in 
the same manner that we applied proxy data for such hospitals in the FY 
2012 wage index occupational mix adjustment (76 FR 51586). As a result 
of applying this methodology, the proposed FY 2021 occupational mix 
adjusted national average hourly wage is the following:
[GRAPHIC] [TIFF OMITTED] TP29MY20.158

F. Analysis and Implementation of the Proposed Occupational Mix 
Adjustment and the Proposed FY 2021 Occupational Mix Adjusted Wage 
Index

    As discussed in section III.E. of the preamble of this proposed 
rule, for FY 2021, we are proposing to apply the occupational mix 
adjustment to 100 percent of the FY 2021 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).
    The proposed FY 2021 national average hourly wages for each 
occupational mix nursing subcategory as calculated in Step 2 of the 
occupational mix calculation are as follows.

[[Page 32714]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.159

    The proposed national average hourly wage for the entire nurse 
category is computed in Step 5 of the occupational mix calculation. 
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 percent, 
and the national percentage of hospital employees in the all other 
occupations category is 58 percent. At the CBSA level, the percentage 
of hospital employees in the nurse category ranged from a low of 27 
percent in one CBSA to a high of 82 percent in another CBSA.
    We compared the proposed FY 2021 occupational mix adjusted wage 
indexes for each CBSA to the proposed unadjusted wage indexes for each 
CBSA. Applying the proposed occupational mix adjustment to the wage 
data resulted in the following:
[GRAPHIC] [TIFF OMITTED] TP29MY20.160

    These results indicate that a larger percentage of urban areas 
(57.8 percent) would benefit from the occupational mix adjustment than 
would rural areas (44.7 percent).

G. Proposed Application of the Rural Floor, Proposed Application of the 
State Frontier Floor, and Continuation of the Low Wage Index Hospital 
Policy

1. Proposed Rural Floor
    Section 4410(a) of Public Law 105-33 provides that, for discharges 
on or after October 1, 1997, the area wage index applicable to any 
hospital that is located in an urban area of a State may not be less 
than the area wage index applicable to hospitals located in rural areas 
in that State. This provision is referred to as the ``rural floor''. 
Section 3141 of Public

[[Page 32715]]

Law 111-148 also requires that a national budget neutrality adjustment 
be applied in implementing the rural floor. Based on the FY 2021 wage 
index associated with this proposed rule (which is available via the 
internet on the CMS website) and based on the calculation of the rural 
floor without the wage data of hospitals that have reclassified as 
rural under Sec.  412.103, we estimate that 255 hospitals would receive 
an increase in their FY 2021 wage index due to the application of the 
rural floor.
2. Proposed State Frontier Floor for FY 2021
    Section 10324 of Public Law 111-148 requires that hospitals in 
frontier States cannot be assigned a wage index of less than 1.0000. 
(We refer readers to the regulations at 42 CFR 412.64(m) and to a 
discussion of the implementation of this provision in the FY 2011 IPPS/
LTCH PPS final rule (75 FR 50160 through 50161).) In this FY 2021 IPPS/
LTCH PPS proposed rule, we are not proposing any changes to the 
frontier floor policy for FY 2021. In this proposed rule, 45 hospitals 
would receive the frontier floor value of 1.0000 for their FY 2021 wage 
index. These hospitals are located in Montana, North Dakota, South 
Dakota, and Wyoming. We note that while Nevada meets the criteria of a 
frontier State, all hospitals within the State currently receive a wage 
index value greater than 1.0000.
    The areas affected by the proposed rural and frontier floor 
policies for the proposed FY 2021 wage index are identified in Table 2 
associated with this proposed rule, which is available via the internet 
on the CMS website.
3. Continuation of the Low Wage Index Hospital Policy
    To help mitigate wage index disparities, including those resulting 
from the inclusion of hospitals with rural reclassifications under 42 
CFR 412.103 in the rural floor, in the FY 2020 IPPS/LTCH PPS final rule 
(84 FR 42325 through 42339), we finalized policies to reduce the 
disparity between high and low wage index hospitals by increasing the 
wage index values for certain hospitals with low wage index values and 
doing so in a budget neutral manner through an adjustment applied to 
the standardized amounts for all hospitals, as well as by changing the 
calculation of the rural floor. We also provided for a transition in FY 
2020 for hospitals experiencing significant decreases in their wage 
index values as compared to their final FY 2019 wage index, and made 
these changes in a budget neutral manner.
    We increase the wage index for hospitals with a wage index value 
below the 25th percentile wage index value for a fiscal year by half 
the difference between the otherwise applicable final wage index value 
for a year for that hospital and the 25th percentile wage index value 
for that year across all hospitals. We stated in the FY 2020 IPPS/LTCH 
PPS final rule (84 FR 42326 through 42328) that this policy will be 
effective for at least 4 years, beginning in FY 2020, in order to allow 
employee compensation increases implemented by these hospitals 
sufficient time to be reflected in the wage index calculation. 
Therefore, this policy will continue in FY 2021. Based on the data for 
this proposed rule, for FY 2021, the 25th percentile wage index value 
across all hospitals would be 0.8420. In order to offset the estimated 
increase in IPPS payments to hospitals with wage index values below the 
25th percentile wage index value, we are proposing to apply the budget 
neutrality adjustment in the same manner as we applied it in FY 2020, 
as a uniform budget neutrality factor applied to the standardized 
amount.
    In addition, in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42332 
through 42336), we removed urban to rural reclassifications from the 
calculation of the rural floor to prevent inappropriate payment 
increases under the rural floor due to rural reclassifications, such 
that, beginning in FY 2020, the rural floor is calculated without 
including the wage data of hospitals that have reclassified as rural 
under section 1886(d)(8)(E) of the Act (as implemented in the 
regulations at Sec.  412.103). Also, for the purposes of applying the 
provisions of section 1886(d)(8)(C)(iii) of the Act, effective 
beginning in FY 2020, we remove the data of hospitals reclassified from 
urban to rural under section 1886(d)(8)(E) of the Act (as implemented 
in the regulations at Sec.  412.103) from the calculation of ``the wage 
index for rural areas in the State in which the county is located'' as 
referred to in section 1886(d)(8)(C)(iii). As previously mentioned in 
section III.G.1. of this proposed rule, the rural floor for this FY 
2021 proposed rule is calculated without the wage data of hospitals 
that have reclassified as rural under Sec.  412.103.
    Lastly, for FY 2020, we placed a 5-percent cap on any decrease in a 
hospital's wage index from the hospital's final wage index in FY 2019 
(84 FR 42336 through 42338). We applied a budget neutrality adjustment 
to the standardized amount so that this transition policy was 
implemented in a budget neutral manner. We clarified in the FY 2020 
IPPS/LTCH PPS final rule (84 FR 42337 through 42338) that this 5-
percent cap on wage index decreases applied to all hospitals that have 
any decrease in their wage indexes, regardless of the circumstance 
causing the decline, so that a hospital's final wage index for FY 2020 
will not be less than 95 percent of its final wage index for FY 2019. 
In light of the recent OMB updates described in section III.B.2. of 
this proposed rule, for FY 2021 we are proposing to again cap any 
decreases in the wage index at 5 percent so that a hospital's final 
wage index for FY 2021 will not be less than 95 percent of its final 
wage index for FY 2020, and to apply a budget neutrality adjustment for 
this proposed transition policy in the same manner as in FY 2020. As 
previously mentioned, on September 14, 2018, OMB issued OMB Bulletin 
No. 18-04 which established revised delineations. Consistent with our 
past practice of implementing transition policies to help mitigate 
negative impacts on hospitals of certain wage index proposals, due to 
the revised OMB delineations, for FY 2021 we are proposing to again 
provide for a transition of a 5-percent cap on any decrease in a 
hospital's wage index from the hospital's final wage index from the 
prior fiscal year which would be FY 2020. We refer readers to section 
III.B.2.c. of the preamble of this proposed rule for a complete 
discussion of the proposed wage index transition policy.

H. Proposed FY 2021 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). As 
discussed in the FY 2019 IPPS/LTCH PPS final rule (83 FR 41380), 
beginning with FY 2019, we added Table 4 which is titled and includes a 
``List of Counties Eligible for the Out-Migration Adjustment under 
Section 1886(d)(13) of the Act'' for the relevant fiscal year. We refer 
readers to section VI. of the Addendum to this proposed rule for a 
discussion of the proposed wage index tables for FY 2021.

[[Page 32716]]

I. Proposed 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). We note that rural hospitals 
reclassifying under the MGCRB to another state's rural area are not 
eligible for the rural floor, because the rural floor may apply to 
urban, not rural, hospitals.
    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. In the FY 2020 IPPS/LTCH PPS final rule (84 
FR 42332 through 42336), we finalized a policy to exclude the wage data 
of urban hospitals reclassifying to rural areas under 42 CFR 412.103 
from the calculation of the rural floor. 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. 
For a discussion on the effects of reclassifications under Sec.  
412.103 on the rural area wage index and the calculation of the rural 
floor, we refer readers to the FY 2020 IPPS/LTCH PPS final rule (84 FR 
42332 through 42336).
2. MGCRB Reclassification and Redesignation Issues for FY 2021
a. FY 2021 Reclassification Application Requirements and Approvals
    As previously stated, under section 1886(d)(10) of the Act, the 
MGCRB considers applications by hospitals for geographic 
reclassification for purposes of payment under the IPPS. The specific 
procedures and rules that apply to the geographic reclassification 
process are outlined in regulations under 42 CFR 412.230 through 
412.280. At the time this proposed rule was constructed, the MGCRB had 
completed its review of FY 2021 reclassification requests. Based on 
such reviews, there are 435 hospitals approved for wage index 
reclassifications by the MGCRB starting in FY 2021. Because MGCRB wage 
index reclassifications are effective for 3 years, for FY 2021, 
hospitals reclassified beginning in FY 2019 or FY 2020 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 244 hospitals approved for wage index reclassifications in 
FY 2019 that will continue for FY 2021, and 279 hospitals approved for 
wage index reclassifications in FY 2020 that will continue for FY 2021. 
Of all the hospitals approved for reclassification for FY 2019, FY 
2020, and FY 2021, based upon the review at the time of this proposed 
rule, 957 hospitals are in a MGCRB reclassification status for FY 2021 
(with 101 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).
b. Hospitals With One or Two Years of Wage Data Seeking MGCRB 
Reclassification
    We are proposing to modify the regulation at Sec.  
412.230(d)(2)(ii)(A) to clarify that a hospital may qualify for an 
individual wage index reclassification by the MGCRB under Sec.  412.230 
to another labor market area if the hospital only has 1 or 2 years of 
wage data. Section 412.230(d)(2)(ii)(A) provides that, for hospital-
specific wage data, a

[[Page 32717]]

hospital must provide a weighted 3-year average of its average hourly 
wages using data from the CMS hospital wage survey used to construct 
the wage index. We note that in certain circumstances, such as that of 
a new hospital, a hospital may not have 3 years of published wage data 
within the applicable 3-year average hourly wage period used by the 
MGCRB. In such cases, it has been CMS's longstanding policy that a 
hospital must accumulate at least 1 year of wage data within the 
applicable 3-year average hourly wage period used by the MGCRB, in 
order to apply for individual reclassification. We are concerned that 
this policy may not be clear in the current regulation text at Sec.  
412.230(d)(2)(ii)(A), and we are now proposing to revise Sec.  
412.230(d)(2)(ii)(A) to clarify this. For hospitals that have 
accumulated fewer than 3 years of wage data within the applicable 3-
year average hourly wage period used by the MGCRB, the appropriate 
hospital-specific wage data to be used by an applicant under Sec.  
412.230(d) is either the single year of published wage data (if the 
hospital has accumulated just 1 year of wage data), or, if applicable, 
the weighted average of its 2 years of wage data within the 3-year 
period reviewed by the MGCRB. Although Sec.  412.230(d)(2)(iv) reflects 
this longstanding policy as it pertains to new providers, we note that 
this policy has not been limited to new providers. Section 
412.230(d)(2)(iv) specifies that if a new owner does not accept 
assignment of the hospital's provider agreement, the hospital is 
considered a new provider with a new provider number, and the wage data 
associated with the previous hospital's provider number cannot be used 
to calculate the new hospital's 3-year average hourly wage. Section 
412.230(d)(2)(iv) further states that, in this case, the new hospital 
would be eligible to apply for an individual MGCRB reclassification 
after accumulating at least 1 year of wage data (we refer readers to 
the FY 2003 IPPS/LTCH final rule (67 FR 50066) for further discussion 
of this policy). As previously noted, however, we have not limited this 
wage data policy to new providers, and thus we are proposing to revise 
Sec.  412.230(d)(2)(ii)(A) to clarify this. Specifically, we are 
proposing to reformat Sec.  412.230(d)(2)(ii)(A) so that it consists of 
two paragraphs (paragraphs (d)(2)(ii)(A)(1) and (2)), and to include 
new language in new of Sec.  412.230(d)(2)(ii)(A)(2) stating that once 
a hospital has accumulated at least 1 year of wage data in the 
applicable 3-year average hourly wage period used by the MGCRB, the 
hospital is eligible to apply for reclassification based on those data 
Consistent with our current policy, hospitals without wage data or that 
have accumulated less than 1 year of wage data would not be eligible 
for individual wage index reclassification.
c. Effects of Implementation of Revised OMB Labor Market Area 
Delineations on Reclassified Hospitals
(1) Assignment Policy for Hospitals Reclassified to CBSAs Where One or 
More Counties Move to a New or Different Urban CBSA
    Because hospitals that have been reclassified beginning in FY 2019, 
2020, or 2021 were reclassified based on the current labor market 
delineations, if we adopt the revised OMB delineations based on the OMB 
Bulletin No. 18-04 beginning in FY 2021, the areas to which they have 
been reclassified, or the areas where they are located, may change. 
Under the revised OMB delineations, some existing CBSAs would be 
reconfigured. Hospitals with current reclassifications are encouraged 
to verify area wage indexes on Table 2 in the appendix of proposed 
rule, and confirm that the areas to which they have been reclassified 
for FY 2021 would continue to provide a higher wage index than their 
geographic area wage index. Hospitals may withdraw or terminate their 
FY 2021 reclassifications by contacting the MGCRB within 45 days from 
the date this proposed rule is issued in the Federal Register (Sec.  
412.273(c)).
    In some cases, adopting the revised OMB delineations would result 
in counties splitting apart from CBSAs to form new CBSAs, or counties 
shifting from one CBSA designation to another CBSA. Reclassifications 
granted under section 1886(d)(10) of the Act are effective for 3 fiscal 
years so that a hospital or county group of hospitals would be assigned 
a wage index based upon the wage data of hospitals in a nearby labor 
market area for a 3-year period. If CBSAs are split apart, or if 
counties shift from one CBSA to another under the revised OMB 
delineations, we must determine which reclassified area to assign to 
the hospital for the remainder of a hospital's 3-year reclassification 
period if the area to which the hospital reclassified split or had 
counties shift to another new or modified urban CBSA.
    Consistent with the policy CMS implemented in the FY 2005 IPPS 
final rule (69 FR 49054 through 49056) and in the FY 2015 IPPS final 
rule (79 FR 49973 through 49977), for FY 2021, if a CBSA would be 
reconfigured due to adoption of the revised OMB delineations and it 
would not be possible for the reclassification to continue seamlessly 
to the reconfigured CBSA, we believe it would be appropriate for us to 
determine the best alternative location to reassign current 
reclassifications for the remaining 3 years. Therefore, to maintain the 
integrity of a hospital's 3-year reclassification period, we are 
proposing that current geographic reclassifications (applications 
approved effective for FY 2019, FY 2020, or FY 2021) that would be 
affected by CBSAs that are split apart or counties that shift to 
another CBSA under the revised OMB delineations, would ultimately be 
assigned to a CBSA under the revised OMB delineations that contains at 
least one county from the reclassified CBSA under the current FY 2020 
definitions, and would be generally consistent with rules that govern 
geographic reclassification. That is, consistent with the policy 
finalized in FY 2015 (79 FR 49973), we are proposing a policy that 
affected reclassified hospitals be assigned to a CBSA that would 
contain the most proximate county that--(1) is located outside of the 
hospital's proposed FY 2021 geographic labor market area, and (2) is 
part of the original FY 2020 CBSA to which the hospital is 
reclassified. (Please note, in the next section, we are making a minor 
modification to this proposed assignment policy for certain hospitals 
currently reclassified to their current geographic CBSA (that is, as 
discussed later in this section, we would not require these 
reclassifications to be assigned to a CBSA outside the hospital's 
proposed FY 2021 geographic labor market area)). We believe that 
assigning reclassifications to the CBSA that contains the nearest 
county that meets the aforementioned criteria satisfies the statutory 
requirement at section 1886(d)(10)(v) of the Act by maintaining 
reclassification status for a period of 3 fiscal years, while generally 
respecting the longstanding principle of geographic proximity in the 
labor market reclassification process. For county group 
reclassifications, we would follow our proposed policy, as previously 
discussed, except that, for county group reclassifications, we are 
proposing to reassign hospitals in a county group reclassification to 
the CBSA under the revised OMB delineations that contains the county to 
which the majority of hospitals in the group reclassification are 
geographically closest. We are also proposing to allow such hospitals, 
or county groups of hospitals, to submit a request to the 
[email protected] mailbox for reassignment to another CBSA that

[[Page 32718]]

would contain a county that is part of the current FY 2020 CBSA to 
which it is reclassified if the hospital or county group of hospitals 
can demonstrate compliance with applicable reclassification proximity 
rules, as described later in this section.
    We recognize that the proposed reclassification reassignment 
policy, as previously described, for hospitals that are reclassified to 
CBSAs that would split apart or to counties that would shift to another 
CBSA under the revised OMB delineations may result in the reassignment 
of the hospital for the remainder of its 3-year reclassification period 
to a CBSA having a lower wage index than the wage index that would have 
been assigned for the reclassified hospital in the absence of the 
proposed adoption of the revised OMB delineations. Therefore, as 
discussed in section III.B.2.e. of the preamble of this proposed rule, 
as a transition, we are proposing to continue to apply for FY 2021 a 5-
percent cap on any decrease in a hospital's wage index from the 
hospital's final wage index for the prior fiscal year. In other words, 
we would apply a 5 percent cap in FY 2021 on any decrease in a 
hospital's wage index compared to its final wage index for FY 2020. We 
believe that this proposed transitional wage index would mitigate 
significant negative payment impacts for FY 2021, and would afford 
hospitals adequate time to fully assess any additional reclassification 
options available to them.
    We note that if the CBSA to which a hospital is reclassified 
experiences only a change in name and/or number, (in other words, a 
county (or county equivalent) did not move to a new or different CBSA), 
we considered the CBSA, and associated reclassifications, to remain 
unchanged. For example, any hospital reclassified to current CBSA 19380 
(Dayton, OH), 39140 (Prescott, AZ) or 43524 (Silver Spring-Frederick-
Rockville, MD) would have its reclassification transferred to the 
proposed equivalent CBSA 19430 (Dayton-Kettering, OH), 39150 (Prescott 
Valley-Prescott, AZ), and 23224 (Frederick-Gaithersburg-Rockville, MD), 
respectively.
    The following Table 1 provides a list of current FY 2020 CBSAs 
(column 1) where one or more counties would be relocated to a new or 
different urban CBSA. Hospitals with FY 2020 MGCRB reclassifications 
into the CBSAs in column 1 would be subject to the proposed 
reclassification assignment policy. The third column of ``eligible'' 
CBSAs lists all proposed revised CBSAs that contain at least one county 
that is part of the current FY 2020 CBSA (in column 1).
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    The following Table 2 lists all hospitals subject to our proposed 
reclassification assignment policy and where their reclassifications 
would be assigned for FY 2021 under this proposed policy. The table 
lists reclassifications that would be in effect for FY 2021 under our 
proposed policy, and included in Table 2 in the addendum of this 
proposed rule. The table also includes reclassifications (noted by an 
asterisk on the ``MGCRB Case Number'') that were approved in FY 2019 or 
FY 2020 and are superseded by a new FY 2021 reclassification. These 
prior year reclassifications, frequently referred to as ``fallback'' 
reclassifications, may become active if the subsequent FY 2021 
reclassification is withdrawn. (Please note, the following table does 
not include hospitals currently reclassified to their ``home'' 
geographic area, which are discussed in the next section.
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    If a hospital that is subject to the proposed reclassification 
assignment policy discussed earlier in this section wishes to be 
reassigned to another eligible CBSA (that is, to a CBSA other than the 
CBSA to which their reclassification would be assigned under the 
proposed reclassification assignment policy and that contains at least 
one county from the CBSA to which they are reclassified for FY 2020) 
for which they meet the applicable proximity criteria may request 
reassignment within 45 days from the date the proposed rule is placed 
on display at the Federal Register. Hospitals must send a request to 
[email protected] and provide documentation establishing that they 
meet the requisite proximity criteria for reassignment to an alternate 
CBSA that contains one or more counties from the CBSA to which they are 
currently reclassified for FY 2020. We believe this option of allowing 
these hospitals to submit a request to CMS would provide hospitals with 
greater flexibility with respect to their reclassification 
reassignment, while ensuring that the proximity requirements are met. 
We believe that where the proximity requirements are met, the 
reclassified wage index would be consistent with the labor market area 
to which the hospitals were originally approved for reclassification. 
Thus, a hospital that is subject to our proposed reclassification 
assignment policy may request to reassign an individual 
reclassification to any CBSA that contains a county from the CBSA to 
which it is currently reclassified for FY 2020. However, to be 
reassigned to an area that is not the most proximate to the hospital, 
we believe it is necessary that the hospital demonstrates that it 
complies with the applicable proximity criteria. If a hospital cannot 
demonstrate proximity to a different eligible CBSA, the hospital would 
not be considered for reclassification to that labor market area, and 
the reclassification would remain with the CBSA assigned under the 
reclassification assignment policy proposed earlier in this section. In 
the case of a county group reclassification, all requests for 
reassignment must include all active hospitals (that is, excluding any 
hospital that has since closed or converted to a different provider 
type) included on the original MGCRB reclassification application. 
County groups must also demonstrate that they meet the appropriate 
proximity requirements, including, for rural county groups, being 
adjacent to the MSA to which they seek redesignation (Sec.  
412.232(a)(1)(ii)), and for urban county groups, being in the same 
Combined Statistical Area or Core-Based Statistical Area as the urban 
area to which they seek redesignation (Sec.  412.234(a)(3)(iv).
    All hospital requests for reassignment should contain the 
hospital's name, address, CCN, and point of contact information. All 
requests must be sent to [email protected]. Changes to a hospital's 
CBSA assignment on the basis of a hospital's disagreement with our 
determination of closest county, or on the basis of being granted a 
reassignment due to meeting applicable proximity criteria to an 
alternate eligible CBSA will be announced in the FY 2021 IPPS/LTCH PPS 
final rule. Finally, we note that MGCRB case 21C0026 was denied by the 
MGCRB for reclassification to CBSA 35614. The hospital (CCN 310064) has 
appealed this decision to the Office of the Administrator. The result 
of this appeal was not available in time to include in this proposed 
rule. If this decision is overturned in favor of the hospital, based on 
our analysis, this reclassification would be assigned to CBSA 35154 
under our proposed reclassification assignment policy.
(2) Proposed Treatment for Hospitals Reclassified to Their Geographic 
CBSA
    Under the previous assignment policy implemented in FY 2015 IPPS/
LTCH final rule, a hospital reclassified to a CBSA that had one or more 
counties moved to a new of different urban CBSA was required to be 
assigned a new or revised CBSA that is different than its proposed 
geographic CBSA (79 FR 49974 and 49975). We adopted the policy that the 
assigned CBSA must be different than the hospital's geographic area to 
ensure that a hospital that qualified for reclassification to a 
different area continued to be eligible to receive a different wage 
index than its home area. We continue to believe this is the 
appropriate policy for hospitals that originally reclassified to a 
different area. However, as noted in the prior section, for hospitals 
currently reclassified to their current geographic CBSA, we are 
proposing to implement a reclassification assignment policy consistent 
with the policy implemented

[[Page 32721]]

in FY 2015, with a minor modification in that we would not require 
these reclassifications to be assigned to a CBSA outside the hospital's 
proposed FY 2021 geographic labor market area. Since the FY 2015 IPPS/
LTCH final rule was issued, CMS has allowed, under certain 
circumstances, a hospital to seek an MGCRB wage index reclassification 
to its own geographic CBSA. We refer readers to a comment response in 
the FY 2017 IPPS/LTCH PPS final rule (81 FR 56925) discussing such a 
scenario. In these cases, the hospitals are assigned the same wage 
index value as other hospitals located in its geographic labor market 
area, not the wage index assigned to hospitals reclassified to that 
area. We are proposing to assign ``home area'' reclassifications to the 
hospital's proposed geographic CBSA. The assigned ``home area'' 
reclassification CBSA may be different from previous years if the 
hospital is located in a county that was relocated to a new or 
different urban CBSA. The following table lists hospitals with current 
``home area'' reclassifications to one of the seven CBSAs (identified 
in Table 1 earlier in this section) where one or more counties would 
move to a new or different urban CBSA, and each hospital's proposed 
assigned CBSA (column 4).
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    We also note that in the FY 2015 IPPS/LTCH PPS final rule (79 FR 
49977), CMS terminated reclassifications when, as a result of adopting 
the revised OMB delineations, a hospital's geographic county was 
reassigned to the CBSA for which it was approved for MGCRB 
reclassification. At that time, ``home area'' reclassifications were 
not possible. However, since CMS now allows ``home area'' 
reclassifications, as discussed previously, we would consider this 
scenario to be a ``home area'' reclassification and we do not believe 
it is necessary to terminate these reclassifications as we did in FY 
2015. We note that hospitals with a ``home area'' reclassification (or 
any other form of reclassification) are not eligible to receive an 
outmigration adjustment determined under section 1886(d)(13) of the 
Act. If such an adjustment is available, a hospital may wish to 
consider withdrawing or terminating its reclassification by contacting 
the MGCRB within 45 days of the date this proposed rule is issued in 
the Federal Register (Sec.  412.273(c)).
3. Redesignations Under Section 1886(d)(8)(B) of the Act
a. Lugar Status Determinations
    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 outmigration adjustment. 
In addition, in that rule, we adopted a minor

[[Page 32722]]

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 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.
    In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42314 and 42315), we 
clarified that in circumstances where an eligible hospital elects to 
receive the outmigration adjustment within 45 days of the public 
display date of the proposed rule at the Office of the Federal Register 
in lieu of its Lugar wage index reclassification, and the county in 
which the hospital is located would no longer qualify for an out-
migration adjustment when the final rule (or a subsequent correction 
notice) wage index calculations are completed, the hospital's request 
to accept the outmigration adjustment would be denied, and the hospital 
would be automatically assigned to its deemed urban status under 
section 1886(d)(8)(B) of the Act. We stated that final rule wage index 
values would be recalculated to reflect this reclassification, and in 
some instances, after taking into account this reclassification, the 
out-migration adjustment for the county in question could be restored 
in the final rule. However, as the hospital is assigned a Lugar 
reclassification under section 1886(d)(8)(B) of the Act, it would be 
ineligible to receive the county outmigration adjustment under section 
1886(d)(13)(G) of the Act. Because the out-migration adjustment, once 
finalized, is locked for a 3-year period under section 1886(d)(13)(F) 
of the Act, the hospital would be eligible to accept its out-migration 
adjustment in either the second or third year.
b. Effects of Implementation of Revised OMB Labor Market Area 
Delineations on Redesignations Under Section 1886(d)(8)(B) of the Act
    As discussed in section III.A.2. of the preamble of this proposed 
rule, CMS is proposing to update the CBSA labor market delineations to 
reflect the changes made in the September 14, 2018 OMB Bulletin 18-04. 
In that section, we proposed that 47 currently rural counties be added 
to new or existing urban CBSAs. Of those 47 counties, 23 are currently 
deemed urban under Section 1886(d)(8)(B) of the Act. Hospitals located 
in such a ``Lugar'' county, barring another form of wage index 
reclassification, are assigned the reclassified wage index of a 
designated urban CBSA. Section 1886(d)(8)(B) of the Act defines a 
deemed urban county as a ``rural county adjacent to one or more urban 
areas'' that meets certain commuting thresholds. Since we are proposing 
to modify the status of these 23 counties from rural to urban, they 
would no longer qualify as ``Lugar'' counties. Hospitals located within 
these counties would be considered geographically urban under the 
revised OMB delineations. The following table lists the counties that 
would no longer be deemed urban under section 1886(d)(8)(B) of the Act 
if we adopt the revised OMB delineations.

[[Page 32723]]

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    We note that in the FY 2015 IPPS/LTCH PPS final rule (79 FR 49973 
through 49977), when we adopted large scale changes to the CBSA labor 
market delineations based on the new decennial census, we also re-
evaluated the commuting data thresholds for all eligible rural counties 
in accordance with the methodology set forth in 1886(d)(8)(B). In FY 
2015, the OMB bulletin we used to update the CBSA delineations was 
based on the results of the 2010 decennial census, and had broad 
ranging nationwide impacts. With some exceptions, notably the FY 2020 
IPPS/LTCH final rule where we modified the CBSA assignment for some 
``Lugar'' counties based on a revised interpretation of the statute (84 
FR 42315 through 42318), it has been CMS's long-standing policy to only 
revise the list of qualifying counties in conjunction with the adoption 
of the large scale OMB delineation changes following the results of a 
decennial census. Typically, interim OMB bulletins (those issued 
between decennial censuses) have only contained minor modifications to 
labor market delineations. However the April 10, 2018 OMB Bulletin No. 
18-03 and the September 14, 2018 OMB Bulletin No. 18-04 included more 
modifications to the labor market areas than are typical for OMB 
bulletins issued between decennial censuses. Although we believe the 
transition wage index described in section III.B.2.e. of the preamble 
of this proposed rule would mitigate significant negative impacts on 
affected hospitals, and provide hospitals with adequate time to 
evaluate alternative wage index reclassification options, we are aware 
that several hospitals in counties that would be considered rural under 
the revised OMB delineations would qualify for ``Lugar'' status, were 
CMS to reevaluate the commuting data and new labor market delineations. 
We believe providing Lugar status to these hospitals, as appropriate, 
would further mitigate any significant negative impacts on affected 
hospitals. We are therefore proposing to reevaluate the ``Lugar'' 
status for all counties in FY 2021 using the same commuting data table 
used to evaluate

[[Page 32724]]

the list of ``Lugar'' counties when CMS adopted new OMB delineations in 
FY 2015 rulemaking. The data table is the ``2006-2010 5-Year American 
Community Survey Commuting Flows and Employment'' (available on OMB's 
website: https://www.census.gov/data/tables/2010/demo/metro-micro/commuting-employment-2010.html). Since we are using the same data 
tables, any difference in the list of qualifying counties would be 
solely due to the effects of the updated OMB delineations. We believe 
that making the proposed revisions to the qualifying counties using the 
updated OMB delineations but the same 2006-2010 commuting data tables 
used in the FY 2015 IPPS/LTCH PPS final rule trikes an appropriate 
balance between reserving comprehensive revisions to the list of 
qualifying counties to instances where we adopt large scale OMB 
delineation changes following a decennial census, and the desire to 
mitigate any significant negative impacts on hospitals of the proposed 
updated OMB delineations (which do contain a number of material 
changes). We are also proposing to use the same methodology discussed 
in the FY 2020 IPPS/LTCH final rule (84 FR 42315 through 42318) to 
assign the appropriate reclassified CBSA for hospitals in ``Lugar'' 
counties. That is, when assessing which CBSA to assign, we will sum the 
total number of workers that commute from the ``Lugar'' county to both 
``central'' and ``outlying'' urban counties (rather than just 
``central'' county commuters).
    By applying the 2010 ACS commuting data to the updated OMB labor 
market delineations, we are proposing the following changes to the 
current ``Lugar'' county list. Most notably, based on this commuting 
data and the revised OMB delineations, all 34 urban counties that 
became rural under the revised OMB delineations would qualify as 
``Lugar'' counties and all hospitals located within them would be 
designated as ``Lugar.'' This would affect 10 current hospitals located 
in those counties. Additionally, due to the change in designation of 
some urban counties from ``outlying'' to ``central'' status by OMB, we 
are proposing to add two current rural counties in NY as ``Lugar'' 
counties. Specifically, hospitals located in Columbia county, NY 
(FIPSCD 36021) would be deemed ``Lugar'' hospitals and reclassified to 
urban CBSA 10580 (Albany-Schenectady-Troy, NY) and hospitals located in 
Sullivan county, NY (FIPCD 36105) would be deemed ``Lugar'' hospitals 
and reclassified to urban CBSA 39100 (Poughkeepsie-Newburgh-Middletown, 
NY). However, we note all hospitals in these New York counties 
currently have MGCRB reclassifications in place for FY 2021, which 
would supersede these ``Lugar'' reclassifications. Finally, Calhoun 
County, TX (FIPSCD 48057) would no longer qualify as a ``Lugar'' county 
due to the fact it is no longer adjacent to CBSA 18580 (Corpus Christi, 
TX). We are proposing to remove Calhoun County from the list of 
``Lugar'' counties. We note that there are no IPPS hospitals located in 
Calhoun County.
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J. Proposed Out-Migration Adjustment Based on Commuting Patterns of 
Hospital Employees

    In accordance with section 1886(d)(13) of the Act, as added by 
section 505 of Public Law 108-173, beginning with FY 2005, we 
established a process to make adjustments to the hospital wage index 
based on commuting patterns of hospital employees (the ``out-
migration'' adjustment). The process, outlined in the FY 2005 IPPS 
final rule (69 FR 49061), provides for an increase in the wage index 
for hospitals located in certain counties that have a relatively high 
percentage of hospital employees who reside in the county but work in a 
different county (or counties) with a higher wage index.
    Section 1886(d)(13)(B) of the Act requires the Secretary to use 
data the Secretary determines to be appropriate to establish the 
qualifying counties. When the provision of section

[[Page 32729]]

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 outmigration 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 through 2020 
IPPS/LTCH PPS final rules (80 FR 49501, 81 FR 56930, 82 FR 38150, 83 FR 
41384, and 84 FR 42318 respectively), the same policies, procedures, 
and computation that were used for the FY 2012 out-migration adjustment 
were applicable for FYs 2016 through 2020, and we are proposing to use 
them again for FY 2021. We have applied the same policies, procedures, 
and computations since FY 2012, and we believe they continue to be 
appropriate for FY 2021. 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 2021, 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 2021, we 
are not proposing any changes to the methodology or data source that we 
used for FY 2016 (81 FR 25071). (We refer readers to a full discussion 
of the out-migration adjustment, including rules on deeming hospitals 
reclassified under section 1886(d)(8) or section 1886(d)(10) of the Act 
to have waived the out-migration adjustment, in the FY 2012 IPPS/LTCH 
PPS final rule (76 FR 51601 through 51602).)
    Table 2 associated with this proposed rule (which is available via 
the internet on the CMS website) includes the proposed out-migration 
adjustments for the FY 2021 wage index. In addition, as discussed in 
the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20367), we have added a 
Table 4, ``List of Counties Eligible for the Out-Migration Adjustment 
under Section 1886(d)(13) of the Act.'' For this proposed rule, Table 4 
consists of the following: A list of counties that would be eligible 
for the out-migration adjustment for FY 2021 identified by FIPS county 
code, the proposed FY 2021 out-migration adjustment, and the number of 
years the adjustment would be in effect. We believe this table makes 
this information more transparent and provides the public with easier 
access to this information. We note that we intend to make the 
information available annually via Table 4 associated with the IPPS/
LTCH PPS proposed and final rules, and are including it among the 
tables associated with this FY 2021 IPPS/LTCH PPS proposed rule that 
are available via the internet on the CMS website.

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

1. Application for Rural Status and Lock-In Date
    Under section 1886(d)(8)(E) of the Act, a qualifying prospective 
payment hospital located in an urban area may apply for rural status 
for payment purposes separate from reclassification through the MGCRB. 
Specifically, section 1886(d)(8)(E) of the Act provides that, not later 
than 60 days after the receipt of an application (in a form and manner 
determined by the Secretary) from a subsection (d) hospital that 
satisfies certain criteria, the Secretary shall treat the hospital as 
being located in the rural area (as defined in paragraph (2)(D)) of the 
State in which the hospital is located. We refer readers to the 
regulations at 42 CFR 412.103 for the general criteria and application 
requirements for a subsection (d) hospital to reclassify from urban to 
rural status in accordance with section 1886(d)(8)(E) of the Act. The 
FY 2012 IPPS/LTCH PPS final rule (76 FR 51595 through 51596) includes 
our policies regarding the effect of wage data from reclassified or 
redesignated hospitals. We refer readers to the FY 2020 IPPS/LTCH PPS 
final rule (84 FR 42332 through 42336) for a discussion on our current 
policy to calculate the rural floor without the wage data of urban 
hospitals reclassifying to rural areas under 42 CFR 412.103.
    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, 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 add a lock-in date by which a hospital's application 
for rural status must be filed in order to be treated as rural in the 
wage index and budget neutrality calculations for payment rates for the 
next Federal fiscal year. In the FY 2019 IPPS/LTCH PPS final rule (83 
FR 41384 through 41386), we changed the lock-in date to provide for 
additional time in the ratesetting process and to match the lock-in 
date with another existing deadline, the usual public comment deadline 
for the IPPS proposed rule. We revised 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) 
and (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.
    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) and the 
FY 2019 IPPS/LTCH PPS final rule (83 FR 41385 through 41386), 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

[[Page 32730]]

Office receives the application, in accordance with Sec.  412.103(d). 
The hospital's IPPS claims will be paid reflecting its rural status 
beginning on the filing date (the effective date) of the 
reclassification, regardless of when the hospital applies.
2. Proposed Change to the Regulations To Allow Electronic Submission of 
Appeals to the Administrator and Copy to CMS
    The regulation at Sec.  412.278(b)(1) addresses a hospital's 
request for the Administrator's review of an MGCRB decision. This 
regulation currently states that a request for Administrator review 
filed by facsimile (FAX) or other electronic means will not be 
accepted. In addition, Sec.  412.278(b)(1) requires a hospital to mail 
a copy of its request for review to CMS's Hospital and Ambulatory 
Policy Group.
    We believe that these policies of prohibiting electronic submission 
of requests for Administrator review and requiring paper copies to be 
mailed to CMS are outdated and overly restrictive. In the interest of 
burden reduction and to promote ease of requests, we are proposing to 
eliminate the prohibition on submitting a request by facsimile or other 
electronic means so that hospitals may also submit requests for 
Administrator review of MGCRB decisions electronically. In addition, we 
are proposing to require the hospital to submit an electronic copy of 
its request for review to CMS's Hospital and Ambulatory Policy Group. 
We are specifying that copies to CMS' Hospital and Ambulatory Policy 
Group should be submitted via email to [email protected].
    Accordingly, we are proposing to revise the regulation at Sec.  
412.278(b)(1) to read: The hospital's request for review must be in 
writing and sent to the Administrator, in care of the Office of the 
Attorney Advisor. The request must be received by the Administrator 
within 15 days after the date the MGCRB issues its decision. The 
hospital must also submit an electronic copy of its request for review 
to CMS's Hospital and Ambulatory Policy Group.
3. Clarification of Applicable Rural Referral Center (RRC) Criteria for 
Purposes of Meeting Urban to Rural Reclassification at Sec.  
412.103(a)(3)
    As discussed in section IV.D. of the preamble of this proposed 
rule, for purposes of qualifying for RRC classification, a rural 
hospital that does not meet the bed size requirement at Sec.  
412.96(b)(1)(ii) 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). Specifically, a hospital may 
demonstrate that its case-mix index is at least equal to the national 
case-mix index value as established by CMS or the median case-mix index 
value for urban hospitals located in each region, in accordance with 
Sec.  412.96(c)(1), and that it has a number of discharges at least 
equal to 5,000 discharges or, if less, the median number of discharges 
for urban hospitals located in each region, in accordance with Sec.  
412.96(c)(2). CMS publishes the national and regional case-mix index 
values and the national and regional number of discharges for the 
purpose of these criteria in the annual notice of prospective payment 
rates published in the Federal Register.
    For purposes of qualifying for urban to rural reclassification 
under Sec.  412.103, a hospital can demonstrate that it would qualify 
as a rural referral center as set forth in Sec.  412.96, if the 
hospital were located in a rural area. This condition is set forth at 
Sec.  412.103(a)(3).
    It has come to our attention that there is some confusion regarding 
which fiscal year's published case mix index (CMI) or numbers of 
discharges criteria would be used in the situation where a hospital is 
seeking to meet the urban to rural reclassification criterion at Sec.  
412.103(a)(3) by meeting the alternative criteria at Sec.  412.96(c): 
(1) The criteria published in the final rule in effect on the filing 
date of the hospital's Sec.  412.103 application, or (2) the criteria 
that would be in effect during the fiscal year that any RRC 
classification would become effective (that is, the beginning of the 
hospital's cost reporting period).
    Therefore, we are clarifying that for purposes of meeting the urban 
to rural reclassification criterion at Sec.  412.103(a)(3), the 
appropriate CMI values and numbers of discharges to demonstrate RRC 
eligibility are those published in the IPPS/LTCH PPS final rule in 
effect as of the filing date (that is, the effective date) of the 
hospital's application for reclassification under Sec.  412.103. For 
purposes of RRC classification under Sec.  412.96(c), the appropriate 
CMI values and numbers of discharges are those published in the IPPS/
LTCH PPS final rule in effect when the RRC classification will be 
effective at the start of the hospital's next cost reporting period, 
consistent with Sec.  412.96(h)(3) and (i)(3).
    For example, Hospital A has a cost reporting period beginning 
October 1. It applies on September 1, 2020 for urban to rural 
reclassification under Sec.  412.103(a)(3) and for RRC status, by 
meeting the alternative criteria at Sec.  412.96(c). For Hospital A's 
urban to rural reclassification request, the appropriate national or 
regional CMI value and number of discharges that the hospital must meet 
or exceed are the values published in the FY 2020 IPPS/LTCH PPS Final 
Rule since that is the rule in effect as of the filing date (that is, 
effective date) of Hospital A's urban to rural reclassification 
application. For the RRC classification request, the appropriate 
national or regional CMI value and number of discharges that the 
hospital must meet or exceed are the values published in the FY 2021 
IPPS/LTCH PPS final rule since that is the rule that will be in effect 
when the RRC classification will become effective at the start of the 
hospital's next cost reporting period. We note that this policy applies 
regardless of whether a hospital seeks only Sec.  412.103 rural 
reclassification, or Sec.  412.103 rural reclassification along with 
RRC classification.
    We believe our policy is appropriate considering that a hospital 
may apply for rural reclassification under Sec.  412.103 at any time, 
as previously discussed in section III.K.1. of the preamble of this 
proposed rule. We clarified in the FY 2018 IPPS/LTCH PPS final rule (82 
FR 38151) that while applications for RRC status must be submitted 
during the last quarter of a hospital's cost reporting period in 
accordance with section 1886(d)(5)(C)(i) of the Act, applications for 
rural reclassification may be submitted at any time, including 
applications of hospitals seeking rural reclassification under Sec.  
412.103(a)(3). A hospital is permitted at any time to submit an urban 
to rural reclassification request on the basis of qualifying for RRC 
status under Sec.  412.103(a)(3), even before the publication of the 
CMI and discharge criteria in the IPPS/LTCH PPS final rule for the 
period in which any RRC classification would be effective (that is, the 
start of the hospital's next cost reporting period).

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 and the 
preliminary CY 2016 occupational mix data files for the proposed FY 
2021 wage index were made available on May 17, 2019 through the 
internet on the CMS website at: https://www.cms.gov/Medicare/Medicare-
Fee-for-Service-Payment/AcuteInpatientPPS/Wage-

[[Page 32731]]

Index-Files-Items/FY2021-Wage-Index-Home-Page.
    On January 31, 2020, we posted a public use file (PUF) at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files-Items/FY2021-Wage-Index-Home-Page 
containing FY 2021 wage index data available as of January 30, 2020. 
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, 2016 through September 30, 
2017; that is, FY 2017 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 January 31, 2020 wage data PUF, and a tab containing 
the CY 2016 occupational mix data of the hospitals deleted from the 
January 31, 2020 occupational mix PUF. In a memorandum dated January 
29, 2020, we instructed all MACs to inform the IPPS hospitals that they 
service of the availability of the January 31, 2020 wage index data 
PUFs, and the process and timeframe for requesting revisions in 
accordance with the FY 2021 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 29, 2019, we instructed all MACs to 
inform the IPPS hospitals that they service of the availability of the 
preliminary wage index data files and the CY 2016 occupational mix 
survey data files posted on May 17, 2019, and the process and timeframe 
for requesting revisions.
    If a hospital wished to request a change to its data as shown in 
the May 17, 2019 preliminary wage and occupational mix data files, the 
hospital had to submit corrections along with complete, detailed 
supporting documentation to its MAC so that the MAC received them by 
September 3, 2019. 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, 2019 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 5, 2019 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 2020. CMS published the wage 
index PUFs that included hospitals' revised wage index data on January 
31, 2020. Hospitals had until February 14, 2020, to submit requests to 
the MACs to correct errors in the January 31, 2020 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 January 31, 
2020 PUF. Hospitals also were required to submit sufficient 
documentation to support their requests. Hospitals' requests and 
supporting documentation must be received by the MAC by the February 
deadline (that is, by February 14, 2020 for the FY 2021 wage index).
    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 19, 2020. 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 2, 
2020. Data that were incorrect in the preliminary or January 31, 2020 
wage index data PUFs, but for which no correction request was received 
by the February 14, 2020 deadline, are not considered for correction at 
this stage. In addition, April 2, 2020 was the deadline for hospitals 
to dispute data corrections made by CMS of which the hospital is 
notified after the January 31, 2020 PUF and at least 14 calendar days 
prior to April 2, 2020 (that is, March 19, 2020), that do not arise 
from a hospital's request for revisions. The hospital's request and 
supporting documentation must be received by CMS (and a copy received 
by the MAC) by the April deadline (that is, by April 2, 2020 for the FY 
2021 wage index). We refer readers to the wage index timeline for 
complete details.
    Hospitals are given the opportunity to examine Table 2 associated 
with this proposed rule, which is listed in section VI. of the Addendum 
to this proposed rule and available via the internet on the CMS website 
at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/FY2021-IPPS-Proposed-Rule-Home-Page.html. Table 2 
contains each hospital's proposed adjusted average hourly wage used to 
construct the wage index values for the past 3 years, including the FY 
2017 data used to construct the proposed FY 2021 wage index. We note 
that the proposed hospital average hourly wages shown in Table 2 only 
reflect changes made to a hospital's data that were transmitted to CMS 
by early February 2020.
    We plan to post the final wage index data PUFs in late April 2020 
via the internet on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files-Items/FY2021-Wage-Index-Home-Page. The April 2020 PUFs are made 
available solely for the limited purpose of identifying any potential 
errors made by CMS or the MAC in the entry of the final wage index data 
that resulted from the correction process previously described (the 
process for disputing revisions submitted to CMS by the MACs by March 
19, 2020, 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 2020 wage index data PUFs, changes 
to the wage and occupational mix data can only be made in those very 
limited situations involving an error by the MAC or CMS that the 
hospital could not have known about before its review of the final wage 
index data files. Specifically, neither the MAC nor CMS will approve 
the following types of requests:
     Requests for wage index data corrections that were 
submitted too late to be included in the data transmitted to CMS by the 
MACs on or before March 19, 2020.
     Requests for correction of errors that were not, but could 
have been, identified during the hospital's review of the January 31, 
2020 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 2020 final wage index data PUFs, a 
hospital

[[Page 32732]]

believes that its wage or occupational mix data are incorrect due to a 
MAC or CMS error in the entry or tabulation of the final data, the 
hospital is given the opportunity to notify both its MAC and CMS 
regarding why the hospital believes an error exists and provide all 
supporting information, including relevant dates (for example, when it 
first became aware of the error). The hospital is required to send its 
request to CMS and to the MAC so that it is received no later than May 
29, 2020. May 29, 2020 is also the deadline for hospitals to dispute 
data corrections made by CMS of which the hospital is notified on or 
after 13 calendar days prior to April 2, 2019 (that is, March 20, 
2020), and at least 14 calendar days prior to May 29, 2020 (that is, 
May 15, 2020), that do not arise from a hospital's request for 
revisions. (Data corrections made by CMS of which a hospital is 
notified on or after 13 calendar days prior to May 29, 2020 (that is, 
May 16, 2020) may be appealed to the Provider Reimbursement Review 
Board (PRRB)). In accordance with the FY 2021 wage index timeline 
posted on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Downloads/FY-2021-Hospital-Wage-Index-Development-Time-Table.pdf, the May appeals must be sent via 
mail and email to CMS and the MACs. We refer readers to the wage index 
timeline for complete details.
    Verified corrections to the wage index data received timely (that 
is, by May 29, 2020) by CMS and the MACs will be incorporated into the 
final FY 2021 wage index, which will be effective October 1, 2020.
    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 2021 payment rates. 
Accordingly, hospitals that do not meet the procedural deadlines set 
forth earlier will not be afforded a later opportunity to submit wage 
index data corrections or to dispute the MAC's decision with respect to 
requested changes. Specifically, our policy is that hospitals that do 
not meet the procedural deadlines as previously set forth (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 changes.
    Again, we believe the wage index data correction process described 
earlier provides hospitals with sufficient opportunity to bring errors 
in their wage and occupational mix data to the MAC's attention. 
Moreover, because hospitals have access to the final wage index data 
PUFs by late April 2020, they have the opportunity to detect any data 
entry or tabulation errors made by the MAC or CMS before the 
development and publication of the final FY 2021 wage index by August 
2020, and the implementation of the FY 2021 wage index on October 1, 
2020. 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 29, 
2020, 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 29, 2020 for the FY 2021 
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 29, 2020 deadline for the 
FY 2021 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 29, 2020 deadline for the FY 2021 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 32733]]

2. Process for Data Corrections by CMS After the January 31 Public Use 
File (PUF)
    The process set forth with the wage index timeline discussed in 
section III.L.1. of the preamble of this proposed rule allows hospitals 
to request corrections to their wage index data within prescribed 
timeframes. In addition to hospitals' opportunity to request 
corrections of wage index data errors or MACs' mishandling of data, CMS 
has the authority under section 1886(d)(3)(E) of the Act to make 
corrections to hospital wage index and occupational mix data in order 
to ensure the accuracy of the wage index. As we explained in the FY 
2016 IPPS/LTCH PPS final rule (80 FR 49490 through 49491) and the FY 
2017 IPPS/LTCH PPS final rule (81 FR 56914), section 1886(d)(3)(E) of 
the Act requires the Secretary to adjust the proportion of hospitals' 
costs attributable to wages and wage-related costs for area differences 
reflecting the relative hospital wage level in the geographic areas of 
the hospital compared to the national average hospital wage level. We 
believe that, under section 1886(d)(3)(E) of the Act, we have 
discretion to make corrections to hospitals' data to help ensure that 
the costs attributable to wages and wage-related costs in fact 
accurately reflect the relative hospital wage level in the hospitals' 
geographic areas.
    We have an established multistep, 15-month process for the review 
and correction of the hospital wage data that is used to create the 
IPPS wage index for the upcoming fiscal year. Since the origin of the 
IPPS, the wage index has been subject to its own annual review process, 
first by the MACs, and then by CMS. As a standard practice, after each 
annual desk review, CMS reviews the results of the MACs' desk reviews 
and focuses on items flagged during the desk review, requiring that, if 
necessary, hospitals provide additional documentation, adjustments, or 
corrections to the data. This ongoing communication with hospitals 
about their wage data may result in the discovery by CMS of additional 
items that were reported incorrectly or other data errors, even after 
the posting of the January 31 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.C. of the preamble of the FY 2019 IPPS/LTCH PPS final rule (83 FR 
41364), 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). Furthermore, 
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) and as first 
implemented with the FY 2019 wage index (83 FR 41389), hospitals are 
able 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 
January 31 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) promote additional transparency to instances where CMS 
makes data corrections after the January 31 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 2021 Wage Index Development Time Table, as well 
as in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38154 through 38156).
3. Update to Wage Index Development Timetable To Include Time Zone for 
Deadlines
    During the FY 2021 Wage Index development process, we received 
inquiries regarding the time zone for deadlines in the Wage Index 
Development Timetable. Specifically, hospitals asked if revision 
requests submitted after 11:59 p.m. Eastern Standard Time (EST) could 
be accepted if the deadline had not yet passed in the time zone where 
the hospitals are located. The current timetable does not specify time 
zones. To eliminate confusion and promote clear deadlines, we are 
proposing to use Eastern Standard Time (EST) as the time zone for wage 
index deadlines after October 1, 2020 on the FY 2022 Wage Index 
Development Timetable. We believe using one time zone is important for 
a clear and consistent deadline for all hospitals. We also believe that 
EST is an appropriate time zone for the deadline because CMS's central 
office headquarters are located in the EST and because it is consistent 
with the time zone used for other CMS deadlines, such as the deadline 
to register to report certain quality data via the CMS Web Interface 
(see the Registration Guide available for download at https://qpp.cms.gov/mips/how-to-register-for-CMS-WI-and-CAHPS) and applications 
for ACOs to participate in the Shared Savings Program (see deadlines 
outlined at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/sharedsavingsprogram/for-acos/application-types-and-timeline, 
in accordance with Sec.  425.202). We welcome commenters' input on 
which time zone is most reasonable for all hospitals and appropriate 
for supporting consistent, clear deadlines.

M. Proposed Labor-Related Share for the Proposed FY 2021 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 that are attributable to wages and wage-related costs 
of the

[[Page 32734]]

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 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. In the FY 2020 IPPS/
LTCH PPS final rule (84 FR 42325), for FY 2020, we continued to use a 
labor-related share of 68.3 percent for discharges occurring on or 
after October 1, 2019.
    The labor-related share is used to determine the proportion of the 
national IPPS base payment rate to which the area wage index is 
applied. We include a cost category in the labor-related share if the 
costs are labor intensive and vary with the local labor market. In this 
proposed rule, for FY 2021, we are not proposing to make any further 
changes to the national average proportion of operating costs that are 
attributable to wages and salaries, employee benefits, professional 
fees: Labor-related, administrative and facilities support services, 
installation, maintenance, and repair services, and all other labor-
related services. Therefore, for FY 2021, we are proposing to continue 
to use a labor-related share of 68.3 percent for discharges occurring 
on or after October 1, 2020.
    As discussed in section IV.B. of the preamble of this proposed 
rule, prior to January 1, 2016, Puerto Rico hospitals were paid based 
on 75 percent of the national standardized amount and 25 percent of the 
Puerto Rico-specific standardized amount. As a result, we applied the 
Puerto Rico-specific labor-related share percentage and nonlabor-
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 2021, we are 
not proposing a Puerto Rico-specific labor-related share percentage or 
a nonlabor-related share percentage.
    Tables 1A and 1B, which are published in section VI. of the 
Addendum to this FY 2021 IPPS/LTCH PPS proposed rule and available via 
the internet on the CMS website, reflect the proposed national labor-
related share, which is also applicable to Puerto Rico hospitals. For 
FY 2021, for all IPPS hospitals (including Puerto Rico hospitals) whose 
wage indexes are less than or equal to 1.0000, we are proposing to 
apply the wage index to a labor-related share of 62 percent of the 
national standardized amount. For all IPPS hospitals (including Puerto 
Rico hospitals) whose wage indexes are greater than 1.000, for FY 2021, 
we are proposing to apply the wage index to a proposed labor-related 
share of 68.3 percent of the national standardized amount.

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

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

1. Background
    Existing regulations at 42 CFR 412.4(a) define discharges under the 
IPPS as situations in which a patient is formally released from an 
acute care hospital or dies in the hospital. Section 412.4(b) defines 
acute care transfers, and Sec.  412.4(c) defines postacute care 
transfers. Our policy set forth in Sec.  412.4(f) provides that when a 
patient is transferred and his or her length of stay is less than the 
geometric mean length of stay for the MS-DRG to which the case is 
assigned, the transferring hospital is generally paid based on a 
graduated per diem rate for each day of stay, not to exceed the full 
MS-DRG payment that would have been made if the patient had been 
discharged without being transferred.
    The per diem rate paid to a transferring hospital is calculated by 
dividing the full MS-DRG payment by the geometric mean length of stay 
for the MS-DRG. Based on an analysis that showed that the first day of 
hospitalization is the most expensive (60 FR 45804), our policy 
generally provides for payment that is twice the per diem amount for 
the first day, with each subsequent day paid at the per diem amount up 
to the full MS-DRG payment (Sec.  412.4(f)(1)). Transfer cases also are 
eligible for outlier payments. In general, the outlier threshold for 
transfer cases, as described in Sec.  412.80(b), is equal to the fixed-
loss outlier threshold for nontransfer cases (adjusted for geographic 
variations in costs), divided by the geometric mean length of stay for 
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

[[Page 32735]]

transfer policy. Specifically, if the MS-DRG's total number of 
discharges to postacute care equals or exceeds the 55th percentile for 
all MS-DRGs and the proportion of short-stay discharges to postacute 
care to total discharges in the MS-DRG exceeds the 55th percentile for 
all MS-DRGs, CMS will apply the postacute care transfer policy to that 
MS-DRG and to any other MS-DRG that shares the same base MS-DRG. The 
statute directs us to identify MS-DRGs based on a high volume of 
discharges to postacute care facilities and a disproportionate use of 
postacute care services. As discussed in the FY 2006 IPPS final rule 
(70 FR 47416), we determined that the 55th percentile is an appropriate 
level at which to establish these thresholds. In that same final rule 
(70 FR 47419), we stated that we will not revise the list of DRGs 
subject to the postacute care transfer policy annually unless we are 
making a change to a specific MS-DRG.
    To account for MS-DRGs subject to the postacute care policy that 
exhibit exceptionally higher shares of costs very early in the hospital 
stay, Sec.  412.4(f) also includes a special payment methodology. For 
these MS-DRGs, hospitals receive 50 percent of the full MS-DRG payment, 
plus the single per diem payment, for the first day of the stay, as 
well as a per diem payment for subsequent days (up to the full MS-DRG 
payment (Sec.  412.4(f)(6)). For an MS-DRG to qualify for the special 
payment methodology, the geometric mean length of stay must be greater 
than 4 days, and the average charges of 1-day discharge cases in the 
MS-DRG must be at least 50 percent of the average charges for all cases 
within the MS-DRG. MS-DRGs that are part of an MS-DRG severity level 
group will qualify under the MS-DRG special payment methodology policy 
if any one of the MS-DRGs that share that same base MS-DRG qualifies 
(Sec.  412.4(f)(6)).
    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 
provided 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 is subject to payment as a transfer 
case. In the FY 2019 IPPS/LTCH PPS final rule (83 FR 41394), we made 
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 specified 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) are subject to the 
postacute care transfer policy in accordance with this statutory 
amendment. Consistent with our policy for other qualified discharges, 
CMS claims processing software has been 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.
2. Proposed Changes for FY 2021
    As discussed in section II.F. of the preamble of the FY 2021 IPPS/
LTCH PPS proposed rule, based on our analysis of FY 2019 MedPAR claims 
data, we are proposing to make changes to a number of MS-DRGs, 
effective for FY 2021. Specifically, we are proposing to do the 
following:
     Reassign procedure codes from MS-DRG 16 (Autologous Bone 
Marrow Transplant with CC/MCC or T-Cell Immunotherapy) to create new 
MS-DRG 18 (Chimeric Antigen Receptor [CAR] T-cell Immunotherapy) for 
cases reporting the administration of CAR T-cell therapy.
     Create new MS-DRG 019 (Simultaneous Pancreas and Kidney 
Transplant with Hemodialysis).
     Reassign procedures involving head, face, neck, ear, nose, 
mouth, or throat by creating six new MS-DRGs 140-142 (Major Head and 
Neck Procedures with MCC, with CC, and without CC/MCC, respectively) 
and 143-145 (Other Ear, Nose, Mouth and Throat O.R. Procedures with 
MCC, with CC, and without CC/MCC, respectively) and deleting MS-DRGs 
129-130 (Major Head and Neck Procedures with CC/MCC or Major Device, 
and without CC/MCC, respectively, MS-DRGs 131-132 (Cranial and Facial 
Procedures with CC/MCC and without CC/MCC, respectively) and MS-DRGs 
133-134 (Other Ear, Nose, Mouth and Throat O.R. Procedures with CC/MCC 
and without CC/MCC, respectively).
     Reassign procedure codes from MS-DRGs 469-470 (Major Hip 
and Knee Joint Replacement or Reattachment of Lower Extremity with MCC 
or Total Ankle Replacement, and without MCC, respectively) and create 
two new MS-DRGs, 521 and 522 (Hip Replacement with Principal Diagnosis 
of Hip Fracture with MCC and without MCC, respectively) for cases 
reporting a hip replacement procedure with a principal diagnosis of a 
hip fracture.
     Reassign procedure codes from MS-DRG 652 (Kidney 
Transplant) into two new MS-DRGs, 650 and 651 (Kidney Transplant with 
Hemodialysis with MCC and without MCC, respectively) for cases 
reporting hemodialysis with a kidney transplant during the same 
admission.
    In light of the proposed changes to these MS-DRGs for FY 2021, 
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 2019 MedPAR file. If an MS-DRG qualified for the 
postacute care transfer policy, we also evaluated that MS-DRG under the 
special payment methodology criteria according to regulations at Sec.  
412.4(f)(6). We continue to believe it is appropriate to assess newly 
proposed MS-DRGs and reassess revised MS-DRGs when proposing 
reassignment of procedure codes or diagnosis codes that would result in 
material changes to an MS-DRG. MS-DRGs 469 and 470 (Major Hip and Knee 
Joint Replacement or Reattachment of Lower Extremity with MCC or Total 
Ankle Replacement, and without MCC, respectively) are currently subject 
to the postacute care transfer policy, and 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. Proposed new MS-DRGs 
521 and 522 (Hip Replacement with Principal Diagnosis of Hip Fracture 
with MCC and without MCC, respectively) would also qualify to be 
included on the list of MS-DRGs that are subject to the postacute care 
transfer policy. We are therefore proposing to add MS-DRGs 521 and 522 
to the list of MS-DRGs that are subject to the postacute care transfer 
policy. We note that MS-DRGs that are subject to the postacute transfer 
policy for FY 2020 and are not revised will continue to be subject to 
the policy in FY 2021.

[[Page 32736]]

    Using the December 2019 update of the FY 2019 MedPAR file, we 
developed the following chart which sets forth the analysis of the 
postacute care transfer policy criteria completed for this proposed 
rule with respect to each of these proposed new or revised MS-DRGs. For 
the FY 2021 final rule, we intend to update this analysis using the 
most recent available data at that time.
BILLING CODE 4120-01-P

[[Page 32737]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.170


[[Page 32738]]


    Based on our annual review of proposed new or revised MS-DRGs and 
analysis of the December 2019 update of the FY 2019 MedPAR file, we 
identified MS-DRGs that we are proposing to include on the list of MS-
DRGs subject to the special payment policy methodology. Based on our 
analysis of proposed changes to MS-DRGs included in this proposed rule, 
we determined that proposed MS-DRGs 521 and 522 (Hip Replacement with 
Principal Diagnosis of Hip Fracture with MCC and without MCC, 
respectively) would meet the criteria for the MS-DRG special payment 
methodology. Therefore, we are proposing that proposed MS-DRGs 521 and 
522 would be subject to the MS-DRG special payment methodology, 
effective FY 2021.
    For the FY 2021 final rule, we intend to update this analysis using 
the most recent available data at that time.
[GRAPHIC] [TIFF OMITTED] TP29MY20.171

BILLING CODE 4120-01-C
    The proposed postacute care transfer and special payment policy 
status of these MS-DRGs is reflected in Table 5 associated with this 
proposed rule, which is listed in section VI. of the Addendum to this 
proposed rule and available via the internet on the CMS website.

B. Proposed Changes in the Inpatient Hospital Update for FY 2021 (Sec.  
412.64(d))

1. Proposed FY 2021 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 2021, we are setting the applicable percentage 
increase by applying the adjustments listed in this section in the same 
sequence as we did for FY 2020. (We note that section 
1886(b)(3)(B)(xii) of the Act required an additional reduction each 
year only for FYs 2010 through 2019.) 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 
for FY 2021 is equal to the rate-of-increase in the hospital market 
basket for IPPS hospitals in all areas, subject to all of the 
following:
     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.
     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.
     An adjustment based on changes in economy-wide 
productivity (the multifactor productivity (MFP) adjustment).
    Section 1886(b)(3)(B)(xi) of the Act, as added by section 3401(a) 
of the Affordable Care Act, states that application of the MFP 
adjustment may result in the applicable percentage increase being less 
than zero.
    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 2014-
based IPPS operating market basket, effective with FY 2018.
    We are proposing to base the proposed FY 2021 market basket update 
used to determine the applicable percentage increase for the IPPS on 
IHS Global Inc.'s (IGI's) fourth quarter 2019 forecast of the 2014-
based IPPS market basket rate-of-increase with historical data through 
third quarter 2019, which is estimated to be 3.0 percent. We also are 
proposing that if more recent data subsequently become available (for 
example, a more recent estimate of the market basket and the MFP 
adjustment), we would use such data, if appropriate, to determine the 
FY 2021 market basket update and the MFP adjustment in the final rule.
    For FY 2021, depending on whether a hospital submits quality data 
under the rules established in accordance with section 
1886(b)(3)(B)(viii) of the Act (hereafter referred to as a hospital 
that submits quality data) and is a meaningful EHR user under section 
1886(b)(3)(B)(ix) of the Act (hereafter referred to as a hospital that 
is a meaningful EHR user), there are four possible applicable 
percentage increases that can be applied to the standardized amount, as 
specified in the table that appears later in this section.
    In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51689 through 
51692), we finalized our methodology for calculating and applying the 
MFP adjustment. As we explained in that rule, section 
1886(b)(3)(B)(xi)(II) of the Act, as added by section 3401(a) of the 
Affordable Care Act, defines this

[[Page 32739]]

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.
    For FY 2021, we are proposing an MFP adjustment of 0.4 percentage 
point. Similar to the market basket update, for this proposed rule, we 
used IGI's fourth quarter 2019 forecast of the MFP adjustment to 
compute the proposed FY 2021 MFP adjustment. As noted previously, we 
are proposing that if more recent data subsequently become available, 
we would use such data, if appropriate, to determine the FY 2021 market 
basket update and the MFP adjustment for the final rule.
    Based on these data, for this proposed rule, we have determined 
four proposed applicable percentage increases to the standardized 
amount for FY 2021, as specified in the following table: 
[GRAPHIC] [TIFF OMITTED] TP29MY20.172

    In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42344), we revised 
our regulations at 42 CFR 412.64(d) to reflect the current law for the 
update for FY 2020 and subsequent fiscal years. Specifically, in 
accordance with section 1886(b)(3)(B) of the Act, we added paragraph 
(d)(1)(viii) to Sec.  412.64 to set forth the applicable percentage 
increase to the operating standardized amount for FY 2020 and 
subsequent fiscal years as the percentage increase in the market basket 
index, subject to the reductions specified under Sec.  412.64(d)(2) for 
a hospital that does not submit quality data and Sec.  412.64(d)(3) for 
a hospital that is not a meaningful EHR user, less an MFP adjustment. 
(As previously noted, section 1886(b)(3)(B)(xii) of the Act required an 
additional reduction each year only for FYs 2010 through 2019.)
    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. (Under current law, the MDH 
program is effective for discharges on or before September 30, 2022, as 
discussed in the FY 2019 IPPS/LTCH PPS final rule (83 FR 41429 through 
41430).)
    For FY 2021, we are proposing the following updates to the 
hospital-specific rates applicable to SCHs and MDHs: A proposed update 
of 2.6 percent for a hospital that submits quality data and is a 
meaningful EHR user; a proposed update of 1.85 percent for a hospital 
that fails to submit quality data and is a meaningful EHR user; a 
proposed update of 0.35 percent for a hospital that submits quality 
data and is not a meaningful EHR user; and a proposed update of -0.4 
percent for a hospital that fails to submit quality data and is not a 
meaningful EHR user. As noted previously, for this FY 2021 IPPS/LTCH 
PPS proposed rule, we are using IGI's fourth quarter 2019 forecast of 
the 2014-based IPPS market basket update with historical data through 
third quarter 2019. Similarly, we used IGI's fourth quarter 2019 
forecast of the MFP adjustment. We are proposing that if more recent 
data subsequently become available (for example, a more recent estimate 
of the market basket increase and the MFP adjustment), we would use

[[Page 32740]]

such data, if appropriate, to determine the update in the final rule.
2. FY 2021 Puerto Rico Hospital Update
    As discussed in the FY 2017 IPPS/LTCH PPS final rule (81 FR 56937 
through 56938), prior to January 1, 2016, Puerto Rico hospitals were 
paid based on 75 percent of the national standardized amount and 25 
percent of the Puerto Rico-specific standardized amount. Section 601 of 
Public Law 114-113 amended section 1886(d)(9)(E) of the Act to specify 
that the payment calculation with respect to operating costs of 
inpatient hospital services of a subsection (d) Puerto Rico hospital 
for inpatient hospital discharges on or after January 1, 2016, shall 
use 100 percent of the national standardized amount. Because Puerto 
Rico hospitals are no longer paid with a Puerto Rico-specific 
standardized amount under the amendments to section 1886(d)(9)(E) of 
the Act, there is no longer a need for us to determine an update to the 
Puerto Rico standardized amount. Hospitals in Puerto Rico are now paid 
100 percent of the national standardized amount and, therefore, are 
subject to the same update to the national standardized amount 
discussed under section IV.B.1. of the preamble of this proposed rule. 
Accordingly, in this FY 2021 IPPS/LTCH PPS proposed rule, for FY 2021, 
we are proposing an applicable percentage increase of 2.6 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 2021.

C. Proposed Amendment To Address Short Cost Reporting Periods During 
Applicable Timeframe for Establishment of Service Area for Sole 
Community Hospitals Under Sec.  412.92(c)(3)

    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).
    The criteria to be classified as an SCH are set forth at 42 CFR 
412.92(a). Under the criteria at 42 CFR 412.92(a)(1)(i) and (ii), CMS 
classifies a hospital as a sole community hospital if it is located: 
(1) In a rural area; and (2) between 25 and 35 miles from other like 
hospitals and meets one of the following criteria:
     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.
     The hospital has fewer than 50 beds and the MAC certifies 
that the hospital would have met the previously discussed criteria were 
it not for the fact that some beneficiaries or residents were forced to 
seek care outside the service area due to the unavailability of 
necessary specialty services at the community hospital.
    The term ``service area'' is defined under the regulations at 42 
CFR 412.92(c)(3) as the area from which a hospital draws at least 75 
percent of its inpatients during the most recent 12-month cost 
reporting period ending before it applies for classification as a sole 
community hospital. For more information on service areas, we refer 
readers to the FY 2002 IPPS final rule (66 FR 39875).
    We have become aware of some situations where a hospital's most 
recent cost reporting period prior to seeking SCH classification is a 
short cost reporting period (that is, less than a 12-month cost 
reporting period). We are therefore proposing to amend Sec.  
412.92(c)(3) to clarify our policy in this situation. Specifically, we 
are proposing to amend Sec.  412.92(c)(3) to reflect that where the 
hospital's cost reporting period ending before it applies for 
classification as a sole community hospital is for less than 12 months, 
the hospital's most recent 12-month or longer cost reporting period 
before the short period is used. We note that this policy is consistent 
with our policy for determining Medicare utilization for purposes of 
MDH classification, as reflected in the regulations at 42 CFR 
412.108(a)(1)(v). We are inviting public comment on our proposed 
amendment to Sec.  412.92(c)(3) to reflect our policy that if the 
hospital's most recent cost reporting period is shorter than 12 months, 
the next most recent cost reporting period is used to determine the 
service area for purposes of SCH classification, provided it is at 
least 12 months.

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

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

[[Page 32741]]

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 (5) 
and the September 30, 1988 Federal Register (53 FR 38513) for 
additional discussion.) With respect to the two mandatory 
prerequisites, a hospital may be classified as an RRC if--
     The hospital's CMI is at least equal to the lower of the 
median CMI for urban hospitals in its census region, excluding 
hospitals with approved teaching programs, or the median CMI for all 
urban hospitals nationally; and
     The hospital's number of discharges is at least 5,000 per 
year, or, if fewer, the median number of discharges for urban hospitals 
in the census region in which the hospital is located. The number of 
discharges criterion for an osteopathic hospital is at least 3,000 
discharges per year, as specified in section 1886(d)(5)(C)(i) of the 
Act.
1. Case-Mix Index (CMI)
    Section 412.96(c)(1) provides that CMS establish updated national 
and regional CMI values in each year's annual notice of prospective 
payment rates for purposes of determining RRC status. The methodology 
we used to determine the national and regional CMI values is set forth 
in the regulations at Sec.  412.96(c)(1)(ii). The proposed national 
median CMI value for FY 2021 is based on the CMI values of all urban 
hospitals nationwide, and the proposed regional median CMI values for 
FY 2021 are based on the CMI values of all urban hospitals within each 
census region, excluding those hospitals with approved teaching 
programs (that is, those hospitals that train residents in an approved 
GME program as provided in Sec.  413.75). These proposed values are 
based on discharges occurring during FY 2019 (October 1, 2018 through 
September 30, 2019), and include bills posted to CMS' records through 
December 2019.
    In this FY 2021 IPPS/LTCH PPS proposed rule, we are proposing that, 
in addition to meeting other criteria, if rural hospitals with fewer 
than 275 beds are to qualify for initial RRC status for cost reporting 
periods beginning on or after October 1, 2020, they must have a CMI 
value for FY 2019 that is at least--
     1.70435 (national--all urban); or
     The median CMI value (not transfer-adjusted) for urban 
hospitals (excluding hospitals with approved teaching programs as 
identified in Sec.  413.75) calculated by CMS for the census region in 
which the hospital is located.
    The proposed median CMI values by region are set forth in this 
table. We intend to update the proposed CMI values in the FY 2021 final 
rule to reflect the updated FY 2019 MedPAR file, which will contain 
data from additional bills received through March 2020.
[GRAPHIC] [TIFF OMITTED] TP29MY20.173

    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. For FY 2021, we are 
proposing to update the regional standards based on discharges for 
urban hospitals' cost reporting periods that began during FY 2018 (that 
is, October 1, 2017 through September 30, 2018), which are the latest 
cost report data available at the time this proposed rule was 
developed. Therefore, we are proposing that, in addition to meeting 
other criteria, a hospital, if it is to qualify for initial RRC status 
for cost reporting periods beginning on or after October 1, 2020, must 
have, as the number of discharges for its cost reporting period that 
began during FY 2018, at least--

[[Page 32742]]

     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 proposed numbers of discharges as set forth in 
this table. We intend to update these numbers in the FY 2021 final rule 
based on the latest available cost report data.
[GRAPHIC] [TIFF OMITTED] TP29MY20.174

    We note that because the median number of discharges for hospitals 
in each census region is greater than the national standard of 5,000 
discharges, under this proposed rule, 5,000 discharges is the minimum 
criterion for all hospitals, except for osteopathic hospitals for which 
the minimum criterion is 3,000 discharges.
a. Proposed Amendment to Sec.  412.96(c)(2) for Hospital Cost Reporting 
Periods That Are Longer or Shorter Than 12 Months
    As previously noted, in addition to meeting other criteria, to 
qualify for initial RRC status for cost reporting periods beginning on 
or after October 1 of a given fiscal year, under Sec.  412.96(c)(2), a 
hospital must meet the minimum number of discharges during its cost 
reporting period that began during the same fiscal year as the cost 
reporting periods used to compute the regional median discharges. We 
typically use the cost reporting periods that are 3 years prior to the 
fiscal year for which a hospital is seeking RRC status to compute the 
regional median discharges, as these are generally the latest cost 
report data available at the time of the development of the proposed 
and final rules. For example, and as discussed previously, for FY 2021, 
we are proposing to update the regional standards based on discharges 
for urban hospitals' cost reporting periods that began during FY 2018.
    We have become aware of situations where a hospital's cost 
reporting period that began during the fiscal year used to compute the 
regional median discharge values for a given fiscal year is a short 
cost reporting period (that is, less than 12 months) and as a result, 
the provider may not meet the minimum discharges requirement. 
Conversely, there may also be situations where a hospital's cost 
reporting period that began during the fiscal year used to compute the 
regional median discharge values for a given fiscal year is a long cost 
reporting period (that is, greater than 12 months). We are proposing to 
amend the RRC regulations to add a new paragraph (c)(2)(iii) to Sec.  
412.96 stating that if the hospital's cost reporting period that began 
during the same fiscal year as the cost reporting periods used to 
compute the regional median discharges is for less than 12 months or 
longer than 12 months, the hospital's number of discharges for that 
cost reporting period will be annualized to estimate the total number 
of discharges for a 12 month cost reporting period. We believe this 
policy, which is generally consistent with how we have addressed short 
cost reporting periods for purposes of determining discharges for RRC 
status in the past, provides a more level playing field for purposes of 
determining the number of discharges for those hospitals for which the 
applicable cost reporting period is shorter or longer than 12 months. 
We are proposing that to annualize the discharges, the MAC would divide 
the discharges by the number of days in the hospital's cost reporting 
period and then multiply by the length of a full year (365 or 366 
calendar days, as applicable) to estimate the total number of 
discharges for a 12-month cost reporting period. For example, a short 
cost reporting period beginning on January 1 and ending on October 31 
that is 10 months (or 304 days) with 4,200 discharges would be 
annualized in a non-leap year as follows: (4,200 / 304) x 365 = 5,043 
discharges annualized. Under this proposal, if the hospital has 
multiple cost reports beginning in the same fiscal year and none of 
those cost reports are for 12 months, the hospital's number of 
discharges in the hospital's longest cost report beginning in that 
fiscal year would be annualized to estimate the total number of 
discharges for a 12 month cost reporting period. We are inviting public 
comment on our proposed annualization methodology and our proposed 
amendment to Sec.  412.96(c)(2).

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

1. Background
    Section 1886(d)(12) of the Act provides for an additional payment 
to each qualifying low-volume hospital under the IPPS beginning in FY 
2005. The additional payment adjustment to a low-volume hospital 
provided for under section 1886(d)(12) of the Act is in addition to any 
payment calculated under section 1886 of the Act. Therefore, the 
additional payment adjustment is based on the per discharge amount paid 
to the qualifying hospital under section 1886 of the Act. In other 
words, the low-volume hospital payment adjustment is based on total per 
discharge payments made under section 1886 of the Act, including 
capital, DSH, IME, and outlier payments. For SCHs and MDHs, the low-
volume hospital payment adjustment is based in part on either the 
Federal rate or the hospital-specific rate, whichever results in a 
greater operating IPPS payment.
    As discussed in the FY 2019 IPPS/LTCH PPS final rule (83 FR 41398 
through 41399), section 50204 of the

[[Page 32743]]

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.) Currently, the 
low-volume hospital qualifying criteria provide that a hospital must 
have fewer 3,800 total discharges during the fiscal year, and the 
hospital must be located more than 15 road miles from the nearest 
``subsection (d)'' hospital. These criteria will remain in effect 
through FY 2022. 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. Therefore, in order 
for a hospital to continue to qualify as a low-volume hospital on or 
after October 1, 2022, it must have fewer 200 total discharges during 
the fiscal year and be located more than 25 road miles from the nearest 
``subsection (d)'' hospital (see Sec.  412.101(b)(2)(i)). (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).)
2. Temporary Changes to the Low-Volume Hospital Definition and Payment 
Adjustment Methodology for FYs 2019 Through 2022
    As discussed earlier, section 50204 of the Bipartisan Budget Act of 
2018 further modified the definition of a low-volume hospital and the 
methodology for calculating the payment adjustment for low-volume 
hospitals for FYs 2019 through 2022. Specifically, the qualifying 
criteria for low-volume hospitals under section 1886(d)(12)(C)(i) of 
the Act were amended 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 
1886(d)(12)(D) of the Act was also amended 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 final rule (83 FR 41399), to implement 
this requirement, we specified 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 provided that qualifying hospitals with 500 or 
fewer total discharges will 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 is calculated by subtracting from 25 percent the proportion 
of payments associated with the discharges in excess of 500. As such, 
for qualifying hospitals with fewer than 3,800 total discharges but 
more than 500 total discharges, the low-volume hospital payment 
adjustment for FYs 2019 through 2022 is calculated using the following 
formula:

Low-Volume Hospital Payment Adjustment = 0.25-[0.25 / 3,300] x (number 
of total discharges-500) = (95 / 330)-(number of total discharges / 
13,200).

    For this purpose, we specified that the ``number of total 
discharges'' is 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. The low-volume hospital 
payment adjustment for FYs 2019 through 2022 is set forth in the 
regulations at 42 CFR 412.101(c)(3).
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 2019 IPPS/
LTCH PPS final rule (83 FR 41399 through 41401), 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 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 such 
as the number of discharges, 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 2019 
IPPS/LTCH PPS final rule (83 FR 41399 through 41401).)
    As explained earlier, for FY 2019 and subsequent fiscal years, the 
discharge determination is made based on the hospital's number of total 
discharges, that is, Medicare and non-Medicare discharges, as was the 
case for FYs 2005 through 2010. Under Sec.  412.101(b)(2)(i) and Sec.  
412.101(b)(2)(iii), a hospital's most recently submitted cost report is 
used to determine if the hospital meets the discharge criterion to 
receive the low-volume payment adjustment in the current year. As 
discussed in the FY 2019 IPPS/LTCH PPS final rule (83 FR 41399 and 
41400), 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 final rule, in 
addition to the discharge criterion, for FY 2019

[[Page 32744]]

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 
(iii) for the fiscal year. Specifically, to meet the mileage criterion 
to qualify for the low-volume hospital payment adjustment for FY 2021, 
as was the case for FYs 2019 and 2020, 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.
    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.
    Consistent with this previously established process, for FY 2021, 
we are proposing that a hospital must submit a written request for low-
volume hospital status to its MAC that includes sufficient 
documentation to establish that the hospital meets the applicable 
mileage and discharge criteria (as described earlier). Consistent with 
historical practice, for FY 2021, we are proposing that a hospital's 
written request must be received by its MAC no later than September 1, 
2020 in order for the low-volume hospital payment adjustment to be 
applied to payments for its discharges beginning on or after October 1, 
2020. If a hospital's written request for low-volume hospital status 
for FY 2021 is received after September 1, 2020, 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 2021 
discharges, effective prospectively within 30 days of the date of the 
MAC's low-volume hospital status determination. We note that this 
proposal is consistent with the process for requesting and obtaining 
the low-volume hospital payment adjustment for FY 2020 (84 FR 42348 
through 42349).
    Under this process, a hospital receiving the low-volume hospital 
payment adjustment for FY 2020 may continue to receive a low-volume 
hospital payment adjustment for FY 2021 without reapplying if it 
continues to meet the applicable mileage and discharge criteria (which, 
as discussed previously, are the same qualifying criteria that apply 
for FY 2020). In this case, a hospital's request can include a 
verification statement that it continues to meet the mileage criterion 
applicable for FY 2021. (Determination of meeting the discharge 
criterion is discussed earlier in this section.) We note that a 
hospital must continue to meet the applicable qualifying criteria as a 
low-volume hospital (that is, the hospital must meet the applicable 
discharge criterion and mileage criterion for the fiscal year) in order 
to receive the payment adjustment in that fiscal year; that is, low-
volume hospital status is not based on a ``one-time'' qualification (75 
FR 50238 through 50275). Consistent with historical policy, a hospital 
must submit its request, including this written verification, for each 
fiscal year for which it seeks to receive the low-volume hospital 
payment adjustment, and in accordance with the timeline described 
earlier.

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

    Under the IPPS, an additional payment amount is made to hospitals 
with residents in an approved graduate medical education (GME) program 
in order to reflect the higher indirect patient care costs of teaching 
hospitals relative to nonteaching hospitals. The payment amount is 
determined by use of a statutorily specified adjustment factor. The 
regulations regarding the calculation of this additional payment, known 
as the IME adjustment, are located at Sec.  412.105. We refer readers 
to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51680) for a full 
discussion of the IME adjustment and IME adjustment factor. Section 
1886(d)(5)(B)(ii)(XII) of the Act provides that, for discharges 
occurring during FY 2008 and fiscal years thereafter, the IME formula 
multiplier is 1.35. Accordingly, for discharges occurring during FY 
2021, the formula multiplier is 1.35. We estimate that application of 
this formula multiplier for the FY 2021 IME adjustment will result in 
an increase in IPPS payment of 5.5 percent for every approximately 10 
percent increase in the hospital's resident-to-bed ratio.

G. Payment Adjustment for Medicare Disproportionate Share Hospitals 
(DSHs) for FY 2021 (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

[[Page 32745]]

who, for such days, were eligible for Medicaid, but were not entitled 
to benefits under Medicare Part A, by the hospital's total number of 
inpatient days in the same period.
    Because the DSH payment adjustment is part of the IPPS, the 
statutory references to ``days'' in section 1886(d)(5)(F) of the Act 
have been interpreted to apply only to hospital acute care inpatient 
days. Regulations located at 42 CFR 412.106 govern the Medicare DSH 
payment adjustment and specify how the DPP is calculated as well as how 
beds and patient days are counted in determining the Medicare DSH 
payment adjustment. Under Sec.  412.106(a)(1)(i), the number of beds 
for the Medicare DSH payment adjustment is determined in accordance 
with bed counting rules for the IME adjustment under Sec.  412.105(b).
    Section 3133 of the Patient Protection and Affordable Care Act, as 
amended by section 10316 of the same Act and section 1104 of the Health 
Care and Education Reconciliation Act (Pub. L. 111-152), added a 
section 1886(r) to the Act that modifies the methodology for computing 
the Medicare DSH payment adjustment. (For purposes of this proposed 
rule, we refer to these provisions collectively as section 3133 of the 
Affordable Care Act.) Beginning with discharges in FY 2014, hospitals 
that qualify for Medicare DSH payments under section 1886(d)(5)(F) of 
the Act receive 25 percent of the amount they previously would have 
received under the statutory formula for Medicare DSH payments. This 
provision applies equally to hospitals that qualify for DSH payments 
under section 1886(d)(5)(F)(i)(I) of the Act and those hospitals that 
qualify under the Pickle method under section 1886(d)(5)(F)(i)(II) of 
the Act.
    The remaining amount, equal to an estimate of 75 percent of what 
otherwise would have been paid as Medicare DSH payments, reduced to 
reflect changes in the percentage of individuals who are uninsured, is 
available to make additional payments to each hospital that qualifies 
for Medicare DSH payments and that has uncompensated care. The payments 
to each hospital for a fiscal year are based on the hospital's amount 
of uncompensated care for a given time period relative to the total 
amount of uncompensated care for that same time period reported by all 
hospitals that receive Medicare DSH payments for that fiscal year.
    As provided by section 3133 of the Affordable Care Act, section 
1886(r) of the Act requires that, for FY 2014 and each subsequent 
fiscal year, a subsection (d) hospital that would otherwise receive DSH 
payments made under section 1886(d)(5)(F) of the Act receives two 
separately calculated payments. Specifically, section 1886(r)(1) of the 
Act provides that the Secretary shall pay to such subsection (d) 
hospital (including a Pickle hospital) 25 percent of the amount the 
hospital would have received under section 1886(d)(5)(F) of the Act for 
DSH payments, which represents the empirically justified amount for 
such payment, as determined by the MedPAC in its March 2007 Report to 
Congress. We refer to this payment as the ``empirically justified 
Medicare DSH payment.''
    In addition to this empirically justified Medicare DSH payment, 
section 1886(r)(2) of the Act provides that, for FY 2014 and each 
subsequent fiscal year, the Secretary shall pay to such subsection (d) 
hospital an additional amount equal to the product of three factors. 
The first factor is the difference between the aggregate amount of 
payments that would be made to subsection (d) hospitals under section 
1886(d)(5)(F) of the Act if subsection (r) did not apply and the 
aggregate amount of payments that are made to subsection (d) hospitals 
under section 1886(r)(1) of the Act for such fiscal year. Therefore, 
this factor amounts to 75 percent of the payments that would otherwise 
be made under section 1886(d)(5)(F) of the Act.
    The second factor is, for FY 2018 and subsequent fiscal years, 1 
minus the percent change in the percent of individuals who are 
uninsured, as determined by comparing the percent of individuals who 
were uninsured in 2013 (as estimated by the Secretary, based on data 
from the Census Bureau or other sources the Secretary determines 
appropriate, and certified by the Chief Actuary of CMS), and the 
percent of individuals who were uninsured in the most recent period for 
which data are available (as so estimated and certified), minus 0.2 
percentage point for FYs 2018 and 2019.
    The third factor is a percent that, for each subsection (d) 
hospital, represents the quotient of the amount of uncompensated care 
for such hospital for a period selected by the Secretary (as estimated 
by the Secretary, based on appropriate data), including the use of 
alternative data where the Secretary determines that alternative data 
are available which are a better proxy for the costs of subsection (d) 
hospitals for treating the uninsured, and the aggregate amount of 
uncompensated care for all subsection (d) hospitals that receive a 
payment under section 1886(r) of the Act. Therefore, this third factor 
represents a hospital's uncompensated care amount for a given time 
period relative to the uncompensated care amount for that same time 
period for all hospitals that receive Medicare DSH payments in the 
applicable fiscal year, expressed as a percent.
    For each hospital, the product of these three factors represents 
its additional payment for uncompensated care for the applicable fiscal 
year. We refer to the additional payment determined by these factors as 
the ``uncompensated care payment.''
    Section 1886(r) of the Act applies to FY 2014 and each subsequent 
fiscal year. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50620 
through 50647) and the FY 2014 IPPS interim final rule with comment 
period (78 FR 61191 through 61197), we set forth our policies for 
implementing the required changes to the Medicare DSH payment 
methodology made by section 3133 of the Affordable Care Act for FY 
2014. In those rules, we noted that, because section 1886(r) of the Act 
modifies the 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

[[Page 32746]]

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 this FY 2021 IPPS/LTCH PPS proposed rule), we 
discuss our specific policies regarding eligibility to receive 
empirically justified Medicare DSH payments and uncompensated care 
payments for FY 2021 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 2019 IPPS/LTCH PPS 
final rule (83 FR 41402 through 41403), 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 
began on January 1, 2019. Under the Maryland TCOC Model, Maryland 
hospitals will not be paid under the IPPS in FY 2021, and will be 
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 Factor 3 
and an uncompensated care payment amount for all MDHs, regardless of 
whether they are projected to be eligible for Medicare DSH payments 
during the fiscal year, but the denominator of Factor 3 of the 
uncompensated care payment methodology will be based only 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),

[[Page 32747]]

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 
this proposed rule, there are 27 hospitals participating in the 
demonstration program. Under the payment methodology that applies 
during the second 5 years of the extension period under the 
demonstration program, 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/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. In this 
section of this proposed rule, we discuss the data sources and 
methodologies for computing each of these factors, our final policies 
for FYs 2014 through 2020, and our proposed policies for FY 2021.
a. Proposed Calculation of Factor 1 for FY 2021
    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 2020, in this FY 2021 IPPS/LTCH PPS proposed rule, 
in order to determine Factor 1 in the uncompensated care payment 
formula for FY 2021, we are proposing to continue the policy 
established in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50628 
through 50630) and in the FY 2014 IPPS interim final rule with comment 
period (78 FR 61194) of determining Factor 1 by developing estimates of 
both the aggregate amount of Medicare DSH payments that would be made 
in the absence of section 1886(r)(1) of the Act and the aggregate 
amount of empirically justified Medicare DSH payments to hospitals 
under 1886(r)(1) of the Act. Consistent with the policy that has 
applied in previous years, these estimates will not be revised or 
updated subsequent to the publication of our final projections in the 
FY 2021 IPPS/LTCH PPS final rule.
    Therefore, in order to determine the two elements of proposed 
Factor 1 for FY 2021 (Medicare DSH payments prior to the application of 
section 1886(r)(1) of the Act, and empirically justified Medicare DSH 
payments after application of section 1886(r)(1) of the Act), for this 
proposed rule, we used the most recently available projections of 
Medicare DSH payments for the fiscal year, as calculated by CMS' Office 
of the Actuary using the most recently filed Medicare hospital cost 
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 2018 through FY 2021 are 
discussed in the table titled ``Factors Applied for FY 2018 through FY 
2021 to Estimate Medicare DSH Expenditures Using FY 2017 Baseline.''
    For purposes of calculating Factor 1 and modeling the impact of 
this FY 2021 IPPS/LTCH PPS proposed rule, we

[[Page 32748]]

used the Office of the Actuary's December 2019 Medicare DSH estimates, 
which were based on data from the September 2019 update of the Medicare 
Hospital Cost Report Information System (HCRIS) and the FY 2020 IPPS/
LTCH PPS final rule IPPS Impact File, published in conjunction with the 
publication of the FY 2020 IPPS/LTCH PPS final rule. Because SCHs that 
are projected to be paid under their hospital-specific rate are 
excluded from the application of section 1886(r) of the Act, these 
hospitals also were excluded from the December 2019 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 2019 Medicare DSH 
estimates. The 27 hospitals that are participating in the Rural 
Community Hospital Demonstration Program were also excluded from these 
estimates because, under the payment methodology that applies during 
the second 5 years of the extension period, these hospitals are not 
eligible to receive empirically justified Medicare DSH payments or 
interim and final uncompensated care payments.
    For this proposed rule, using the data sources as previously 
discussed, the Office of the Actuary's December 2019 estimate for 
Medicare DSH payments for FY 2021 without regard to the application of 
section 1886(r)(1) of the Act, is approximately $14.004 billion. 
Therefore, also based on the December 2019 estimate, the estimate of 
empirically justified Medicare DSH payments for FY 2021, with the 
application of section 1886(r)(1) of the Act, is approximately $3.840 
billion (or 25 percent of the total amount of estimated Medicare DSH 
payments for FY 2021). Under Sec.  412.106(g)(1)(i) of the regulations, 
Factor 1 is the difference between these two estimates of the Office of 
the Actuary. Therefore, in this proposed rule, we are proposing that 
Factor 1 for FY 2021 would be $11,518,901,035.84, which is equal to 75 
percent of the total amount of estimated Medicare DSH payments for FY 
2021 ($15,358,534,714.46 minus $3,839,633,678.61). We note that 
consistent with our approach in previous rulemakings, OACT intends to 
use more recent data that may become available for purposes of 
projecting the final Factor 1 estimates for the FY 2021 IPPS/LTCH PPS 
final rule.
    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. We recognize that our 
reliance on the economic assumptions and actuarial analysis used to 
develop 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 President's Budget.
    For a general overview of the principal steps involved in 
projecting future inpatient costs and utilization, we refer readers to 
the ``2019 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 readers to the 2017 Actuarial Report on the Financial 
Outlook for Medicaid for a discussion of general issues regarding 
Medicaid projections. (available at: https://www.cms.gov/Research-Statistics-Data-and-Systems/Research/ActuarialStudies/MedicaidReport).
    In this proposed rule, we include information regarding the data 
sources, methods, and assumptions employed by the actuaries in 
determining the OACT's estimate of Factor 1. In summary, we indicate 
the historical HCRIS data update OACT used to identify Medicare DSH 
payments, we explain that the most recent Medicare DSH payment 
adjustments provided in the IPPS Impact File were used, and we provide 
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 includes a description of the ``Other'' and 
``Discharges'' assumptions, and also provides additional information 
regarding how we address the Medicaid and CHIP expansion.
    The Office of the Actuary's estimates for FY 2021 for this proposed 
rule began with a baseline of $14.004 billion in Medicare DSH 
expenditures for FY 2017. The following table shows the factors applied 
to update this baseline through the current estimate for FY 2021:

[[Page 32749]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.175

    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 2018 are based on Medicare claims data that have 
been adjusted by a completion factor to account for incomplete claims 
data. The discharge figure for FY 2019 is based on preliminary data for 
2019. The discharge figures for FY 2020 and FY 2021 are assumptions 
based on recent trends recovering back to the long-term trend and 
assumptions related to how many beneficiaries will be enrolled in 
Medicare Advantage (MA) plans. The case-mix column shows the increase 
in case-mix for IPPS hospitals. The case-mix figures for FY 2018 and FY 
2019 are based on actual data adjusted by a completion factor. The FY 
2020 and FY 2021 increases are estimates based on the recommendation of 
the 2010-2011 Medicare Technical Review Panel. The ``Other'' column 
shows the increase in other factors that contribute to the Medicare DSH 
estimates. These factors include the difference between the total 
inpatient hospital discharges and the IPPS discharges, and various 
adjustments to the payment rates that have been included over the years 
but are not reflected in the other columns (such as the change in rates 
for the 2-midnight stay policy). In addition, the ``Other'' column 
includes a factor for the Medicaid expansion due to the Affordable Care 
Act. 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 
55 percent of all individuals who were potentially newly eligible 
Medicaid enrollees in 2018 resided in States that had elected to expand 
Medicaid eligibility and, for 2020 and thereafter, that 58 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 2017 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/MedicaidReport2017.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 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 following table shows the factors that are included in the 
``Update'' column of the previous table:
[GRAPHIC] [TIFF OMITTED] TP29MY20.176

b. Calculation of Proposed Factor 2 for FY 2021
(1) Background
    Section 1886(r)(2)(B) of the Act establishes Factor 2 in the 
calculation of the uncompensated care payment. Section 
1886(r)(2)(B)(ii) of the Act provides 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)

[[Page 32750]]

and the percent of individuals who were uninsured in the most recent 
period for which data are available (as so estimated and certified), 
minus 0.2 percentage point for FYs 2018 and 2019. In FY 2020 and 
subsequent fiscal years, there is no longer a reduction. We note that, 
unlike section 1886(r)(2)(B)(i) of the Act, which governed the 
calculation of Factor 2 for FYs 2014, 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 years of age.
    As we discussed in the FY 2018 IPPS/LTCH PPS final rule (82 FR 
38197), in our analysis of a potential data source for the rate of 
uninsurance for purposes of computing Factor 2 in FY 2018, we 
considered the following: (a) The extent to which the source accounted 
for the full U.S. population; (b) the extent to which the source 
comprehensively accounted for both public and private health insurance 
coverage in deriving its estimates of the number of uninsured; (c) the 
extent to which the source utilized data from the Census Bureau; (d) 
the timeliness of the estimates; (e) the continuity of the estimates 
over time; (f) the accuracy of the estimates; and (g) the availability 
of projections (including the availability of projections using an 
established estimation methodology that would allow for calculation of 
the rate of uninsurance for the applicable Federal fiscal year). As we 
explained in the FY 2018 IPPS/LTCH PPS final rule, these considerations 
are consistent with the statutory requirement that this estimate be 
based on data from the Census Bureau or other sources the Secretary 
determines appropriate and help to ensure the data source will provide 
reasonable estimates for the rate of uninsurance that are available in 
conjunction with the IPPS rulemaking cycle. We are proposing to use the 
same methodology as was used in FY 2018 through FY 2020 to determine 
Factor 2 for FY 2021.
    In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38197 and 38198), we 
explained that we determined the source that, on balance, best meets 
all of these considerations is the uninsured estimates produced by CMS' 
Office of the Actuary (OACT) as part of the development of the National 
Health Expenditure Accounts (NHEA). The NHEA represents the 
government's official estimates of economic activity (spending) within 
the health sector. The information contained in the NHEA has been used 
to study numerous topics related to the health care sector, including, 
but not limited to, changes in the amount and cost of health services 
purchased and the payers or programs that provide or purchase these 
services; the economic causal factors at work in the health sector; the 
impact of policy changes, including major health reform; and 
comparisons to other countries' health spending. Of relevance to the 
determination of Factor 2 is that the comprehensive and integrated 
structure of the NHEA creates an ideal tool for evaluating changes to 
the health care system, such as the mix of the insured and uninsured, 
because this information is integral to the well-established NHEA 
methodology. In this section of this proposed rule, 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 through FY 2020 that we believe continue to be 
relevant in developing the estimate for FY 2021. A full description of 
the methodology used to develop the NHEA is available on the CMS 
website at: https://www.cms.gov/files/document/definitions-sources-and-methods.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 2018, 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 2018. 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 
2018, the OACT extrapolates from the 2009 CPS data using data from the 
National Health Interview Survey (NHIS). The NHIS is one of the major 
data collection programs of the National Center for Health Statistics 
(NCHS), which is part of the Centers for Disease Control and Prevention 
(CDC). The U.S. Census Bureau is the data collection agent for

[[Page 32751]]

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 CY 2020 and CY 2021. On an annual basis, 
OACT projects enrollment and spending trends for the coming 10-year 
period. Those projections (currently for years 2019 through 2028) use 
the latest NHEA historical data, which presently run through 2018. 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.
    The use of data from the NHEA to estimate the rate of uninsurance 
is consistent with the statute and meets the criteria we have 
identified for determining the appropriate data source. Section 
1886(r)(2)(B)(ii) of the Act instructs the Secretary to estimate the 
rate of uninsurance for purposes of Factor 2 based on data from the 
Census Bureau or other sources the Secretary determines appropriate. 
The NHEA utilizes data from the Census Bureau; the estimates are 
available in time for the IPPS rulemaking cycle; the estimates are 
produced by OACT on an annual basis and are expected to continue to be 
produced for the foreseeable future; and projections are available for 
calendar year time periods that span the upcoming fiscal year. 
Timeliness and continuity are important considerations because of our 
need to be able to update this estimate annually. Accuracy is also a 
very important consideration and, all things being equal, we would 
choose the most accurate data source that sufficiently meets our other 
criteria.
(2) Proposed Factor 2 for FY 2021
    Using these data sources and the previously described 
methodologies, the OACT estimates that the uninsured rate for the 
historical, baseline year of 2013 was 14 percent and for CYs 2020 and 
2021 is 9.5 percent and 9.5 percent, respectively.\462\ As required by 
section 1886(r)(2)(B)(ii) of the Act, the Chief Actuary of CMS has 
certified these estimates.
    As with the CBO estimates on which we based Factor 2 in prior 
fiscal years, the NHEA estimates are for a calendar year. In the 
rulemaking for FY 2014, many commenters noted that the uncompensated 
care payments are made 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 of rate of uninsurance 
projections for each Federal fiscal year since the FY 2014 IPPS/LTCH 
PPS final rule.
    We continue to believe that, in order to estimate the rate of 
uninsurance during a fiscal year more accurately, Factor 2 should 
reflect the estimated rate of uninsurance that hospitals will 
experience during the fiscal year, rather than the rate of uninsurance 
during only one of the calendar years that the fiscal year spans. 
Accordingly, we are proposing to continue to apply the weighted average 
approach used in past fiscal years in order to estimate the rate of 
uninsurance for FY 2021. 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. We may also consider 
the use of more recent data that may become available for purposes of 
estimating the rates of uninsurance used in the calculation of the 
final Factor 2 for FY 2021.
    The calculation of the proposed Factor 2 for FY 2021 using a 
weighted average of the OACT's projections for CY 2020 and CY 2021 is 
as follows:
     Percent of individuals without insurance for CY 2013: 14 
percent.
     Percent of individuals without insurance for CY 2020: 9.5 
percent.
     Percent of individuals without insurance for CY 2021: 9.5 
percent.
     Percent of individuals without insurance for FY 2021 (0.25 
times 0.095) + (0.75 times 0.095): 9.5 percent.

1-[bond]((0.095-0.14)/0.14)[bond] = 1-0.3214 = 0.6786 (67.86 percent).

    For FY 2020 and subsequent fiscal years, section 1886(r)(2)(B)(ii) 
of the Act no longer includes any reduction to the previous 
calculation. Therefore, we are proposing that Factor 2 for FY 2021 
would be 67.86 percent.
    The proposed FY 2021 uncompensated care amount is 
$15,358,534,714.46x x 0.6786 = $7,816,726,242.92.
[GRAPHIC] [TIFF OMITTED] TP29MY20.177

    We are inviting public comments on our proposed methodology for 
calculating Factor 2 for FY 2021.
---------------------------------------------------------------------------

    \462\ Certification of Rates of Uninsured. April 3, 2020. 
Available at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInPatientPPS/dsh.html.
---------------------------------------------------------------------------

c. Calculation of Proposed Factor 3 for FY 2021
(1) General 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

[[Page 32752]]

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 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. 
Hospitals were on notice as of FY 2014 that Worksheet S-10 could 
eventually become the data source for CMS to calculate uncompensated 
care payments. Furthermore, hospitals' cost reports from FY 2014 had 
been publicly available for some time, and CMS had analyses of 
Worksheet S-10, conducted both internally and by stakeholders, 
demonstrating that Worksheet S-10 accuracy had improved over time. 
Analyses performed by MedPAC had already shown that the correlation 
between audited uncompensated care data from 2009 and the data from the 
FY 2011 Worksheet S-10 was over 0.80, as compared to a correlation of 
approximately 0.50 between the audited uncompensated care data and 2011 
Medicare SSI and Medicaid days. Based on this analysis, MedPAC 
concluded that use of Worksheet S-10 data was already better than using 
Medicare SSI and Medicaid days as a proxy for uncompensated care costs, 
and that the data on Worksheet S-10 would improve over time as the data 
are actually used to make payments (81 FR 25090). In addition, a 2007 
MedPAC analysis of data from the Government Accountability Office (GAO) 
and the American Hospital Association (AHA) had suggested that Medicaid 
days and low-income Medicare days are not an accurate proxy for 
uncompensated care costs (80 FR 49525).
    Subsequent analyses from Dobson/DaVanzo, originally commissioned by 
CMS for the FY 2014 rulemaking and updated in later years, compared 
Worksheet S-10 and IRS Form 990 data and assessed the correlation in 
Factor 3s derived from each of the data sources. Our analyses on 
balance 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

[[Page 32753]]

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 for 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.
    To address concerns raised by commenters regarding a lack of clear 
and concise line level instructions, CMS issued Transmittal 10, which 
clarified and revised the instructions for reporting charity care on 
Worksheet S-10. For a discussion of the revisions and clarifications 
included in Transmittal 10, we refer the reader to the FY 2020 IPPS/
LTCH PPS final rule (84 FR 42360). 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 modifying the calculations relative 
to uncompensated care costs and adding 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 applied 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. As discussed in 
more detail in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42360 and 
42361), we have also provided opportunities for hospitals to submit 
revisions to their Worksheet S-10 data for FY 2014 and FY 2015 cost 
reports.
    As discussed in the FY 2019 IPPS/LTCH PPS final rule (83 FR 41424), 
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 expected to begin audits of the 
Worksheet S-10 in the Fall of 2018. The audit protocol instructions 
were still under development at the time of the FY 2019 IPPS/LTCH PPS 
final rule; yet, we noted the audit protocols would be provided to the 
MACs in advance of the audit. Once the audit protocol instructions were 
complete, we began auditing the Worksheet S-10 data for selected 
hospitals in the Fall of 2018 so that the audited uncompensated care 
data from these hospitals would be available in time for use in the FY 
2020 IPPS/LTCH PPS proposed rule. The audits began with 1 year of data 
(that is, FY 2015 cost reports) in order to maximize the available 
audit resources and not spread those audit resources over multiple 
years, potentially diluting their effectiveness. We chose to begin the 
audits with the FY 2015 cost reports primarily because this was the 
most recent year of data that we had broadly allowed to be resubmitted 
by hospitals, and many hospitals had already made considerable efforts 
to amend their FY 2015 reports in preparation for the FY 2019 
rulemaking. We also considered that we had used the FY 2015 data as 
part of the calculation of the FY 2019 uncompensated care payments; 
therefore, the data had been subject to public comment and scrutiny.
(2) Background on the Methodology Used To Calculate Factor 3 for FY 
2020
    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

[[Page 32754]]

payment under section 1886(r) of the Act for such period. In the FY 
2014 IPPS/LTCH PPS final rule (78 FR 50638), we adopted a process of 
making interim payments with final cost report settlement for both the 
empirically justified Medicare DSH payments and the uncompensated care 
payments required by section 3133 of the Affordable Care Act. 
Consistent with that process, we also determined the time period from 
which to calculate the numerator and denominator of the Factor 3 
quotient in a way that would be consistent with making interim and 
final payments. Specifically, we must have Factor 3 values available 
for hospitals that we estimate will qualify for Medicare DSH payments 
and for those hospitals that we do not estimate will qualify for 
Medicare DSH payments but that may ultimately qualify for Medicare DSH 
payments at the time of cost report settlement.
    In the FY 2020 IPPS/LTCH PPS proposed rule (84 FR 19418 and 19419), 
we proposed to use audited FY 2015 data to calculate Factor 3 for FY 
2020. Given that we had conducted audits of the FY 2015 Worksheet S-10 
data and had previously used the FY 2015 data to determine 
uncompensated care payments, and the fact that the FY 2015 data were 
the most recent data that we had allowed to be resubmitted to date, we 
believed, on balance, that the FY 2015 Worksheet S-10 data were the 
best available data to use for calculating Factor 3 for FY 2020.
    In the FY 2020 IPPS/LTCH PPS proposed rule, we recognized that, for 
FY 2019, we used 3 years of data in the calculation of Factor 3 in 
order to smooth over anomalies between cost reporting periods and to 
mitigate undue fluctuations in the amount of uncompensated care 
payments from year to year. However, we stated that, for FY 2020, we 
believed mixing audited and unaudited data for individual hospitals by 
averaging multiple years of data could potentially lead to a less 
smooth result, which would be counter to our original goal in using 3 
years of data. As we stated in the FY 2020 IPPS/LTCH PPS proposed rule, 
to the extent that the audited FY 2015 data for a hospital are 
relatively different from its unaudited FY 2014 data and/or its 
unaudited FY 2016 data, we potentially would be diluting the effect of 
our considerable auditing efforts and introducing unnecessary 
variability into the calculation if we continued to use 3 years of data 
to calculate Factor 3. As an example, we noted that approximately 10 
percent of audited hospitals had more than a $20 million difference 
between their audited FY 2015 data and their unaudited FY 2016 data.
    Although we proposed to use the Worksheet S-10 data from the FY 
2015 cost reports to calculate Factor 3 for FY 2020, we acknowledged 
that some hospitals had raised concerns regarding some of the 
adjustments made to the FY 2015 cost reports following the audits of 
those cost reports (for example adjustments made to Line 22 of 
Worksheet S-10). In particular, hospitals had raised concerns regarding 
the instructions in effect for FY 2015, especially compared to the 
reporting instructions that were effective for cost reporting periods 
beginning on or after October 1, 2016, contending that some adjustments 
would not have been made if CMS had chosen as an alternative to audit 
the FY 2017 reports. Accordingly, we sought public comments on whether 
the changes in the reporting instructions between the FY 2015 cost 
reports and the FY 2017 cost reports had resulted in a better common 
understanding among hospitals of how to report uncompensated care costs 
and improved relative consistency and accuracy across hospitals in 
reporting these costs. We also sought public comments on whether, due 
to the changes in the reporting instructions, we should use a single 
year of uncompensated care cost data from the FY 2017 reports, instead 
of the FY 2015 reports, to calculate Factor 3 for FY 2020.
    In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42368), we finalized 
our proposal to use the FY 2015 Worksheet S-10 cost report data in the 
methodology for determining Factor 3 for FY 2020. Although some 
commenters expressed support for the alternative policy of using the FY 
2017 Worksheet S-10 data to determine each hospital's share of 
uncompensated care costs in FY 2020, given the feedback from commenters 
in response to both the FY 2019 and FY 2020 IPPS/LTCH PPS proposed 
rules, emphasizing the importance of audits in ensuring the accuracy 
and consistency of data reported on the Worksheet S-10, we concluded 
that the FY 2015 Worksheet S-10 data were the best available audited 
data to be used in determining Factor 3 for FY 2020. We also noted that 
we had begun auditing the FY 2017 data in July 2019, with the goal of 
having the FY 2017 audited data available for future rulemaking.
    With respect to the Worksheet S-10 data, we indicated our belief 
that the definition of uncompensated care adopted in FY 2018 was 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. Therefore, for 
purposes of calculating Factor 3 and uncompensated care costs for FY 
2020, we again defined ``uncompensated care'' 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).
    In the FY 2020 IPPS/LTCH PPS final rule, we continued to apply the 
following policies as part of the Factor 3 methodology: (1) The merger 
policies that were initially adopted in the FY 2015 IPPS/LTCH PPS final 
rule (79 FR 50020); (2) the policy for providers with multiple cost 
reports, beginning in the same fiscal year, of using the longest cost 
report and annualizing Medicaid data and uncompensated care data if a 
hospital's cost report does not equal 12 months of data; (3) the policy 
for the rare cases 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, of using the cost report that spans 
both fiscal years for the latter fiscal year; and (4) the policies 
regarding the application of statistical trim methodologies to 
potentially aberrant CCRs and potentially aberrant uncompensated care 
costs reported on the Worksheet S-10.
    In the FY 2020 IPPS/LTCH PPS final rule (84 FR 19419), we finalized 
a modified new hospital policy for new hospitals that did not have data 
for the cost reporting period(s) used in the Factor 3 calculation for 
FY 2020. Generally, new hospitals do not yet have available data to 
project their eligibility for DSH payments because there is a lag until 
the SSI ratio and Medicaid ratio become available. However, we noted 
that there are some hospitals (that is, hospitals with CCNs established 
after October 1, 2015) that have a preliminary projection of being 
eligible for DSH payments based on their most recent available 
disproportionate patient percentages. Under the modified policy adopted 
for FY 2020, new hospitals that are eligible for Medicare DSH may 
receive interim empirically justified DSH payments. However, because 
these hospitals do not have a FY 2015 cost report to use in the Factor 
3 calculation and the projection of eligibility for DSH payments is 
still preliminary, the MAC will make a final determination concerning 
whether the hospital is eligible to receive Medicare DSH payments at 
cost report settlement based on its FY 2020 cost report. If the

[[Page 32755]]

hospital is ultimately determined to be eligible for Medicare DSH 
payments for FY 2020, the hospital will 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 2020 cost report, and the denominator is the sum of the 
uncompensated care costs reported on Worksheet S-10 of the FY 2015 cost 
reports for all DSH-eligible hospitals. In the FY 2020 IPPS/LTCH PPS 
final rule, 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 in FY 2020.
    For a discussion of the policy that we finalized for FY 2020 for 
new Puerto Rico hospitals, we refer readers to the FY 2020 IPPS/LTCH 
PPS final rule (84 FR 42370 and 42371). In brief, Puerto Rico hospitals 
that do not have a FY 2013 cost report are considered new hospitals and 
subject to the new hospital policy, as previously discussed. 
Specifically, the numerator of the Factor 3 calculation will be the 
uncompensated care costs reported on Worksheet S-10 of the hospital's 
FY 2020 cost report and the denominator is the same denominator that is 
determined prospectively for purposes of determining Factor 3 for all 
DSH-eligible hospitals. We stated that we believe the discussion in the 
FY 2020 IPPS/LTCH PPS proposed rule of our intent to determine Factor 3 
for these hospitals using their uncompensated care costs gave new 
Puerto Rico hospitals sufficient time to take the steps necessary to 
ensure that their uncompensated care costs for FY 2020 are accurately 
reported on their FY 2020 Worksheet S-10. In addition, we indicated 
that we expect MACs to review FY 2020 reports from new hospitals, as 
necessary, which will address past commenters' concerns regarding the 
need for further review of Puerto Rico hospitals' uncompensated care 
data before these data are used to determine Factor 3.
    In the FY 2020 IPPS/LTCH PPS final rule (83 FR 42371), for Indian 
Health Service and Tribal hospitals, and subsection (d) Puerto Rico 
hospitals that have a FY 2013 cost report, we continued the policy we 
first adopted for FY 2018 of substituting data regarding FY 2013 low-
income insured days for the Worksheet S-10 data when determining Factor 
3. As we discussed in the FY 2018 IPPS/LTCH PPS final rule (82 FR 
38209), the use of data from Worksheet S-10 to calculate the 
uncompensated care amount for Indian Health Service and Tribal 
hospitals may jeopardize these hospitals' uncompensated care payments 
due to their unique funding structure. With respect to Puerto Rico 
hospitals that would not be subject to the new hospital policy, we 
indicated that we continued 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. 
Accordingly, for these hospitals, we determined Factor 3 based on 
Medicaid days from FY 2013 and the most recent update of SSI days. The 
aggregated amount of uncompensated care that is used in the Factor 3 
denominator for these hospitals continued to be based on the low-income 
patient proxy; that is, the aggregate amount of uncompensated care 
determined for all DSH-eligible hospitals using the low-income insured 
days proxy. We stated our belief that this approach was 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 addition, because we continued to use 1 year of insured 
low-income patient days as a proxy for uncompensated care for Puerto 
Rico hospitals and residents of Puerto Rico are not eligible for SSI 
benefits, we continued 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 2020, we computed Factor 3 for each hospital by--
    Step 1: Selecting the provider's longest cost report from its 
Federal fiscal year (FFY) 2015 cost reports. (Alternatively, in the 
rare case when the provider has no FFY 2015 cost report because the 
cost report for the previous Federal fiscal year spanned the FFY 2015 
time period, the previous Federal fiscal year cost report would be used 
in this step.)
    Step 2: Annualizing the uncompensated care costs (UCC) from 
Worksheet S-10 Line 30, if the cost report is more than or less than 12 
months. (If applicable, use the statewide average CCR (urban or rural) 
to calculate uncompensated care costs.)
    Step 3: Combining annualized uncompensated care costs for hospitals 
that merged.
    Step 4: Calculating Factor 3 for Indian Health Service and Tribal 
hospitals and Puerto Rico hospitals that have a FY 2013 cost report 
using the low-income insured days proxy based on FY 2013 cost report 
data and the most recent available SSI ratio (or, for Puerto Rico 
hospitals, 14 percent of the hospital's FY 2013 Medicaid days). 
(Alternatively, in the rare case when the provider has no FFY 
applicable cost report because the cost report for the previous Federal 
fiscal year spanned the time period, the previous Federal fiscal year 
cost report would be used in this step.) The denominator is calculated 
using the low-income insured days proxy data from all DSH eligible 
hospitals. Consistent with the policy adopted in the FY 2019 IPPS/LTCH 
PPS final rule, if a hospital did not have both Medicaid days for FY 
2013 and SSI days for FY 2017 available for use in the calculation of 
Factor 3 in Step 4, we considered the hospital not to have data 
available for Step 4.
    Step 5: Calculating Factor 3 for the remaining DSH eligible 
hospitals using annualized uncompensated care costs (Worksheet S-10 
Line 30) based on FY 2015 cost report data (from Step 3). The hospitals 
for which Factor 3 was calculated in Step 4 are excluded from this 
calculation.
    We amended the regulations at Sec.  412.106 by adding a new 
paragraph (g)(1)(iii)(C)(6) to reflect the methodology for computing 
Factor 3 for FY 2020.
(3) Proposed Methodology for Calculating Factor 3 for FY 2021 and 
Subsequent Fiscal Years
(a) Proposal To Use Audited FY 2017 Data To Calculate Factor 3 for FY 
2021
    Since the publication of the FY 2020 IPPS/LTCH PPS final rule, we 
have continued to monitor the reporting of Worksheet S-10 data in order 
to determine the most appropriate data to use in the calculation of 
Factor 3 for FY 2021. Audits of FY 2017 cost reports began in June 2019 
and those audited reports are now available, in time for the 
development of this proposed rule. Feedback from the audits of the FY 
2015 reports and lessons learned were incorporated into the audit 
process for the FY 2017 reports. We again chose to audit 1 year of data 
(that is, FY 2017) in order to maximize the available audit resources 
and not spread those audit resources over multiple years, potentially 
diluting their effectiveness.
    Given that the FY 2017 Worksheet S-10 data were submitted under the 
revised cost reporting instructions that were effective on October 1, 
2017, and we have also undertaken provider outreach regarding 
potentially aberrant data in FY 2017 reports and conducted audits of 
these data (84 FR 42371), we believe, on balance, that the FY 2017 
Worksheet S-10 data are the best available data to use for calculating

[[Page 32756]]

Factor 3 for FY 2021. For a detailed discussion of the cost reporting 
instruction changes between FY 2015 and FY 2017 reports, we refer the 
reader to the FY 2020 IPPS/LTCH PPS final rule (84 FR 42368 and 42369). 
For the reasons discussed in the FY 2020 IPPS/LTCH PPS proposed and 
final rules (84 FR 19419 and 84 FR 42364), we continue to believe that 
mixing audited and unaudited data for individual hospitals by averaging 
multiple years of data could potentially lead to a less smooth result. 
To the extent that the audited FY 2017 data for a hospital are 
relatively different from its FY 2015 data (whether audited or 
unaudited) and/or its unaudited FY 2016 data, we potentially would be 
diluting the effect of the revisions to the cost reporting instructions 
and our considerable auditing efforts, while introducing unnecessary 
variability into the calculation if we were to use multiple years of 
data to calculate Factor 3 for FY 2021. We recognize that the FY 2015 
reports include audited data for some hospitals, however, the FY 2017 
cost reports are the most recent year of audited data and, as 
previously discussed reflect the revisions to the Worksheet S-10 cost 
report instructions that were effective on October 1, 2017.
    Accordingly, we are proposing to use a single year of Worksheet S-
10 data from FY 2017 cost reports to calculate Factor 3 in the FY 2021 
methodology for all eligible hospitals with the exception of Indian 
Health Service (IHS) and Tribal hospitals and Puerto Rico hospitals. As 
discussed in a later section, we are proposing to continue to use the 
low-income insured days proxy to calculate Factor 3 for these hospitals 
for one more year. We note that the proposed uncompensated care 
payments to hospitals whose FY 2017 Worksheet S-10 data have been 
audited represent approximately 65 percent of the proposed total 
uncompensated care payments for FY 2021. For purposes of this FY 2021 
proposed rule, we have used a HCRIS extract updated through February 
19, 2020. We note that we intend to use the March 2020 update of HCRIS 
for the FY 2021 final rule and the respective March updates for all 
future final rules. However, we invite the public to submit comments on 
this intention regarding the use of the March update of HCRIS, and we 
may also consider the use of more recent data that may become available 
after March 2020, but prior to the development of the final rule, if 
appropriate, for purposes of calculating the final Factor 3 for 
purposes of the FY 2021 IPPS/LTCH PPS final rule.
(b) Proposal To Use Most Recent Available Single Year of Audited 
Worksheet S-10 Data To Calculate Factor 3 for All Subsequent Fiscal 
Years
    While the number of audited hospitals may change from year to year 
depending on audit experience and the availability of audit resources, 
we expect the Worksheet S-10 data for an increasing number of hospitals 
will be audited in future cost reporting years. As a result, we have 
confidence that the best available data in future years will be the 
Worksheet S-10 data for cost reporting years for which audits have been 
conducted. In addition, we believe that establishing a policy that 
would apply not only for FY 2021, but also for all subsequent fiscal 
years would help providers have greater predictability for planning 
purposes. Therefore, we are proposing that for FY 2022 and all 
subsequent fiscal years, we would use the most recent single year of 
cost report data that have been audited for a significant number of 
hospitals receiving substantial Medicare uncompensated care payments to 
calculate Factor 3 for all eligible hospitals, with the exception of 
Indian Health Service and Tribal hospitals. We note that we intend to 
consider the comments received on this proposed rule, and may revisit 
this proposal for FY 2022 and subsequent fiscal years either in the 
final rule or through future rulemaking.
    Given the unique nature of IHS and Tribal Hospitals and of the 
patient populations they serve, we believe it may be appropriate to 
restructure Medicare DSH payments and uncompensated care payments to 
these hospitals beginning in FY 2022. As discussed in prior rulemaking 
(for example, 82 FR 38188), the principal mission of the IHS is the 
provision of health care to American Indians and Alaska Natives 
throughout the United States. In carrying out that mission, IHS 
operates under two primary authorizing statutes. The first statute, the 
Snyder Act, authorizes IHS to expend such moneys as Congress may 
determine from time to time appropriate for the conservation of the 
health of American Indians or Alaska Natives. We refer readers to 25 
U.S.C. 13 (providing that the Bureau of Indian Affairs (BIA) will 
expend funds as appropriated for, among other things, the conservation 
of health of American Indians and Alaska Natives); and 42 U.S.C. 
2001(a) (transferring the responsibility for American Indian and Alaska 
Native health care from BIA to HHS). The second statute, the Indian 
Health Care Improvement Act (IHCIA), established IHS as an agency 
within the Public Health Service of HHS and provides authority for 
numerous programs to address particular health initiatives for American 
Indians and Alaska Natives, such as alcohol and substance abuse and 
diabetes (25 U.S.C. 1601 et seq.). IHS and Tribal hospitals are charged 
with addressing the health of American Indians and Alaska Natives and 
are uniquely situated to provide services to this population.
    When Congress was considering reductions to the Medicare DSH 
payments and the creation of the Medicare uncompensated care payments 
under section 3133 the Affordable Care Act, one significant source of 
available information was the analysis done by the Medicare Payment 
Advisory Commission (MedPAC) in its March 2007 Report to the Congress. 
We note that section 1886(r)(1) of the Act explicitly refers to this 
March 2007 Report to Congress as the basis for reducing DSH payments to 
25 percent of the amount that would otherwise be paid under section 
1886(d)(5)(F) of the Act. We have reviewed MedPAC's analysis in the 
March 2007 Report to Congress and it is not apparent that MedPAC was 
focused on the unique aspects of IHS and Tribal hospitals described 
above when developing its recommendations for possible changes to DSH 
payments. Rather, it appears that MedPAC's analysis was focused on 
broader underlying issues and hospitals more generally.
    Given the unique nature of IHS and Tribal hospitals, and the fact 
that we do not believe that the DSH analysis available to Congress at 
the time section 3133 of the Affordable Care Act was being developed 
was focused on the specific circumstances of these hospitals, we 
believe it may be appropriate, beginning in FY 2022, to use our 
authority under section 1886(d)(5)(I)(i) of the Act to create an 
exception for IHS and Tribal hospitals from Medicare DSH payments under 
1886(d)(5)(F), as amended by section 3133 of the Affordable Care Act. 
This exception would also have the consequence that IHS and Tribal 
hospitals would be excluded from the calculation of Medicare 
uncompensated care payments under 1886(r). Concurrently, we believe it 
may be appropriate to use our authority under section 1886(d)(5)(I)(i) 
to adjust payments to IHS and Tribal hospitals through the creation of 
a new IHS and Tribal hospital Medicare DSH payment. The methodology for 
determining this IHS and Tribal hospital Medicare DSH payment would 
mirror the calculation of the Medicare DSH payment under

[[Page 32757]]

1886(d)(5)(F) except that the payment would be determined at 100 
percent of the calculated amount rather than 25 percent of the 
calculated amount as required under section 3133 of the Affordable Care 
Act. We seek comment on this potential restructuring of the Medicare 
DSH and uncompensated care payments to IHS and Tribal hospitals 
beginning in FY 2022. We also intend to consider input received on this 
issue through consultation with IHS and Tribal hospitals.
(c) Proposed Definition of ``Uncompensated Care''
    We continue to believe that the definition of ``uncompensated 
care'' first adopted in FY 2018 when we started to incorporate data 
from Worksheet S-10 into the determination of Factor 3 and that was 
used again in both FY 2019 and FY 2020 is appropriate, as it 
incorporates the most commonly used factors within uncompensated care 
as reported by stakeholders, namely, charity care costs and bad debt 
costs, and correlates to Line 30 of Worksheet S-10. Therefore, we are 
proposing that, for purposes of determining uncompensated care costs 
and calculating Factor 3 for FY 2021 and subsequent fiscal years, 
``uncompensated care'' would continue to 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 refer readers to the FY 2020 IPPS/LTCH PPS rule (84 
FR 42369 and 42370), for a detailed discussion of additional topics 
related to definition of uncompensated care.
    In the FY 2020 IPPS/LTCH PPS final rule, we stated that, we would 
attempt to address commenters' concerns regarding the Worksheet S-10 
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. (84 FR 42370). We note that the Paper Reduction Act (PRA) 
package for Form CMS-2552-10 (OMB Control Number 0938-0050, expiration 
date March 31, 2022) offers an additional opportunity to comment on the 
cost reporting instructions. For further information regarding PRA, we 
refer the reader to the CMS website at: https://www.cms.gov/Regulations-and-Guidance/Legislation/PaperworkReductionActof1995.
(d) Proposed Changes to the Methodology for Calculating Factor 3 for FY 
2021 and Subsequent Fiscal Years
    The proposed changes to the methodology for calculating Factor 3 
include the following:
 Merger Multiplier for Acquired Hospital Data
    In the FY 2015 IPPS/LTCH PPS final rule, we defined a merger as an 
acquisition where the Medicare provider agreement of one hospital is 
subsumed into the provider agreement of the surviving provider (79 FR 
50020). In that final rule, we adopted a policy for calculating Factor 
3 for hospitals that undergo a merger during or after the time period 
of the data that is used in the Factor 3 calculations, as well as a 
separate policy for a merger that occurs after the development of the 
final rule for the applicable fiscal year. A proposed policy for newly 
merged hospitals is discussed in the next section. In the FY 2019 IPPS/
LTCH PPS final rule, we finalized a policy for determining the 
uncompensated care costs of hospitals that have multiple cost reporting 
periods starting in the same fiscal year of using the longest cost 
report beginning in the applicable fiscal year and annualizing the 
uncompensated care data if a hospital's cost report does not equal 12 
months of data (83 FR 41427). This policy applied for all hospitals, 
including those involved in a merger. However, taking into 
consideration past comments regarding mergers, including comments on 
the FY 2019 IPPS/LTCH PPS proposed rule which suggested that we not 
annualize the uncompensated care costs data provided in short cost 
reporting periods for acquired hospitals because their uncompensated 
care costs for the remaining part of year are included in the new 
combined hospital's cost report (83 FR 41427), we are proposing to 
modify the annualization policy that was finalized in FY 2019 with 
respect to merged hospitals.
    We note that for most mergers, the effective date of the merger 
coincides with the cost reporting end date for the hospital that is 
being acquired. In effect, this means that the FY 2015 merger policy of 
combining uncompensated care costs (UCC) across CCNs results in adding 
together data reported on the cost report for two different CCNs (the 
acquired hospital and the surviving hospital) to estimate the merged 
hospital's post-merger total UCC. For mergers with a recent merger 
effective date, such as a merger in Federal fiscal year 2019 (that is, 
a merger after the period of the FY 2017 cost reports we are proposing 
to use for the Factor 3 calculation), we continue to believe the 
current policy of annualizing and combining across historical cost 
reports produces the best available estimate for post-merger total UCC. 
For example, if the acquired hospital's FY 2017 cost report includes 
less than 12 months of data, we would annualize the data to reflect a 
full 12 months of data. Similarly, in this example, if the surviving 
hospital's cost report includes less than 12 months of data, we would 
annualize its uncompensated care data. However, as discussed below, we 
are proposing a modification to this policy when the merger effective 
date occurs partway through the surviving hospital's cost reporting 
period.
    In some mergers, the merger effective date does not coincide with 
the start date for the surviving hospital's cost reporting period. When 
the merger effective date does not coincide with the start date of the 
surviving hospital's cost reporting period, the policy of annualizing 
the acquired hospital's data before combining data across hospital cost 
reports could substantially overestimate the acquired hospital's UCC, 
given that the surviving hospital's cost report reflects the UCC 
incurred by the acquired hospital during the portion of the year after 
the merger effective date. In other words, when the merger effective 
date is partway through the surviving hospital's cost reporting period, 
annualizing acquired hospital's data may double-count UCC for the 
portion of the year that overlaps with the remainder of the surviving 
hospital's cost reporting period.
    Accordingly, when the merger effective date occurs partway through 
the surviving hospital's cost reporting period, to more accurately 
estimate UCC for the hospitals involved in a merger, we are proposing 
not to annualize the acquired hospital's data. Further, we are 
proposing to use only the portion of the acquired hospital's 
unannualized UCC data that reflects the UCC incurred prior to the 
merger effective date, but after the start of the surviving hospital's 
current cost reporting period. Specifically, we are proposing to 
calculate a multiplier to be applied to an acquired hospital's UCC when 
the merger effective date occurs partway through the surviving 
hospital's cost reporting period. This multiplier will represent the 
portion of the UCC data from the acquired hospital that should be 
incorporated with the surviving hospital's data to determine UCC for 
purposes of determining Factor 3 for the surviving hospital. This 
multiplier is obtained by calculating the number of days between the 
start of the

[[Page 32758]]

applicable cost reporting period for the surviving hospital and the 
merger effective date, and then dividing this result by the total 
number of days in the reporting period of the acquired hospital. 
Applying this multiplier to the acquired hospital's unannualized UCC 
data will determine the final portion of the acquired hospital's UCC 
that should be added to that of the surviving hospital for purposes of 
determining Factor 3.
    As an example, if the cost reporting period start dates of the 
acquired and surviving hospitals align and a merger occurs halfway 
through the surviving hospital's cost reporting period (for example, 
the hospital's fiscal year), then ultimately, the cost report for the 
surviving hospital for that fiscal year would already reflect half a 
year of the acquired hospital's UCC (because the merger occurred 
halfway through the surviving hospital's cost reporting period and the 
UCC data reported by the surviving hospital incorporate any UCC 
incurred by the acquired hospital during the second half of the fiscal 
year). For illustrative purposes, consider that the cost reporting 
period start dates of the acquired and surviving hospitals are 10/01/
2016; the cost reporting period end date of the acquired hospital is 
06/30/2017; and the merger acquisition date is 07/01/2017. Thus, there 
are 273 days between the start of the cost reporting period of the 
surviving hospital and the merger effective date, and the cost 
reporting period of the acquired hospital is 273 days. The multiplier, 
as previously defined, would be 1 (273 days divided by 273 days) and 
all of the acquired hospital's unannualized UCC data for the period 10/
01/2016 to 06/30/2017 would be added to that of the surviving hospital 
for purposes of calculating Factor 3 for FY 2021. It is not necessary 
to annualize the acquired hospital's data from its short cost report, 
because the UCC incurred by the acquired hospital for the remainder of 
the surviving hospital's fiscal year post-merger (07/01/2017 to 09/30/
2017) are already included in the UCC data reported by the surviving 
hospital for the cost reporting period ending on 09/30/2017.
    As another example, assume the merger effective date is the same as 
the start date for the surviving hospital's cost reporting period and 
the surviving hospital's cost reporting period is 12 months long. In 
this example, we believe it would not be necessary to combine 
uncompensated care costs across multiple cost reports, because the 
surviving hospital's cost report already reflects 12 months of 
uncompensated care costs for the merged hospital. In this example, the 
multiplier would be 0 because there are 0 days between the start of the 
surviving hospital's cost reporting period and the merger effective 
date, and there would be no need to combine data from the acquired 
hospital given that the surviving hospital's cost report reflects all 
post-merger UCC data for the acquired hospital.
 Newly Merged Hospitals
    We propose to continue to treat hospitals that merge after the 
development of the final rule similar to new hospitals. As explained in 
the FY 2015 IPPS/LTCH PPS final rule, for these newly merged hospitals, 
we do not have data currently available to calculate a Factor 3 amount 
that accounts for the merged hospital's uncompensated care burden (79 
FR 50021). In the FY 2015 IPPS/LTCH PPS final rule, we finalized a 
policy under which Factor 3 for hospitals that we do not identify as 
undergoing a merger until after the public comment period and 
additional review period following the publication of the final rule or 
that undergo a merger during the fiscal year would be recalculated 
similar to new hospitals (79 FR 50021 and 50022).
    Consistent with the policy adopted in the FY 2015 IPPS/LTCH PPS 
final rule, we are proposing to treat newly merged hospitals in a 
similar manner as new hospitals, such that the newly merged hospital's 
final uncompensated care payment would be determined at cost report 
settlement where the numerator of the newly merged hospital's Factor 3 
would be based on the cost report of only the surviving hospital (that 
is, the newly merged hospital's cost report) for the current fiscal 
year. However, if the hospital's cost reporting period includes less 
than 12 months of data, we propose that the newly merged hospital's 
cost report's data would be annualized for purposes of the Factor 3 
calculation. We note that we are not proposing that the multiplier 
calculation discussed previously would be used, as that would only be 
necessary for estimating post-merger data using historical reports. The 
acquired hospital's uncompensated care payment for the fiscal year 
during which the merger occurs would be determined using the 
prospectively determined Factor 3 amount for the acquired hospital and 
then pro rated, if applicable. We refer the reader to the detailed 
discussion in the FY 2015 IPPS/LTCH PPS rule regarding the calculation 
of pro rata uncompensated care payments (79 FR 50151 through 50153).
    Consistent with past policy, we also are proposing that the interim 
uncompensated care payments for the newly merged hospital would be 
based only on the data for the surviving hospital's CCN available the 
time of the development of the final rule. In other words, for FY 2021, 
eligibility for a newly merged hospital to receive interim 
uncompensated care payments and the amount of any interim uncompensated 
care payments, would be based only on the FY 2017 cost report available 
for the surviving CCN at the time the final rule is developed. However, 
at cost report settlement, we would determine the newly merged 
hospital's final uncompensated care payment based on the uncompensated 
care costs reported on its FY 2021 cost report. That is, we would 
revise the numerator of Factor 3 for the newly merged hospital to 
reflect the uncompensated care costs reported on the newly merged 
hospital's FY 2021 cost report.
 Annualization and Long Cost Reports
    We are proposing to continue the policy that was finalized in the 
FY 2018 IPPS/LTCH PPS final rule of annualizing uncompensated care cost 
data reported on the Worksheet S-10 if a hospital's cost report does 
not equal 12 months of data, except in the case of mergers, which would 
be subject to the proposed modified merger policy previously discussed. 
In addition, we are proposing to continue the policies that were 
finalized in the FY 2019 IPPS/LTCH final rule (83 FR 41415) regarding 
the use of the longest cost report available within the Federal fiscal 
year. However, we are proposing to modify our current policy for those 
rare situations where a hospital has a cost report that starts in one 
fiscal year but spans the entirety of the following fiscal year such 
that the hospital has no cost report starting in that subsequent fiscal 
year. Under this proposal, we would use the cost report that spans both 
fiscal years for purposes of calculating Factor 3 when data for the 
latter fiscal year is used in the Factor 3 methodology. The current 
policy for this rare situation includes the criterion that the hospital 
have multiple cost reports beginning in the same fiscal year. However, 
we no longer believe this is a necessary condition, given that we have 
identified some hospitals that have no FY 2017 cost report, but that 
only have one FY 2016 cost report, which spans the entire FY 2017 
period.
 New Hospital for Purposes of Factor 3
    We are proposing to continue the new hospital policy that was 
finalized in the FY 2020 IPPS/LTCH PPS final rule.

[[Page 32759]]

Specifically, for new hospitals that do not have an FY 2017 cost report 
to use in the Factor 3 calculation (that is, hospitals with CCNs 
established on or after October 1, 2017) that may have a preliminary 
projection of being eligible for DSH payments based on their most 
recent available disproportionate patient percentage, we are proposing 
that the MAC would make a final determination concerning whether the 
hospital is eligible to receive Medicare DSH payments at cost report 
settlement based on its FY 2021 cost report. If the hospital is 
ultimately determined to be eligible for Medicare DSH payments for FY 
2021, the hospital would 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 2021 cost 
report, and the denominator is the sum of the uncompensated care costs 
reported on Worksheet S-10 of the FY 2017 cost reports for all DSH-
eligible hospitals. This denominator would be the same denominator that 
is determined prospectively for purposes of determining Factor 3 for 
all DSH-eligible hospitals, with the exception of Puerto Rico hospitals 
and IHS and Tribal hospitals. The new hospital would not receive 
interim uncompensated care payments before cost report settlement 
because we would have no FY 2017 uncompensated care data on which to 
determine what those interim payments should be.
 IHS and Tribal Hospitals
    For the reasons discussed in the FY 2018 IPPS/LTCH PPS final rule 
(82 FR 38209), we continue to recognize that the use of data from 
Worksheet S-10 to calculate the uncompensated care amount for IHS and 
Tribal hospitals for FY 2021 may jeopardize these hospitals' payments 
due to their unique funding structure. Prior to this proposed 
rulemaking for FY 2021, CMS consulted with IHS and Tribal hospitals 
regarding Worksheet S-10 uncompensated care reporting as well as any 
potential barriers under the current cost reporting instructions to 
reporting by IHS and Tribal hospitals on Worksheet S-10. During the 
consultation, representatives of some hospitals indicated that it was 
not clear to them that they could submit Worksheet S-10 data given the 
historical use of the low-income patient proxy when determining Factor 
3 for these hospitals. CMS reiterated that the use of low-income 
patient proxy when determining Factor 3 does not preclude the 
submission of Worksheet S-10 data by these hospitals. CMS explained 
that IHS and Tribal Hospitals should be aware of and comply with the 
instructions and requirements for the submission of Worksheet S-10 
data. For an overview of the instructions and requirements, one source 
is the MLN Matters[supreg] Special Edition article ``Updates to 
Medicare's Cost Report Worksheet S-10 to Capture Uncompensated Care 
Data'' that was released on September 29, 2017 and is available on the 
CMS website at https://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNMattersArticles/Downloads/SE17031.pdf. Another 
source of information is the ``Worksheet S-10--Hospital Uncompensated 
and Indigent Care Data Following 2018 IPPS Final Rule Questions and 
Answers'' that is also available on the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Downloads/Worksheet-S-10-UCC-QandAs.pdf. As discussed 
previously in this section, CMS continues to consider the feedback 
provided during IHS and Tribal consultation for purposes of determining 
what policies should apply with respect to DSH and uncompensated care 
payments to IHS and Tribal hospitals in future years. We also seek 
comment on this issue to assist future rulemaking. We also note that 
the Paper Reduction Act (PRA) package for Form CMS 2552-10 will be an 
additional opportunity for comments on the Worksheet S-10 instructions.
    Therefore, for IHS and Tribal hospitals that have a FY 2013 cost 
report, we are proposing to continue the policy first adopted for the 
FY 2018 rulemaking regarding the low-income patient proxy. 
Specifically, for FY 2021 we are proposing to determine Factor 3 for 
these hospitals based on Medicaid days for FY 2013 and the most recent 
update of SSI days. The aggregate amount of uncompensated care that is 
used in the Factor 3 denominator for these hospitals would continue to 
be based on the low-income patient proxy; that is, the aggregate amount 
of uncompensated care determined for all DSH eligible hospitals using 
the low-income insured days proxy. We continue to believe this approach 
is appropriate because the FY 2013 data reflect the most recent 
available information regarding these hospitals' Medicaid days before 
any expansion of Medicaid. At the time of development of this proposed 
rule, for modeling purposes, we computed Factor 3 for these hospitals 
using FY 2013 Medicaid days from a HCRIS extract updated through 
February 19, 2020, and the most recent available FY 2018 SSI days.
 Puerto Rico Hospitals
    With respect to Puerto Rico hospitals, we considered calculating 
their Factor 3 amounts for FY 2021 using the same methodology we are 
proposing for hospitals other than IHS and Tribal hospitals. However, 
we concluded that the recent natural disasters in Puerto Rico may 
negatively impact the ability of these hospitals to engage in the FY 
2021 rulemaking on the particular issue of the data to be used to 
determine Factor 3 for Puerto Rico hospitals, while simultaneously 
focusing on ensuring that their FY 2018 uncompensated care Worksheet S-
10 data is accurately reported and available for use in calculating FY 
2022 Medicare uncompensated care payments consistent with our proposed 
approach for FY 2022 and subsequent fiscal years.
    Accordingly, for FY 2021 we are proposing to determine Factor 3 for 
Puerto Rico hospitals that have a FY 2013 cost report based on the low-
income patient proxy. We would determine Factor 3 for these hospitals 
based on Medicaid days for FY 2013 and the most recent update of SSI 
days. The aggregate amount of uncompensated care that is used in the 
Factor 3 denominator for these hospitals would continue to be based on 
the low-income patient proxy; that is, the aggregate amount of 
uncompensated care determined for all DSH eligible hospitals using the 
low-income insured days proxy. We continue to believe the use of FY 
2013 data in determining the low-income insured days proxy is 
appropriate because the FY 2013 data reflect the most recent available 
information regarding these hospitals' Medicaid days before any 
expansion of Medicaid. At the time of development of the proposed rule, 
for modeling purposes, we computed Factor 3 for these hospitals using 
FY 2013 Medicaid days from a recent HCRIS extract and the most recent 
available FY 2018 SSI days. In addition, because we are proposing to 
continue to use 1 year of insured low-income patient days as a proxy 
for uncompensated care for Puerto Rico hospitals and residents of 
Puerto Rico are not eligible for SSI benefits, we are proposing to 
continue to use a proxy for SSI days for Puerto Rico hospitals, 
consisting of 14 percent *COM007*of a hospital's Medicaid days, as 
finalized in the FY 2017 IPPS/LTCH PPS final rule (81 FR 56953 through 
56956).
 All-Inclusive Rate Providers
    In FY 2018 IPPS/LTCH PPS final rule (82 FR 38218), we indicated 
that we would further explore which trims are

[[Page 32760]]

appropriate to apply to the CCRs on Line 1 of Worksheet S-10, including 
whether it is appropriate to apply a unique trim to certain subsets of 
hospitals, such as all-inclusive rate providers. We noted that all-
inclusive rate providers have the ability to compute and enter their 
appropriate CCR on Worksheet S-10, Line 1, by answering Yes to the 
question on Worksheet S-2, Part I, Line 115, and not have it computed 
using information from Worksheet C, Part I. We stated that we would 
give more consideration to the utilization of statewide averages in 
substituting outlier CCRs, and that we intended to consider other 
approaches that would ensure validity of the trim methodology and not 
penalize hospitals that use alternative methods of cost apportionment 
in future rulemaking. In the FY 2020 IPPS/LTCH PPS proposed rule (84 FR 
19420), we stated that we had examined the CCRs from the FY 2015 cost 
reports and believed the risk that all-inclusive rate providers will 
have aberrant CCRs and, consequently, aberrant uncompensated care data, 
was mitigated by the proposal to apply the trim methodology for 
potentially aberrant uncompensated care costs to all hospitals.
    In preparation for the FY 2021 rulemaking, we conducted a review of 
the CCRs from the FY 2017 cost reports from all-inclusive rate 
providers (AIRPs) and determined that in rare situations they may 
include a potentially aberrant CCR (Worksheet S-10 line 1) which 
results in a ratio of total UCC to total operating costs of greater 
than 50 percent. For FY 2021, we continue to believe that all-inclusive 
rate providers should be excluded from the CCR trim methodology because 
all-inclusive rate providers have alternative methods of cost 
apportionment that are different from those used in the standard CCR 
calculation. However, in order to ensure that we are able to calculate 
a reasonable estimate of the hospital's FY 2017 UCC, we are proposing 
to modify the potentially aberrant UCC trim methodology when it is 
applied to all-inclusive rate providers. Specifically, we are proposing 
that when an AIRP's total UCC are greater than 50 percent of its total 
operating costs when calculated using the CCR included on its FY 2017 
cost report, we would recalculate UCC using the CCR reported on 
Worksheet S-10, line 1 of the hospital's most recent available prior 
year cost report that would not result in UCC of over 50 percent of 
total operating costs. That is, we would apply the CCR from Worksheet 
S-10 line 1 of that prior cost report to the data reported on Worksheet 
S-10 of the FY 2017 cost report. For purposes of this proposed rule, we 
identified a few AIRPs that have UCC in excess of 50 percent of their 
total operating costs. For these hospitals, we used the CCR from 
Worksheet S-10, line 1 of their FY 2015 cost report in place of the CCR 
reported on Worksheet S-10, line 1 of their FY 2017 cost report, in 
order to re-calculate their UCC. We believe this approach produces a 
more accurate estimate of the AIRP's UCC for purposes of determining 
Factor 3, while continuing to reflect the information on uncompensated 
care included in the AIRP's FY 2017 cost report, which for the reasons 
discussed previously we believe is the most appropriate data to be used 
in determining Factor 3 for FY 2021.
 Proposed CCR Trim Methodology
    The calculation of a hospital's total uncompensated care costs on 
Worksheet S-10 requires the use of the hospital's cost to charge ratio 
(CCR). Similar to the process used in the FY 2018 IPPS/LTCH PPS final 
rule (82 FR 38217 through 38218), the FY 2019 IPPS/LTCH PPS final rule 
(83 FR 41415 and 41416), and the FY 2020 IPPS/LTCH PPS final rule (84 
FR 42372) for trimming CCRs, we are proposing the following steps to 
determine the applicable CCR:
    Step 1: Remove Maryland hospitals. In addition, we would remove 
all-inclusive rate providers because their CCRs are not comparable to 
the CCRs calculated for other IPPS hospitals.
    Step 2: For FY 2017 cost reports, 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 
fiscal year is not necessary, 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 purposes of this 
proposed rule, this trim would remove 12 hospitals that have a CCR 
above the calculated ceiling of 0.937 for FY 2017 cost reports.)
    Step 3: Using the CCRs for the remaining hospitals in Step 2, 
determine the urban and rural statewide average CCRs for FY 2017 for 
hospitals within each State (including non-DSH eligible hospitals), 
weighted by the sum of total hospital discharges from Worksheet S-3, 
Part I, Line 14, Column 15. (We note that this is not a change from the 
methodology used in past years. In past rules, we inadvertently 
referred to Column 14, rather than Column 15.)
    Step 4: Assign the appropriate statewide average CCR (urban or 
rural) calculated in Step 3 to all hospitals, excluding all-inclusive 
rate providers, with a CCR for FY 2017 greater than 3 standard 
deviations above the national geometric mean for that fiscal year (that 
is, the CCR ``ceiling''). For this proposed rule, the statewide average 
CCR would apply to 12 hospitals, of which 4 hospitals have FY 2017 
Worksheet S-10 data.
    Step 5: For providers that did not report a CCR on Worksheet S-10, 
Line 1, we would assign them the statewide average CCR as determined in 
step 3.
    After completing the above steps, we propose to re-calculate the 
hospital's uncompensated care costs (Line 30) using the trimmed CCR 
(the statewide average CCR (urban or rural, as applicable)).
 Uncompensated Care Data Trim Methodology
    After applying the CCR trim methodology, we note that there are 
rare situations where a hospital has potentially aberrant data that are 
unrelated to CCR. Therefore, we are proposing to continue the trim 
methodology for potentially aberrant UCC that was finalized in the FY 
2019 and FY 2020 IPPS/LTCH PPS final rules. That is, if the hospital's 
uncompensated care costs for FY 2017 are an extremely high ratio 
(greater than 50 percent) of its total operating costs, we propose to 
determine the ratio of uncompensated care costs to the hospital's total 
operating costs from another available cost report, and to apply that 
ratio to the total operating expenses for the potentially aberrant 
fiscal year to determine an adjusted amount of uncompensated care 
costs. Specifically, if the FY 2017 cost report is determined to 
include potentially aberrant data, we are proposing that data from the 
FY 2018 cost report would be used for the ratio calculation. Thus, the 
hospital's uncompensated care costs for FY 2017 would be trimmed by 
multiplying its FY 2017 total operating costs by the ratio of 
uncompensated care costs to total operating costs from the hospital's 
FY 2018 cost report to calculate an estimate of the hospital's

[[Page 32761]]

uncompensated care costs for FY 2017 for purposes of determining Factor 
3 for FY 2021.
    However, because we have audited the FY 2017 Worksheet S-10 data 
for a number of hospitals, we believe it is necessary to modify the UCC 
data trim methodology for hospitals whose FY 2017 cost report has been 
audited. Because the UCC data for these hospitals have been subject to 
audit, we believe there is increased confidence that if high 
uncompensated care costs are reported by these audited hospitals, the 
information is accurate. Therefore, we no longer believe it is 
necessary to apply the trim methodology for these audited hospitals. 
That is, we would exclude hospitals that were part of the audits from 
the trim methodology for potentially aberrant UCC. For those hospitals 
that do not have audited Worksheet S-10 data, we propose to continue to 
apply the trim methodology as previously described.
 Summary of Proposed Methodology
    In summary, for FY 2021, we are proposing to compute Factor 3 for 
each hospital using the following steps--
    Step 1: Select the provider's longest cost report from its Federal 
fiscal year (FFY) 2017 cost reports. (Alternatively, in the rare case 
when the provider has no FFY 2017 cost report because the cost report 
for the previous Federal fiscal year spanned the FFY 2017 time period, 
the previous Federal fiscal year cost report would be used in this 
step.)
    Step 2: Annualize the uncompensated care costs (UCC) from Worksheet 
S-10 Line 30, if the cost report is more than or less than 12 months. 
(If applicable, use the statewide average CCR (urban or rural) to 
calculate uncompensated care costs.)
    Step 3: Combine adjusted and/or annualized uncompensated care costs 
for hospitals that merged using the proposed merger policy, discussed 
earlier.
    Step 4: Calculate Factor 3 for Indian Health Service and Tribal 
hospitals and Puerto Rico hospitals using the low-income insured days 
proxy based on FY 2013 cost report data and the most recent available 
SSI ratio (or, for Puerto Rico hospitals, 14 percent of the hospital's 
FY 2013 Medicaid days). The denominator is calculated using the low-
income insured days proxy data from all DSH eligible hospitals.
    Step 5: Calculate Factor 3 for the remaining DSH eligible hospitals 
using annualized uncompensated care costs (Worksheet S-10 Line 30) 
based on FY 2017 cost report data (from Step 1, 2 or 3). The hospitals 
for which Factor 3 was calculated in Step 4 are excluded from this 
calculation.
    We are proposing to amend the regulation at Sec.  412.106 by adding 
a new paragraph (g)(1)(iii)(C)(7) to reflect the proposed methodology 
for computing Factor 3 for FY 2021. We are also proposing to add a new 
paragraph (g)(1)(iii)(C)(8) to reflect the proposal for all subsequent 
fiscal years to use the most recent available single year of audited 
Worksheet S-10 data to calculate Factor 3 for all eligible hospitals, 
except IHS and Tribal hospitals.
(e) Proposals Related to the per Discharge Amount of Interim 
Uncompensated Care Payments
    Consistent with the policy adopted in FY 2014 and applied in each 
subsequent fiscal year, we are proposing to use a 3-year average of the 
number of discharges for a hospital to produce an estimate of the 
amount of the uncompensated care payment per discharge. Specifically, 
the hospital's total uncompensated care payment amount, is divided by 
the hospital's historical 3-year average of discharges computed using 
the most recent available data. The result of that calculation is a per 
discharge payment amount that will be used to make interim 
uncompensated care payments to each projected DSH eligible hospital. 
The interim uncompensated care payments made to the hospital during the 
fiscal year are reconciled following the end of the year to ensure that 
the final payment amount is consistent with the hospital's 
prospectively determined uncompensated care payment for the Federal 
fiscal year.
    In response to our proposal in the FY 2020 IPPS/LTCH PPS proposed 
rule to continue to determine interim uncompensated care payments using 
a 3-year average of discharges, we received a comment expressing 
concern that discharge growth discrepancies create the risk of 
overpayments of interim uncompensated care payments and unstable cash 
flows for CMS, hospitals, and MA plans (84 FR 42373). Taking the 
commenter's concerns into consideration, for FY 2021, we are proposing 
a voluntary process through which a hospital may submit a request to 
its Medicare Administrative Contractor (MAC) for a lower per discharge 
interim uncompensated care payment amount, including a reduction to 
zero, once before the beginning of the Federal fiscal year and/or once 
during the Federal fiscal year. In conjunction with this request, the 
hospital would be required to provide supporting documentation 
demonstrating there would likely be a significant recoupment (for 
example, 10 percent or more of the hospital's total uncompensated care 
payment or at least $100,000) at cost report settlement if the per 
discharge amount were not lowered. For example, a hospital might submit 
documentation showing a large projected increase in discharges during 
the fiscal year to support reduction of its per discharge uncompensated 
care payment amount. As another example, a hospital might request that 
its per discharge uncompensated care payment amount be reduced to zero 
midyear if the hospital's interim uncompensated care payments during 
the year have already surpassed the total uncompensated care payment 
calculated for the hospital.
    We are proposing that the hospital's MAC would evaluate these 
requests and the supporting documentation before the beginning of the 
Federal fiscal year and/or with midyear requests when the 3-year 
average of discharges is lower than hospital's projected FY 2021 
discharges. If following review of the request and the supporting 
documentation, the MAC agrees that there likely would be significant 
recoupment of the hospital's interim Medicare uncompensated care 
payments at cost report settlement, the only change that would be made 
would be to lower the per discharge amount either to the amount 
requested by the hospital or another amount determined by the MAC to be 
appropriate to reduce the likelihood of a substantial recoupment at 
cost report settlement. No change would be made to the total 
uncompensated care payment amount determined for the hospital on the 
basis of its Factor 3. In other words, this proposal does not change 
how the total uncompensated care payment amount will be reconciled at 
cost report settlement.
(f) Process for Notifying CMS of Merger Updates and To Report Upload 
Issues
    As we have done for every proposed and final rule beginning in FY 
2014, in conjunction with both the FY 2021 IPPS/LTCH PPS proposed rule 
and final rule, we will 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 2021 (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

[[Page 32762]]

determined at cost report settlement. We note that, at the time of 
development of the proposed rule, the FY 2018 SSI ratios were 
available. Accordingly, for purposes of the proposed rule, we computed 
Factor 3 for Indian Health Service and Tribal hospitals and Puerto Rico 
hospitals using the most recent available data regarding SSI days from 
the FY 2018 SSI ratios.
    We also will publish a supplemental data file containing a list of 
the mergers that we are aware of and the computed uncompensated care 
payment for each merged hospital.
    Hospitals have 60 days from the date of public display of this FY 
2021 IPPS/LTCH PPS proposed rule to review the table and supplemental 
data file published on the CMS website in conjunction with this 
proposed rule and to notify CMS in writing of issues related to mergers 
and/or to report potential upload discrepancies due to MAC mishandling 
of the Worksheet S-10 data during the report submission process (for 
example, report not reflecting audit results due to MAC mishandling or 
most recent report differs from previously accepted amended report due 
to MAC mishandling). Comments raising issues that are specific to the 
information included in the table and supplemental data file can be 
submitted to the CMS DSH inbox at [email protected]. All other 
comments submitted in response to our proposed policies for determining 
uncompensated care payments for FY 2021 must be submitted in one of 
three ways found in the ADDRESSES section of this proposed rule before 
the close of the comment period in order to be assured consideration. 
In addition, this CMS DSH inbox is not intended for Worksheet S-10 
audit process related emails, which should be directed to the MACs. We 
will address comments related to mergers and/or reporting upload 
discrepancies submitted to the CMS DSH inbox as appropriate in the 
table and the supplemental data file that we publish on the CMS website 
in conjunction with the publication of the FY 2021 IPPS/LTCH PPS final 
rule.
    For FY 2021, we are proposing that after the publication of the FY 
2021 IPPS/LTCH PPS final rule, hospitals would have 15 business days 
from the date of public display of the FY 2021 IPPS/LTCH PPS final rule 
to review and submit comments on the accuracy of the table and 
supplemental data file published in conjunction with the final rule. 
Any changes to Factor 3 will be posted on the CMS website prior to 
October 1, 2020. We acknowledge that this is less time compared to 
previous years. However, there is only a limited amount of time to 
review the information submitted by the hospitals and to implement the 
finalized policies before the start of the Federal fiscal year. In 
general, we believe hospitals will have sufficient opportunity during 
the proposed rule's comment period to provide information about recent 
and/or pending mergers and/or to report upload discrepancies. We 
currently expect to use data from the March 2020 HCRIS extract for the 
FY 2021 final rule, which contributes to our increased confidence that 
hospitals will be able to comment on mergers and report any upload 
discrepancies during the comment period for this proposed rule. As 
noted earlier in this section, for purposes of calculating final Factor 
3 in the FY 2021 IPPS/LTCH PPS final rule, we may also consider using 
more recent data that may become available after March 2020, but before 
the final rule. In the event that there are any remaining merger 
updates and/or upload discrepancies after the final rule, the 15 
business days from the date of public display of the FY 2021 IPPS/LTCH 
PPS final rule deadline should allow for the time necessary to prepare 
and make any corrections to Factor 3 calculations before the beginning 
of the Federal fiscal year. In addition, we intend to revisit in future 
rulemaking whether to discontinue this additional comment process after 
the final rule, because we believe, in general, the comment period on 
the proposed rule should provide sufficient opportunity for hospitals 
to notify CMS regarding pending mergers and/or to report upload 
discrepancies.
    We are inviting public comments on our proposed methodology for 
calculating Factor 3 for FY 2021, including, but not limited to, our 
proposed use of FY 2017 Worksheet S-10 data. In addition, we also 
request public comments on our proposal to calculate Factor 3 for all 
subsequent fiscal years and for all eligible hospitals, except Indian 
Health Service and Tribal hospitals, using the most recent available 
single year of audited Worksheet S-10 data. We are also seeking 
comments on the potential use of our exceptions and adjustments 
authority under section 1886(d)(5)(I)(i) of the Act to restructure the 
DSH and uncompensated care payments to IHS and Tribal hospitals for FY 
2022 and subsequent fiscal years, as described earlier.

H. Proposed Payment for Allogeneic Hematopoietic Stem Cell Acquisition 
Costs (Sec.  412.113)

1. Background
    Medicare reimburses allogeneic hematopoietic stem cell transplants 
provided to Medicare beneficiaries for the treatment of certain 
diagnoses if such treatment is considered reasonable and necessary. 
Allogeneic hematopoietic stem cell transplants involve collecting or 
acquiring stem cells from a healthy donor's bone marrow, peripheral 
blood, or cord blood for intravenous infusion to the recipient. 
Currently, acquisition costs associated with allogeneic hematopoietic 
stem cell transplants are included in the operating costs of inpatient 
hospital services for subsection (d) hospitals (that is, hospitals paid 
under the IPPS). In addition, IPPS payments for acquisition services 
associated with allogeneic hematopoietic stem cell transplants are 
currently included in the MS-DRG payments for the allogeneic 
hematopoietic stem cell transplants when the transplants occurred in 
the inpatient setting.
    Section 108 of the Further Consolidated Appropriations Act, 2020 
(Pub. L. 116-94), provides that, effective for cost reporting periods 
beginning on or after October 1, 2020, costs related to hematopoietic 
stem cell acquisition for the purpose of an allogeneic hematopoietic 
stem cell transplant are not included in the definition of ``operating 
costs of inpatient hospital services'' at section 1886(a)(4) of the 
Act. In addition, section 108 of the Further Consolidated 
Appropriations Act, 2020 provides that in the case of a subsection (d) 
hospital that furnishes an allogeneic hematopoietic stem cell 
transplant, payment to such hospital for hematopoietic stem cell 
acquisition shall be made on a reasonable cost basis, and that the 
Secretary shall specify the items included in such hematopoietic stem 
cell acquisition in rulemaking. Section 108 of the Further Consolidated 
Appropriations Act, 2020, also requires that, beginning in FY 2021, the 
payments made based on reasonable cost for the acquisition costs of 
allogeneic hematopoietic stem cells be made in a budget neutral manner. 
We discuss each of the amendments under section 108 of the Further 
Consolidated Appropriations Act, 2020, and our proposed codification 
and implementation of those amendments, in the sections that follow.

[[Page 32763]]

2. Proposed Revisions to the Regulations for the Payment for Allogeneic 
Hematopoietic Stem Cell Acquisition Costs
a. Payment for Allogeneic Hematopoietic Stem Cell Acquisition Costs on 
a Reasonable Cost Basis
    Division N, Section 108 of the Further Consolidated Appropriations 
Act, 2020 (Pub. L. 116-94) amended section 1886(d)(5) of the Act by 
adding a new paragraph (M)(i) which requires that, for cost reporting 
periods beginning on or after October 1, 2020, in the case of a 
subsection (d) hospital that furnishes an allogeneic hematopoietic stem 
cell transplant to an individual during such a period, payment to such 
hospital for hematopoietic stem cell acquisition shall be made on a 
reasonable cost basis. We are proposing to amend 42 CFR 412.113 to 
reflect this new statutory requirement by adding a new paragraph (e). 
This proposed new paragraph (e) states that for cost reporting periods 
beginning on or after October 1, 2020, in the case of a subsection (d) 
hospital that furnishes an allogeneic hematopoietic stem cell 
transplant to an individual, Medicare payment to such hospital for 
hematopoietic stem cell acquisition costs is made on a reasonable cost 
basis. This is the same way hospitals with approved transplant centers 
are reimbursed for their acquisition costs for solid organs under 42 
CFR 412.113(d).
    We are proposing to add new paragraph (e)(3) to 42 CFR 412.113 to 
specify that a subsection (d) hospital that furnishes allogeneic 
hematopoietic stem cell transplants be required to formulate a standard 
acquisition charge. The hospital's standard acquisition charge is based 
on costs expected to be reasonably and necessarily incurred in the 
acquisition of hematopoietic stem cells. The standard acquisition 
charge does not represent the cost of acquiring stem cells for an 
individual allogeneic hematopoietic stem cell transplant; rather, it is 
a charge that approximates the hospital's average cost of acquiring 
hematopoietic stem cells for all of its allogeneic hematopoietic stem 
cell transplants. We are proposing that the standard acquisition charge 
would be billed and paid on an interim payment basis as a ``pass-
through'' item in accordance with 42 CFR 413.60 and 413.64. The actual 
charges by ancillary cost center from the provider's records would be 
included on the Medicare cost report and converted to reasonable cost 
using the corresponding ancillary cost-to-charge ratios. At the end of 
the cost reporting period, a settlement determination would be made of 
the actual cost incurred compared to the interim payments made during 
the period.
    We are proposing to add new paragraph (e)(5) to 42 CFR 412.113 to 
specify that a subsection (d) hospital maintain an itemized statement 
that identifies the services furnished in collecting hematopoietic stem 
cells, the charges, the person receiving the service (donor/recipient, 
if donor the provider must identify the prospective recipient), and the 
recipient's health care insurance number.
    We are proposing to add new paragraph (e)(4) to 42 CFR 412.113 to 
specify that the hospital's Medicare share of the hematopoietic stem 
cell acquisition costs is based on the ratio of the number of its 
allogeneic hematopoietic stem cell transplants furnished to Medicare 
beneficiaries to the total number of its allogeneic hematopoietic stem 
cell transplants furnished to all patients, regardless of payer, 
applied to reasonable cost. This is the same methodology used to 
reimburse transplant hospitals with approved transplant programs for 
their acquisition costs for solid organs, and will be further discussed 
in a forthcoming Paperwork Reduction Act (PRA) package as referenced in 
section IV.H.3. of this proposed rule.
    In addition, we are proposing to amend 42 CFR 412.1(a) to reflect 
the new statutory requirement by revising the parenthetical identifying 
other costs related to inpatient hospital services that are paid for on 
a reasonable cost basis to include costs related to hematopoietic stem 
cell acquisition for the purpose of an allogeneic hematopoietic stem 
cell transplant. In addition, we are proposing to make formatting 
changes to 42 CFR 412.1(a) to improve the readability of this 
paragraph. We are also proposing to add new paragraph (e)(6) to 42 CFR 
412.2 to add the costs of hematopoietic stem cell acquisition for the 
purpose of an allogeneic hematopoietic stem cell transplant to the list 
of services which are paid for on a reasonable cost basis.
b. Definition of Allogeneic Hematopoietic Stem Cell Transplant
    Division N, Section 108 of the Further Consolidated Appropriations 
Act, 2020 (Pub. L. 116-94) amended section 1886(d)(5) of the Act by 
adding a new paragraph (M)(ii) which defines the term `allogeneic 
hematopoietic stem cell transplant' to mean, with respect to an 
individual, the intravenous infusion of hematopoietic cells derived 
from bone marrow, peripheral blood stem cells, or cord blood, but not 
including embryonic stem cells, of a donor to an individual that are or 
may be used to restore hematopoietic function in such individual having 
an inherited or acquired deficiency or defect. We are proposing to 
codify this definition by adding new paragraph (e)(1) to 42 CFR 
412.113.
c. Items Included as Allogeneic Hematopoietic Stem Cell Acquisition 
Costs
    As noted, Division N, Section 108 of the Further Consolidated 
Appropriations Act, 2020 (Pub. L. 116-94) amended section 1886(d)(5) of 
the Act by adding a new paragraph (M)(i), which also requires that the 
Secretary specify the items included as allogeneic hematopoietic stem 
cell acquisition costs through rulemaking. Allogeneic hematopoietic 
stem cell acquisition costs apply only to hematopoietic allogeneic stem 
cell transplants, for which stem cells are obtained from a donor (other 
than the recipient himself or herself). Specifically, we are proposing 
that allogeneic hematopoietic stem cell acquisition costs would include 
registry fees from a national donor registry described in 42 U.S.C. 
274k, if applicable, for stem cells from an unrelated donor; tissue 
typing of donor and recipient; donor evaluation; physician pre-
admission/pre-procedure donor evaluation services; costs associated 
with the collection procedure such as, general routine and special care 
services, procedure/operating room and other ancillary services, and 
apheresis services; post-operative/post-procedure evaluation of donor; 
and the preparation and processing of stem cells derived from bone 
marrow, peripheral blood stem cells, or cord blood (but not including 
embryonic stem cells). We are also proposing to codify this definition 
of allogeneic hematopoietic stem cell acquisition costs by adding new 
proposed paragraph (e)(2) to 42 CFR 412.113. We invite public comments 
on whether any additional items should be included in the final rule.
3. Clarification of Hospital Cost Reporting Instructions
    In the CY 2017 Outpatient Prospective Payment System (OPPS) final 
rule that appeared in the November 14, 2016 Federal Register (81 FR 
79587), we finalized the policy to update the Medicare hospital cost 
report (Form CMS-2552-10, OMB control number 0938-0050, expiration date 
March 31, 2022) by adding a new standard cost center, line 77 
``Allogeneic Stem Cell Acquisition'' to Worksheet A (and applicable 
worksheets) with the standard cost center code of ``07700''. The new 
cost center line was

[[Page 32764]]

established in order to record any acquisition costs related to 
allogeneic stem cell transplants as defined in Section 231.11, Chapter 
4, of the Medicare Claims Processing Manual (Pub. 100-04) in order to 
develop an accurate estimate of allogeneic hematopoietic stem cell 
donor acquisition costs for future ratesetting for CY 2017 and 
subsequent years. Note there is a similar discussion of allogeneic stem 
cell acquisition costs when the transplant occurs in the inpatient 
setting found in the Medicare Claims Processing Manual (Pub 100-04), 
Chapter 3, Section 90.3.1. However, with the establishment of this line 
came additional challenges on how to reclassify expenses into the new 
cost center from routine and ancillary departments. In addition, we 
found inconsistencies in the reporting of costs and charges for 
allogeneic hematopoietic stem cell acquisition costs.
    The current cost reporting instructions require providers to report 
on line 77, the acquisition costs for allogeneic stem cell transplants. 
Line 77 only allows providers to report direct expenses, and does not 
provide a method for determining other routine and ancillary costs that 
are part of the allogeneic stem cell acquisition costs. Some providers 
are reclassifying costs from routine and ancillary cost centers to line 
77. However, this practice does not align costs and charges properly in 
accordance with the Provider Reimbursement Manual, 15-1, chapter 23, 
sections 2300, 2302.7 and 2302.8 (available online at: https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Paper-Based-Manuals-Items/CMS021929.). In addition, in order to reimburse 
allogeneic hematopoietic stem cell acquisition costs on a reasonable 
cost basis as required by the Further Consolidated Appropriations Act, 
2020 (Pub. L. 116-94), and to accommodate the reporting of both direct 
and indirect costs on line 77 as well as routine and ancillary costs 
associated with the acquisition of hematopoietic stem cells, we are 
modifying cost reporting forms and instructions. We are developing a 
worksheet similar to the Worksheet D-4 for solid organs that will allow 
providers to capture costs from line 77 as well as to report charges by 
routine and ancillary cost center and compute the related costs.
    Changes to the forms and instructions will be described in more 
detail in a forthcoming Paperwork Reduction Act (PRA) package, with 
comment period. In addition, the forthcoming PRA package will address 
providers' requests for a standardized format for data collection as 
referenced in the FY 2019 IPPS/LTCH PPS final rule (83 FR 41681 through 
41684) and Worksheet S-10 modifications as referenced in the FY 2020 
IPPS/LTCH PPS final rule (84 FR 42375).
4. Budget Neutrality for the Reasonable Cost Based Payment for 
Allogeneic Hematopoietic Stem Cell Acquisition Costs
    Section 108 of the Further Consolidated Appropriations Act, 2020 
(Pub. L. 116-94) amended section 1886(d)(4)(C)(iii) of the Act to 
require that beginning with FY 2021, the reasonable cost based payments 
for allogeneic hematopoietic stem cell acquisition costs be made in a 
manner that assures that the aggregate IPPS payments for discharges in 
the fiscal year are not greater or less than those that would have been 
made without such payments; that is, that the reasonable cost based 
payments for allogeneic hematopoietic stem cell acquisition costs be 
made in a budget neutral manner.
    To implement this requirement, we are proposing to make an 
adjustment to the standardized amount to ensure the effects of the 
additional payments for allogeneic hematopoietic stem cell acquisition 
costs are budget neutral, as required under section 108 of Public Law 
116-94. We are also proposing to codify this budget neutrality 
requirement by adding new paragraph (e)(5) to 412.64 to specify that 
CMS makes an adjustment to the standardized amount to ensure that the 
reasonable cost based payments for allogeneic hematopoietic stem cell 
acquisition costs are made in a manner so that aggregate payments to 
hospitals are not affected.
    When the allogeneic stem cell transplant occurs in the inpatient 
setting, the hospital identifies stem cell acquisition charges for 
allogeneic hematopoietic stem cell transplants separately using revenue 
code 0815 on the inpatient hospital bill (see Medicare Claims 
Processing Manual, CMS Pub. 100-04, Chapter 3, section 90.3.1.B., which 
is available online at https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/clm104c03pdf.pdf). To estimate the 
reasonable cost based payments for allogeneic hematopoietic stem cell 
acquisition costs for purposes of the proposed budget neutrality 
adjustment, we used the charges reported on the hospital's inpatient 
claim in revenue center code 0815 (which is reflected in the MedPAR 
field for the Revenue Center Allogeneic Stem Cell Acquisition/Donor 
Services) and converted those charges to costs by applying the 
hospital's operating cost-to-charge ratio (CCR) (that is, the same 
hospital-specific CCR used to estimate the hospital's operating outlier 
payments).
    Based on the latest data for this proposed rule (claims from the 
December 2019 update of the FY 2019 MedPAR file and CCRs from the 
December 2019 update of the PSF), we estimate that reasonable cost 
based payments for allogeneic hematopoietic stem cell acquisition costs 
for FY 2021 would be $15,865,373.61. Therefore, the total amount that 
we are proposing to use to make an adjustment to the standardized 
amounts to ensure the additional payments for allogeneic hematopoietic 
stem cell acquisition costs are budget neutral is $15,865,373.61. We 
are further proposing that if more recent data become available for the 
final rule, we would use that data to determine the final amount we 
would use to make the budget neutrality adjustment. (We refer readers 
to section II.A.4.f. of the Addendum of this proposed rule for 
discussion of the budget neutrality adjustment factor we are proposing 
to apply to the standardized amounts for FY 2021 based on these 
estimated allogeneic hematopoietic stem cell acquisition costs.)

I. Proposed Payment Adjustment for CAR T-cell Clinical Trial Cases 
(Sec. Sec.  412.85 and 412.312)

    As discussed in section II.D.2.b. of the preamble of this proposed 
rule, we are proposing to create new MS-DRG 018 for cases that include 
procedures describing CAR T-cell therapies, which are currently 
reported using ICD-10-PCS procedure codes XW033C3 or XW043C3. As a 
requestor noted, a large percentage of the total cases that would group 
to any new MS-DRG for CAR T-cell therapy cases would be clinical trial 
cases, in which the provider typically does not incur the cost of the 
drug. By comparison, for non-clinical trial cases involving CAR T-cell 
therapy, the drug cost is an extremely large portion of the total 
costs. To address this, as described in section II.E.2.b. of this 
proposed rule, we are proposing to modify our relative weight 
methodology for proposed new MS-DRG 018 in order to develop a relative 
weight that is reflective of the typical costs of providing CAR T-cell 
therapies relative to other IPPS services. Specifically, in determining 
the relative weights, we are proposing that clinical trial claims that 
group to proposed new MS-DRG 018 would not be included when calculating 
the average cost for

[[Page 32765]]

proposed new MS-DRG 018 that is used to calculate the relative weight 
for this MS-DRG, so that the relative weight reflects the costs of the 
CAR T-cell therapy drug. For additional details on the proposed 
modifications to our relative weight methodology relating to clinical 
trial cases involving CAR-T cell therapy, we refer readers to section 
II.E.2.b. of this proposed rule.
    Cases involving clinical trials, like non-clinical trial cases, are 
currently paid using the relative weight for the MS-DRG to which the 
case is assigned. However, given that the drug cost is an extremely 
large portion of the total costs of the non-clinical trial CAR T-cell 
therapy cases, and that the relative weight for proposed new MS-DRG 018 
assumes that the provider has incurred the costs of the CAR T-cell 
therapy drug, we are proposing to apply an adjustment to the payment 
amount for clinical trial cases that would group to proposed new MS-DRG 
018. We are proposing to calculate this proposed adjustment using the 
same methodology that we are proposing to use to adjust the case count 
for purposes of the relative weight calculations:
     Calculate the average cost for cases to be assigned to 
proposed new MS-DRG 018 that contain ICD-10-CM diagnosis code Z00.6 or 
contain standardized drug charges of less than $373,000.
     Calculate the average cost for cases to be assigned to 
proposed new MS-DRG 018 that do not contain ICD-10-CM diagnosis code 
Z00.6 or standardized drug charges of at least $373,000.
     Calculate an adjustor by dividing the average cost 
calculated in step 1 by the average cost calculated in step 2.
     Apply this adjustor when calculating payments for clinical 
trial cases that group to MS-DRG 018 by multiplying the relative weight 
for MS-DRG 018 by the adjustor.
    Consistent with our methodology for calculating the proposed case 
count adjustment for purposes of the relative weight calculations, for 
FY 2021, for purposes of calculating this proposed payment adjustment, 
we identified clinical trial claims as claims that contain ICD-10-CM 
diagnosis code Z00.6 (Encounter for examination for normal comparison 
and control in clinical research program) or contain standardized drug 
charges of less than $373,000.
    For FY 2021, based on the claims data from the December 2019 update 
of the FY 2019 MedPAR files used for this proposed rule, the ratio of 
the average cost for CAR T-cell therapy cases identified as clinical 
trial cases to the average cost for non-clinical trial CAR T-cell 
therapy cases (that is, those cases not identified as being clinical 
trial cases) is 0.15. Therefore, we are proposing that the adjustor 
that would be applied to CAR T-cell therapy clinical trial cases would 
be 0.15. For example, if the relative weight for proposed new MS-DRG 
018 is 30.00, we would multiply 30.00 by the adjustor of 0.15 as part 
of the calculation of the payment for clinical trial claims assigned to 
proposed new MS-DRG 018.
    The clinical trial cases involving CAR T-cell therapy that would be 
subject to this proposed adjustment would be those cases that would 
group to proposed new MS-DRG 18 and include ICD-10-CM diagnosis code 
Z00.6 (Encounter for examination for normal comparison and control in 
clinical research program). ICD-10-CM diagnosis code Z00.6 is required 
to be included with clinical trial cases and we expect hospitals to 
include this code for clinical trial cases that would group to proposed 
MS-DRG 18 for FY 2021 and all subsequent years. Consistent with our 
historical practice, we are also proposing to update the value of the 
adjustor based on more recent data for the final rule.
    We are also proposing to amend our regulations at 42 CFR part 412, 
subpart F (for operating IPPS payments), and 42 CFR 412.312 (for 
capital IPPS payments) to codify this proposed payment adjustment for 
certain clinical trial cases. Under 42 CFR part 412, subpart F, we are 
proposing to redesignate existing Sec.  412.86 (which sets forth 
payment for extraordinarily high-cost day outliers for discharges 
occurring before October 1, 1997) as new Sec.  412.83, and to add a new 
center heading and new Sec.  412.85 to codify the proposed payment 
adjustment for certain clinical trial cases. We are also proposing to 
make conforming changes to Sec.  412.82(c) to replace the reference to 
Sec.  412.86 with Sec.  412.83, and proposing to reserve Sec.  412.86. 
We are proposing this restructuring to subpart F in order to keep the 
sections related to payment for outlier cases together under the 
``Payment for Outlier Cases'' center heading when adding the proposed 
section to codify the proposed payment adjustment for certain clinical 
trial cases. Specifically, proposed new Sec.  412.85 provides for a 
payment adjustment for a discharge assigned to MS-DRG 018 that is part 
of a clinical trial as determined by CMS based on the reporting of a 
diagnosis code indicating the encounter is part of a clinical research 
program on the claim for the discharge. Proposed new Sec.  412.85 
further provides that payment for such a discharge is adjusted by 
adjusting the DRG weighting factor determined under Sec.  412.60(b) by 
a factor that reflects the average cost for cases to be assigned to MS-
DRG 018 that are part of a clinical trial to the average cost for cases 
to be assigned to MS-DRG 018 that are not part of a clinical trial. 
Similarly, we are proposing to add paragraph (f) to Sec.  412.312 to 
specify that in determining the capital IPPS payments under that 
section for certain clinical trial cases as described in Sec.  
412.85(b), the DRG weighting factor described in Sec.  412.312(b)(1) is 
adjusted as described in Sec.  412.85(c).
    We are inviting public comments on our proposals.

J. Proposed Changes for Hospitals With High Percentage of End Stage 
Renal Disease (ESRD) Discharges (Sec.  412.104)

    Under Sec.  412.104(a), CMS provides an additional payment to a 
hospital for inpatient services provided to End Stage Renal Disease 
(ESRD) beneficiaries who receive a dialysis treatment during a hospital 
stay, if the hospital has established that ESRD beneficiary discharges, 
excluding discharges classified into MS-DRG 652 (Kidney Transplant), 
MS-DRG 682 (Renal Failure with MCC), MS-DRG 683 (Renal Failure with 
CC), MS-DRG 684 (Renal Failure without CC/MCC) and MS-DRG 685 (Admit 
for Renal Dialysis), where the beneficiary received dialysis services 
during the inpatient stay, constitute 10 percent or more of its total 
Medicare discharges. (We note that in existing Sec.  412.104(a), the 
title of MS DRG 652 is mistakenly shown as ``Renal Failure'' instead of 
``Kidney Transplant''.)
    As discussed in section II.D.8.a. of the preamble of this proposed 
rule, for FY 2021, we are proposing to create a new Pre-MDC MS-DRG for 
cases describing the performance of hemodialysis during an admission 
where the patient received a simultaneous pancreas/kidney transplant. 
We are also proposing to create two new MS-DRGs with a two-way severity 
level split for cases describing the performance of hemodialysis in an 
admission where the patient received a kidney transplant in MDC 11. 
These proposed new MS-DRGs are proposed new MS-DRG 019 (Simultaneous 
Pancreas/Kidney Transplant with Hemodialysis), proposed new MS-DRG 650 
(Kidney Transplant with Hemodialysis with MCC), and proposed new MS-DRG 
651 (Kidney Transplant with Hemodialysis without MCC). The relative 
weights for these proposed MS-DRGs reflect the resources related to the 
provision of inpatient hemodialysis. Accordingly, we

[[Page 32766]]

believe that discharges classified to these proposed new MS-DRGs should 
be excluded in determining a hospital's eligibility for the additional 
payment for hospitals with high percentages of ESRD discharges and, 
therefore, are proposing to add MS-DRGs 019, 650, and 651 to the list 
of excluded MS-DRGs set forth in Sec.  412.104(a). Furthermore, under 
the proposed MS-DRG logic for kidney transplants, a case with a 
hemodialysis procedure reported on the claim would no longer group to 
MS-DRG 652 (Kidney Transplant). We also note that MS-DRG 685 (Admit for 
Renal Dialysis) was deleted effective FY 2019 (83 FR 41201 through 
41202). Therefore, we are proposing to remove MS-DRGs 652 and 685 from 
the list of excluded MS-DRGs set forth in Sec.  412.104(a).
    We are proposing to revise Sec.  412.104(a) to reflect these 
proposed changes to the MS-DRG logic for kidney transplants and the 
previous deletion of MS-DRG 685. We are also proposing to make 
formatting changes to this provision to list the MS-DRG exclusions.

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

1. Statutory Basis for the Hospital Readmissions Reduction Program
    Section 1886(q) of the Act, as amended by section 15002 of the 21st 
Century Cures Act, establishes the Hospital Readmissions Reduction 
Program. Under the Hospital Readmissions Reduction 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 hospitals with respect to the proportion of 
beneficiaries who are dually eligible for Medicare and full-benefit 
Medicaid (dual eligibles) in determining the extent of excess 
readmissions. We refer readers to the FY 2016 IPPS/LTCH PPS final rule 
(80 FR 49530 through 49531) and 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).
 FY 2018 IPPS/LTCH PPS final rule (82 FR 38221 through 38240).
 FY 2019 IPPS/LTCH PPS final rule (83 FR 41431 through 41439).
 FY 2020 IPPS/LTCH PPS final rule (84 FR 42380 through 42390).

    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 
measure removal factors policy; (3) the calculation of the excess 
readmission ratio (ERR), which is used, in part, to calculate the 
payment adjustment factor; (4) the calculation of the proportion of 
``dually eligible'' Medicare beneficiaries, which is used to stratify 
hospitals into peer groups and establish the peer group median ERRs; 
(5) 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; (6) the opportunity for hospitals to review and submit 
corrections using a process similar to what is currently used for 
posting results on Hospital Compare or its successor; (7) the adoption 
of an extraordinary circumstances exception policy to address hospitals 
that experience a disaster or other extraordinary circumstance; (8) the 
clarification that the public reporting of ERRs will be posted on an 
annual basis to the Hospital Compare website or its successor as soon 
as is feasible following the review and corrections period; and (9) 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 United States territories and Puerto Rico.
    We have also codified certain requirements of the Hospital 
Readmissions Reduction Program at 42 CFR 412.152 through 412.154. In 
section IV.K.11. of the preamble of this proposed rule, we are 
proposing to update the regulatory text to reflect the policies that we 
are proposing in this proposed rule.
3. Summary of Proposed Policies for the Hospital Readmissions Reduction 
Program
    In section IV.K.6. of the preamble of this proposed rule, we are 
proposing the automatic adoption of applicable periods policy beginning 
with the FY 2023 program year and all subsequent program years, unless 
otherwise specified by the Secretary. In section IV.K.11. of the 
preamble of this proposed rule, we are proposing to update the 
definition of applicable period at 42 CFR 412.152 to align with this 
proposal.
    We discuss these proposals in greater detail in this rule.
4. Current Measures for FY 2021 and Subsequent Years
    The Hospital Readmissions Reduction Program currently includes six 
applicable conditions/procedures: Acute myocardial infarction (AMI); 
heart failure (HF); pneumonia; elective primary total hip arthroplasty/
total knee arthroplasty (THA/TKA); chronic obstructive pulmonary 
disease (COPD); and coronary artery bypass graft (CABG) surgery.
    We continue to believe the measures we have adopted adequately meet 
the goals of the Hospital Readmissions Reduction Program. Therefore, we 
are not proposing to remove or adopt any additional measures at this 
time.
    We refer readers to the FY 2019 IPPS/LTCH PPS final rule (83 FR 
41431 through 41439) for more information about how the Hospital 
Readmissions Reduction Program supports CMS' goal of bringing quality 
measurement, transparency, and improvement together with value-based 
purchasing to the hospital inpatient care setting through the 
Meaningful Measures Initiative.
5. Definition of ``Dual-Eligible'' Beginning in FY 2021 and for 
Subsequent Years
    In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38226 through 
38229), as part of implementing the 21st Century Cures Act, we 
finalized the definition of dual-eligible as follows: ``[A]n individual 
would be counted as a full-benefit dual 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.'' In the FY 2019 IPPS/LTCH PPS final rule (83 FR 41437 
through 41438), we codified this definition at 42 CFR 412.152 along 
with other definitions

[[Page 32767]]

pertinent to dual-eligibility calculations for assigning hospitals into 
peer groups. In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42384 
through 42385), we finalized an update to the definition of ``dual-
eligible'' to specify that, for the payment adjustment factors 
beginning with the FY 2021 program year, ``dual-eligible'' is a patient 
beneficiary who has been identified as having full benefit status in 
both the Medicare and Medicaid programs in data sourced from the State 
MMA files for the month the beneficiary was discharged from the 
hospital, except for those patient beneficiaries who die in the month 
of discharge, who will be identified using the previous month's data 
sourced from the State MMA files.
    The updated definition accounts for misidentification of the dual-
eligible status of patient beneficiaries who die in the month of 
discharge, which can occur under the previous definition. We estimated 
that the number of misidentified patient beneficiaries was very small, 
and our analysis showed that this very small total increase did not 
have a large impact on peer grouping assignments or payment 
adjustments. We remind readers that we finalized this updated 
definition for FY 2021 and for subsequent program years. We refer 
readers to the FY 2020 IPPS/LTCH PPS final rule (84 FR 42384 through 
42385) for a more detailed discussion of this topic. We are not 
proposing any updates to our definition of ``dual-eligible'' 
beneficiaries in this proposed rule.
6. Proposed Automatic Adoption of Applicable Periods for FY 2023 and 
Subsequent Years
    We refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 
51671) and the FY 2013 IPPS/LTCH PPS final rule (77 FR 53375) for 
discussion of our previously finalized policy for defining applicable 
periods. In the FY 2019 IPPS/LTCH PPS final rule (83 FR 41434 through 
41435) and the FY 2020 IPPS/LTCH PPS final rule (84 FR 42387), we 
finalized the following ``applicable periods'' consistent with the 
definition specified at 42 CFR412.152, to calculate the readmission 
payment adjustment factor for FY 2021 and FY 2022, respectively:
     The 3-year time period of July 1, 2016 through June 30, 
2019 for FY 2021.
     The 3-year time period of July 1, 2017 through June 30, 
2020 for FY 2022.
    This is the 3-year period from which data are being collected in 
order to calculate ERRs and payment adjustment factors for the fiscal 
year; this 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 Hospital Readmissions Reduction Program.
    We continue to believe that the 3-year period is the appropriate 
data collection period for the Hospital Readmissions Reduction Program 
measures. In order to provide greater certainty around future 
applicable periods for the Hospital Readmissions Reduction Program, we 
are proposing the automatic adoption of applicable periods for FY 2023 
and all subsequent program years for the Hospital Readmissions 
Reduction Program. Beginning in FY 2023, the applicable period for the 
Hospital Readmissions Reduction Program will be the 3-year period 
beginning 1 year advanced from previous program fiscal year's start of 
the applicable period. That is, for FY 2023, the applicable period for 
the Hospital Readmissions Reduction Program measures and for 
determining dual eligibility will be the 3-year period from July 1, 
2018 through June 30, 2021, which is advanced 1 year from the 
applicable period for the FY 2022 Hospital Readmissions Reduction 
Program. Under this proposed policy, for all subsequent years, we would 
advance this 3-year period by 1 year unless otherwise specified by the 
Secretary, which we would convey through notice and comment rulemaking. 
Similarly, the applicable period for dual eligibility would continue to 
correspond to the applicable period for the Hospital Readmissions 
Reduction Program, unless otherwise specified by the Secretary. We 
believe that the automatic adoption of the applicable period each year 
will streamline the process and provide additional clarity and 
consistency to the Program.
7. Identification of Aggregate Payments for Each Condition/Procedure 
and All Discharges for FY 2021
    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 each condition/
procedure using Medicare inpatient claims from the MedPAR file with 
discharge dates that are within the applicable period. Under our 
established methodology, we use the update of the MedPAR file for each 
Federal fiscal year, which is updated 6 months after the end of each 
Federal fiscal year within the applicable period, as our data source.
    In identifying discharges for the applicable conditions/procedures 
to calculate the aggregate payments for excess readmissions, we apply 
the same exclusions to the claims in the MedPAR file as are applied in 
the measure methodology for each of the applicable conditions/
procedures. For the FY 2021 applicable period, this includes the 
discharge diagnoses for each applicable condition/procedure based on a 
list of specific ICD-10-CM and ICD-10-PCS code sets, as applicable, for 
that condition/procedure, because diagnoses and procedure codes for 
discharges occurring on or after October 1, 2015 (FY 2016) began 
reporting under the ICD-10-CM and ICD-10-PCS code sets as opposed to 
the previous ICD-9-CM code set.
    We identify Medicare fee-for-service (FFS) claims that meet the 
criteria as previously described for each applicable condition/
procedure to calculate the aggregate payments for excess readmissions. 
This means that claims paid for under Medicare Part C (Medicare 
Advantage) are not included in this calculation. This policy is 
consistent with the methodology to calculate ERRs based solely on 
admissions and readmissions for Medicare FFS patients. Therefore, 
consistent with our established methodology, for FY 2021, we are 
proposing to continue to exclude admissions for patients enrolled in 
Medicare Advantage (MA), as identified in the Medicare Enrollment 
Database.
    In this proposed rule, for FY 2021, we are proposing to determine 
aggregate payments for excess readmissions, and aggregate payments for 
all discharges using data from MedPAR claims with discharge dates that 
align with the FY 2021 applicable period. As we stated in FY 2018 IPPS/
LTCH PPS final rule (82 FR 38232), we will determine the neutrality 
modifier using the most recently available full year of MedPAR data. 
However, we note that, for the purpose of modeling the proposed FY 2021 
readmissions payment adjustment factors for this proposed rule, we are 
using the proportion of dual-eligibles, excess readmission ratios, and 
aggregate payments for each condition/procedure and all discharges for 
applicable hospitals from the FY 2020 Hospital Readmissions Reduction 
Program applicable period. For the FY 2021 program year, applicable 
hospitals will have the opportunity to review and correct calculations 
based on the proposed FY 2021 applicable period of July 1, 2016 to June 
30, 2019, before they are made public under our policy regarding 
reporting of hospital-specific information. Again, we reiterate that

[[Page 32768]]

this period is intended to review the program calculations, and not the 
underlying data. For more information on the review and corrections 
process, we refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 
FR 53399 through 53401).
    In this proposed rule, we are proposing to continue to use MedPAR 
data corresponding to the applicable period for the Hospital 
Readmissions Reduction Program calculations. We are proposing to use 
the March update of the fiscal year MedPAR to identify discharges 
within the applicable period during that fiscal year.
8. Calculation of Payment Adjustment Factors for FY 2021
    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.
    We refer readers to the FY 2018 IPPS/LTCH PPS final rule (82 FR 
38226 through 38237) for a detailed discussion of the payment 
adjustment methodology. In the FY 2021 IPPS/LTCH PPS proposed rule, we 
are not proposing any changes to this payment adjustment calculation 
methodology for FY 2021.
9. Calculation of Payment Adjustment for FY 2021
    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--(1) the aggregate payments for excess readmissions; and (2) the 
aggregate payments for all discharges, scaled by the neutrality 
modifier. The calculation of this ratio is codified at 42 CFR 
412.154(c)(1) and the floor adjustment factor is codified at 42 CFR 
412.154(c)(2). 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 42 CFR 412.154(c)(2), for FY 2021, 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 2021, 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).
    For additional information on the FY 2021 payment calculation, we 
refer readers to the Hospital Readmissions Reduction Program 
information and resources available on our QualityNet website. We are 
not proposing any changes to our calculation of payment methodology in 
this proposed rule.
10. Confidential Reporting of Stratified Data for Hospital Quality 
Measures
    Consistent with our plans described in the FY 2020 IPPS/LTCH PPS 
final rule (84 FR 42388 through 42390), we will include in confidential 
hospital-specific reports (HSR) data stratified by patient dual-
eligible status for the six readmissions measures included in the 
Hospital Readmissions Reduction Program in the Spring of 2020. These 
data will include two disparity methodologies designed to illuminate 
potential disparities within individual hospitals and across hospitals 
nationally and will supplement the measure data currently publicly 
reported on the Hospital Compare website. However, this stratified data 
would be in confidential reports and not publicly reported at this 
time. The first methodology, the Within-Hospital Disparity Method, 
highlights differences in outcomes for dual-eligible versus non-dual-
eligible patients within an individual hospital, while the second 
methodology, the Dual Eligible Outcome Method, allows for a comparison 
of performance in care for dual-eligible patients across hospitals (82 
FR 38405 through 38407; 83 FR 41598; 84 FR 42388 through 42389). These 
two disparity methods are separate from the methodology used by the 
Hospital Readmissions Reduction Program that assesses hospital 
performance relative to other hospitals with a similar proportion of 
dual-eligible patients (that is, peer group), and we emphasize that the 
two disparity methods would not be used in payment adjustment factor 
calculations under the Hospital Readmissions Reduction Program.
    We note that the two disparity methods do not place any additional 
collection or reporting burden on hospitals because dual-eligibility 
data are readily available in claims data. In addition, we reiterate 
that these confidential hospital-specific reports data do not impact 
the calculation of hospital payment adjustment factors under the 
Hospital Readmissions Reduction Program.
    We are not proposing any updates to the confidential reporting of 
stratified data in this proposed rule.
11. Proposed Regulatory Revisions
    We are proposing to revise 42 CFR 412.152 to reflect the proposed 
policy to automatically adopt applicable periods for the Program, as 
previously discussed in section IV.K.6. of the preamble of this 
proposed rule. Specifically, we are proposing to revise the definition 
of ``applicable period'' and ``applicable period for dual-eligibility'' 
as follows:
    Applicable period is, with respect to a fiscal year, the 3-year 
period (specified by the Secretary) from which data are collected in 
order to calculate excess readmission ratios and adjustments under the 
Hospital Readmissions Reduction Program. The applicable period for FY 
2022 is the 3-year period from July 1, 2017 through June 30, 2020. 
Beginning with the FY 2023 program year, the applicable period is the 
3-year period advanced by 1-year from the prior year's period from 
which data are collected in order to calculate excess readmission 
ratios and adjustments under the Hospital Readmissions Reduction 
Program, unless otherwise specified by the Secretary. That is, the 
applicable period for FY 2023 is the 3-year period from July 1, 2018 
through June 30, 2021.
    Applicable period for dual-eligibility is the 3-year data period 
corresponding to the applicable period for the Hospital Readmissions 
Reduction Program, unless otherwise established by the Secretary.

L. Hospital Value-Based Purchasing (VBP) Program: Updates

1. Background
a. Statutory Background and Overview of Past Program Years
    Section 1886(o) of the 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);

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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); the FY 2018 IPPS/LTCH PPS final rule (82 FR 38240 
through 38269); the FY 2019 IPPS/LTCH PPS final rule (83 FR 41440 
through 41472); and the FY 2020 IPPS/LTCH PPS final rule (84 FR 42390 
through 42402).
    We also have codified certain requirements for the Hospital VBP 
Program at 42 CFR 412.160 through 412.167.
b. FY 2021 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)(v) of the Act, the applicable percent 
for the FY 2021 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 2021 is approximately $1.9 billion, based on 
the December 2019 update of the FY 2019 MedPAR file. We intend to 
update this estimate in the FY 2021 IPPS/LTCH PPS final rule using the 
March 2020 update of the FY 2019 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 2021, on a per-claim 
basis. We are publishing proxy value-based incentive payment adjustment 
factors in Table 16 associated with this proposed rule (which is 
available via the internet on the CMS website). The proxy factors are 
based on the TPSs from the FY 2020 program year. These FY 2020 
performance scores are the most recently available performance scores 
hospitals have been given the opportunity to review and correct. The 
slope of the linear exchange function used to calculate the proxy 
value-based incentive payment adjustment factors in Table 16 is 
2.8109876851. This slope, along with the estimated amount available for 
value-based incentive payments, is also published in Table 16.
    We intend to update this table as Table 16A associated with the 
final rule (which will be available on the CMS website) to reflect 
changes based on the March 2020 update to the FY 2019 MedPAR file. We 
also intend to update the slope of the linear exchange function used to 
calculate those updated proxy value-based incentive payment adjustment 
factors. The updated proxy value-based incentive payment adjustment 
factors for FY 2021 will continue to be based on historic FY 2020 
program year TPSs because hospitals will not have been given the 
opportunity to review and correct their actual TPSs for the FY 2021 
program year until after the FY 2021 IPPS/LTCH PPS final rule is 
published.
    After hospitals have been given an opportunity to review and 
correct their actual TPSs for FY 2021, we will post as Table 16B 
associated with the final rule (which will be available via the 
internet on the CMS website) the actual value-based incentive payment 
adjustment factors, exchange function slope, and estimated amount 
available for the FY 2021 program year. We expect Table 16B will be 
posted on the CMS website in the Fall of 2020.
2. Retention and Removal of Quality Measures
a. Retention of Previously Adopted Hospital VBP Program Measures and 
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 final rule (83 FR 41440 through 41441), we 
finalized a revision to 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 or its successor for 
at least 1 year prior to its inclusion in a Hospital VBP Program 
performance period), the Hospital VBP Program statute does not require 
that the measure continue to remain in the Hospital IQR Program. We are 
not proposing any changes to these policies in this proposed rule.
b. Measure Removal Factors for the Hospital VBP Program
    In the FY 2019 IPPS/LTCH PPS final rule (83 FR 41441 through 
41446), in alignment with the Hospital IQR Program, we finalized 
measure removal factors for the Hospital VBP Program, and we refer 
readers to that final rule for details. We are not proposing any 
changes to these policies in this proposed rule.
c. Summary of Previously Adopted Measures for the FY 2023 and FY 2024 
Program Years
    We refer readers to the FY 2020 IPPS/LTCH PPS final rule (84 FR 
42392 through 42393) for summaries of previously adopted measures for 
the FY 2022 and FY 2023 program years, and to the tables in this 
section showing summaries of previously adopted measures for the FY 
2023 and FY 2024 program years. We note that we are not proposing to 
add new measures or remove measures from the Hospital VBP Program in 
this proposed rule.
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3. 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 2020, FY 2021, 
and FY 2022 program years. In the same final 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), the FY 2019 IPPS/LTCH PPS final rule 
(83 FR 41466 through 41469), and the FY 2020 IPPS/LTCH PPS final rule 
(84 FR 42393 through 42395) 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 a 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.
    We are not proposing any changes to these policies in this proposed 
rule.
c. Clinical Outcomes Domain
    For the FY 2020 and FY 2021 program years, we adopted a 36-month 
baseline period and a 36-month performance period for measures in the 
Clinical Outcomes domain (previously referred to as the Clinical Care 
domain) (79 FR 50073; 80 FR 49563 through 49564). In the FY 2017 IPPS/
LTCH PPS final rule (81 FR 57001), we also adopted a 22-month 
performance period and a 36-month baseline period specifically for the 
MORT-30-PN (updated cohort) measure for the FY 2021 program year.
    In the FY 2017 IPPS/LTCH PPS final rule (81 FR 57000), we adopted a 
36-month performance period and a 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, COMP-HIP-KNEE, and MORT-30-CABG measures. In the same final 
rule (81 FR 57001), we adopted a 34-month performance period and a 36-
month baseline period for the MORT-30-PN (updated cohort) measure for 
the FY 2022 program year.
    In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38259), we adopted a 
36-month performance period and a 36-month baseline period for the 
MORT-30-AMI, MORT-30-HF, MORT-30-COPD, MORT-30-CABG, MORT-30-PN 
(updated cohort), and COMP-HIP-KNEE 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, 5 years prior to the applicable fiscal program year, to June 30, 2 
years prior to the applicable fiscal program year, and the baseline 
period runs for 36 months from July 1, 10 years prior to the applicable 
fiscal program year, to June 30, 7 years prior to the applicable fiscal 
program year. For the COMP-HIP-KNEE measure, the performance period 
runs for 36 months from April 1, 5 years prior to the applicable fiscal 
program year, to March 31, 2 years prior to the applicable fiscal 
program year, and the baseline period runs for 36 months from April 1, 
10 years prior to the applicable fiscal program year, to March 31, 7 
years prior to the applicable fiscal program year.
    We are not proposing any changes to the length of these performance 
or baseline periods in this proposed rule.
d. Safety Domain
    In the FY 2017 IPPS/LTCH PPS final rule (81 FR 57000), we finalized 
our proposal to adopt a performance period for all measures in the 
Safety domain--with the exception of the CMS Patient Safety and Adverse 
Events Composite (CMS PSI 90) measure--that runs on the calendar year 2 
years prior to the applicable program year and a baseline period that 
runs on the calendar year 4 years prior to the applicable program year 
for the FY 2019 program year and subsequent program years.
    In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38258), for the FY 
2023 program year, we adopted a 21-month baseline period (October 1, 
2015 to June 30, 2017) and a 24-month performance period (July 1, 2019 
to June 30, 2021) for the CMS PSI 90 measure. In the FY 2018 IPPS/LTCH 
PPS final rule (82 FR 38258 through 38259), we adopted a 24-month 
performance period and a 24-month baseline period for the CMS PSI 90 
measure for the FY 2024 program year and subsequent years. 
Specifically, the performance period runs from July 1, 4 years prior to 
the applicable fiscal program year, to June 30, 2 years prior to the 
applicable fiscal program year, and the baseline period runs from July 
1, 8 years prior to the applicable fiscal program year, to June 30, 6 
years prior to the applicable fiscal program year.
    We are not proposing any changes to these policies in this proposed 
rule.
e. Efficiency and Cost Reduction Domain
    Since the FY 2016 program year, we have adopted a 12-month baseline 
period and a 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 (81 FR 56998), 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.
    We are not proposing any changes to these policies in this proposed 
rule.
f. Summary of Previously Adopted Baseline and Performance Periods for 
the FY 2023 Through FY 2026 Program Years
    These tables summarize the baseline and performance periods that we 
have previously adopted.

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4. 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 involved, 
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 50077 through 50081, respectively) for a more detailed discussion 
of the general scoring methodology used in the Hospital VBP Program. We 
refer readers to the FY 2020 IPPS/LTCH PPS final rule (84 FR 42396) for 
previously established performance standards for the FY 2022 program 
year.
    We note that the performance standards for all of the following 
measures are calculated with lower values representing better 
performance:
     CDC NHSN HAI measures (CLABSI, CAUTI, CDI, MRSA 
Bacteremia, and Colon and Abdominal Hysterectomy SSI).
     CMS PSI 90 measure.
     COMP-HIP-KNEE measure.
     MSPB measure.
    This distinction is made in contrast to other measures--HCAHPS and 
the mortality measures, which use survival rates rather than mortality 
rates--for which higher values indicate better performance. As 
discussed further in the FY 2014 IPPS/LTCH PPS final rule (78 FR 
50684), the performance standards for the Colon and Abdominal 
Hysterectomy SSI measure are computed separately for each procedure 
stratum, and we first award achievement and improvement points to each 
stratum separately, and then compute a weighted average of the points 
awarded to each stratum by predicted infections.
b. Previously Established and Estimated Performance Standards for the 
FY 2023 Program Year
    In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38264 through 
38265), we established performance standards for the FY 2023 program 
year for the Clinical Outcomes domain measures (MORT-30-AMI, MORT-30-
HF, MORT-30-PN (updated cohort), MORT-30-COPD, MORT-30-CABG, and COMP-
HIP-KNEE) and for the Efficiency and Cost Reduction domain measure 
(MSPB). In the FY 2019 IPPS/LTCH PPS final rule (83 FR 41471 through 
41472), we established, for the FY 2023 program year, the performance 
standards for the Safety domain measure, CMS PSI 90. 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.
    In accordance with our methodology for calculating performance 
standards discussed more fully in the Hospital Inpatient VBP Program 
final rule (76 FR 26511 through 26513) and codified at 42 CFR 412.160, 
we are estimating additional performance standards for the FY 2023 
program year. We note that the numerical values for the performance 
standards for the Safety and Person and Community Engagement domains 
for the FY 2023 program year in these tables are estimates based on the 
most recently available data, and we intend to update the numerical 
values in the FY 2021 IPPS/LTCH PPS final rule.
    The previously established and estimated performance standards for 
the measures in the FY 2023 program year are set out in this table.

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    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; therefore, 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.

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c. Previously Established Performance Standards for Certain Measures 
for the FY 2024 Program Year
    We have adopted certain measures for the Safety domain, Clinical 
Outcomes domain, and 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 final rule (83 FR 41472), we 
established performance standards for the FY 2024 program year for the 
Clinical Outcomes domain measures (MORT-30-AMI, MORT-30-HF, MORT-30-PN 
(updated cohort), MORT-30-COPD, MORT-30-CABG, and COMP-HIP-KNEE) and 
the Efficiency and Cost Reduction domain measure (MSPB). In the FY 2020 
IPPS/LTCH PPS final rule (84 FR 42395 through 42398), we established, 
for the FY 2024 program year, the performance standards for the Safety 
domain measure, CMS PSI 90. 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 established performance standards for these 
measures are set out in this table.
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d. Previously Established and Newly Established Performance Standards 
for Certain Measures for the FY 2025 Program Year
    We have adopted certain measures for the Safety domain, 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 2020 IPPS/LTCH PPS final rule (84 FR 42398 through 
42399), we established performance standards for the FY 2025 program 
year for the Clinical Outcomes domain measures (MORT-30-AMI, MORT-30-
HF, MORT-30-PN (updated cohort), MORT-30-COPD, MORT-30-CABG, and COMP-
HIP-KNEE) and the Efficiency and Cost Reduction domain

[[Page 32778]]

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.
    In accordance with our methodology for calculating performance 
standards discussed more fully in the Hospital Inpatient VBP Program 
final rule (76 FR 26511 through 26513), and codified at 42 CFR 412.160, 
we are establishing performance standards for the CMS PSI 90 measure 
for the FY 2025 program year. The previously established and newly 
established performance standards for these measures are set out in 
this table.
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e. Newly Established Performance Standards for Certain Measures for the 
FY 2026 Program Year
    As previously discussed, we have adopted certain measures for the 
Clinical Outcomes domain (MORT-30-AMI, MORT-30-HF, MORT-30-PN (updated 
cohort), MORT-30-COPD, MORT-30-CABG, and COMP-HIP-KNEE) and the 
Efficiency and Cost Reduction domain (MSPB) for future program years in 
order to ensure that we can adopt baseline and performance periods of 
sufficient length for performance scoring purposes. In accordance with 
our methodology for calculating performance standards discussed more 
fully in the Hospital Inpatient VBP Program final rule (76 FR 26511 
through 26513), and our performance standards definitions codified at 
42 CFR 412.160, we are establishing the following performance standards 
for the FY 2026 program year for 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. The newly established performance standards for 
these measures are set out in this table.

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5. Scoring Methodology and Data Requirements
a. Domain Weighting for the FY 2022 Program Year and Subsequent Years 
for Hospitals That Receive a Score on All Domains
    In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38266), we adopted a 
policy to retain the equal weight of 25 percent for each of the four 
domains in the Hospital VBP Program for the FY 2020 program year and 
subsequent years for hospitals that receive a score in all domains. We 
are not proposing any changes to these domain weights in this proposed 
rule.
b. Domain Weighting for the FY 2022 Program Year and Subsequent Years 
for Hospitals Receiving Scores on Fewer Than Four Domains
    In the FY 2015 IPPS/LTCH PPS final rule (79 FR 50084 through 
50085), 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. We are not proposing any changes to these 
domain weights in this proposed rule.
c. Minimum Numbers of Measures for Hospital VBP Program Domains
    Based on our previously finalized policies (82 FR 38266), for a 
hospital to receive domain scores:
     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 to receive a Clinical Outcomes 
domain score.
     A hospital must receive a minimum of two measure scores 
within the Safety domain to receive a Safety domain score.
     A hospital must receive a minimum of one measure score 
within the Efficiency and Cost Reduction domain to receive an 
Efficiency and Cost Reduction domain score.
    We are not proposing any changes to these policies in this proposed 
rule.
d. Minimum Numbers of Cases for Hospital VBP Program Measures
(1) Background
    Section 1886(o)(1)(C)(ii)(IV) of the Act requires the Secretary to 
exclude for the fiscal year hospitals that do not report a minimum 
number (as determined by the Secretary) of cases for the measures that 
apply to the hospital for the performance period for the fiscal year. 
For additional discussion of the previously finalized minimum numbers 
of cases for measures under the Hospital VBP Program, we refer readers 
to the Hospital Inpatient VBP Program final rule (76 FR 26527 through 
26531); the CY 2012 OPPS/ASC final rule (76 FR 74532 through 74534); 
the FY 2013 IPPS/LTCH PPS final rule (77 FR 53608 through 53610); the 
FY 2015 IPPS/LTCH PPS final rule (79 FR 50085 through 50086); the FY 
2016 IPPS/LTCH PPS final rule (80 FR 49570); the FY 2017 IPPS/LTCH PPS 
final rule (81 FR 57011); the FY 2018 IPPS/LTCH PPS final rule (82 FR 
38266 through 38267); the FY 2019 IPPS/LTCH PPS final rule (83 FR 41465 
through 41466); and the FY 2020 IPPS/LTCH PPS final rule (84 FR 42399 
through 42400). We are not proposing any changes to these policies in 
this proposed rule.
(2) Summary of Previously Adopted Minimum Number of Cases
    The previously adopted minimum numbers of cases for these measures 
are set forth in this table.
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BILLING CODE 4120-01-C
e. Summary of Previously Adopted Administrative Policies for NHSN 
Healthcare-Associated Infection (HAI) Measure Data
    In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42400 through 
42402), we finalized our proposal for the Hospital VBP Program to use 
the same data to calculate the CDC NHSN HAI measures that the HAC 
Reduction Program uses for purposes of calculating the measures under 
that program, beginning on January 1, 2020 for CY 2020 data collection, 
which would apply to the Hospital VBP Program starting with data for 
the FY 2022 program year performance period. In the FY 2020 IPPS/LTCH 
PPS final rule (84 FR 42402), we also finalized our proposal for the 
Hospital VBP Program to use the same processes adopted by the HAC 
Reduction Program for hospitals to review and correct data for the CDC 
NHSN HAI measures and to rely on HAC Reduction Program validation to 
ensure the accuracy of CDC NHSN HAI measure data used in the Hospital 
VBP Program. We are not proposing any changes to these policies in this 
proposed rule.
    We also refer readers to section IV.M. of the preamble of this 
proposed rule for additional information about HAC Reduction Program 
refinements to validation policies for the CDC NHSN HAI measures.

M. Hospital-Acquired Condition (HAC) Reduction Program: Proposed 
Updates and Changes (42 CFR 412.170)

1. Regulatory Background
    We refer readers to the FY 2014 IPPS/LTCH PPS final rule (78 FR 
50707 through 50708) for a general overview of the HAC Reduction 
Program and to the same final rule (78 FR 50708 through 50709) for a 
detailed discussion of the statutory basis for the Program. For 
additional descriptions of our previously finalized policies for the 
HAC Reduction Program, we also refer readers to the following final 
rules:
     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).
     The FY 2018 IPPS/LTCH PPS final rule (82 FR 38269 through 
38278).
     The FY 2019 IPPS/LTCH PPS final rule (83 FR 41472 through 
41492).
     The FY 2020 IPPS/LTCH PPS final rule (84 FR 42402 through 
42411).
    These rules describe the general framework for the HAC Reduction 
Program's implementation, 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) data collection; (6) validation; (7) measure 
removal factors policy; (8) 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; (9) the extraordinary circumstance exception policy; and 
(10) limitation of administrative and judicial review. We remind 
readers that data collection and validation policies (items (5) and 
(6)) were finalized in the FY 2019 IPPS/LTCH PPS final rule (83 FR 
41472 through 41492) and further clarified in the FY 2020 IPPS/LTCH PPS 
final rule (84 FR 42402 through 42411).
    We have also codified certain requirements of the HAC Reduction 
Program at 42 CFR 412.170 through 412.172.
2. Summary of Proposed Policies for the HAC Reduction Program
    In section IV.M.4. of the preamble of this proposed rule, we are 
proposing the automatic adoption of applicable periods beginning with 
the FY 2023 program year and all subsequent program years, unless 
otherwise specified by the Secretary. In section IV.M.6. of the 
preamble of this proposed rule, we are proposing refinements to the HAC 
Reduction Program validation procedures. Finally, in section IV.M.7. of 
the preamble of this proposed rule, we are proposing to update the 
definition of applicable period at 42 CFR 412.170 to align with this 
proposal.
3. Measures for FY 2021 and Subsequent Years
a. Current Measures
    The HAC Reduction Program has adopted six measures to date. In the 
FY 2014 IPPS/LTCH PPS final rule (78 FR 50717), we finalized the use of 
five CDC NHSN HAI measures: (1) CAUTI; (2) CDI; (3) CLABSI; (4) Colon 
and Abdominal Hysterectomy SSI; and (5) MRSA Bacteremia. In the FY 2017 
IPPS/LTCH PPS final rule (81 FR 57014), we also finalized the use of 
the CMS PSI 90 measure. These previously finalized measures, with their 
full measure names, are shown in this table.
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    Technical specifications for the CMS PSI 90 measure can be found on 
the QualityNet website. Technical specifications for the CDC NHSN HAI 
measures 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.
    In this proposed rule, we are not proposing to adopt or remove any 
measures.
b. Measure Removal Factors Policy
    We refer readers to the FY 2019 IPPS/LTCH PPS final rule (83 FR 
41472 through 41474) for more information about how the HAC Reduction 
Program supports CMS' goal of bringing quality measurement, 
transparency, and improvement together with value-based purchasing to 
the hospital inpatient care setting through the Meaningful Measures 
Initiative. We also refer readers to the FY 2020 IPPS/LTCH PPS final 
rule (84 FR 42404 through 42406) for information about our measure 
removal and retention factors for the HAC Reduction Program. In this 
proposed rule, we are not proposing any removal and retention factor 
policy changes.
4. Applicable Period for the HAC Reduction FY 2023 Program Year and 
Subsequent Years
    As we stated in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50717), 
we believe that using 24-month data collection periods for the CMS PSI 
90 and CDC NHSN HAI measures for the HAC Reduction Program provides 
hospitals and the general public the most current data available. The 
24-month data period also allows time to complete the complex 
calculation process for these measures, to perform comprehensive 
quality assurance to enhance the accuracy of measure results, and to 
disseminate confidential reports on hospital-level results to 
individual hospitals. Though we had truncated the applicable period to 
shorter than a 24-month data collection period for the CMS PSI 90 to 
accommodate the transition to the ICD-10 classification system for FY 
2018 and 2019,\463\ we returned to using the full 24-month data 
collection period as soon as the ICD-10 transition was complete. In the 
FY 2018 IPPS/LTCH PPS final rule (82 FR 38271), for FY 2020, we 
finalized the applicable period for the CMS PSI 90 as the 24-month 
period from July 1, 2016 through June 30, 2018. Additionally, we 
finalized the applicable period for the CDC NHSN HAI measures (CLABSI, 
CAUTI, Colon and Abdominal Hysterectomy SSI, MRSA Bacteremia, and CDI), 
as the 24-month period from January 1, 2017 through December 31, 2018. 
We have finalized the 24-month applicable periods for FYs 2021 and 2022 
\464\ consistent with these applicable periods and with the definition 
specified at Sec.  412.170.
---------------------------------------------------------------------------

    \463\ FY 2017 IPPS/LTCH PPS final rule (81 FR 57020).
    \464\ FY 2019 IPPS/LTCH PPS final rule (83 FR 41489); FY 2020 
IPPS/LTCH PPS final rule (84 FR 42410).
---------------------------------------------------------------------------

    We continue to believe that the 24-month period is the appropriate 
data collection period for both the CMS PSI 90 and CDC NHSN HAI 
measures. In order to provide greater certainty around future 
applicable periods for the HAC Reduction Program, we are proposing the 
automatic adoption of applicable periods for the FY 2023 program year 
and all subsequent program years for the HAC Reduction Program. 
Beginning in FY 2023, the applicable period for both the CMS PSI 90 and 
CDC NHSN HAI measures will be the 24-month period beginning 1 year 
advanced from the previous program year's start of the applicable 
period. That is, for FY 2023, the applicable period for the CMS PSI 90 
would be the 24-month period from July 1, 2019 through June 30, 2021, 
and the applicable period for CDC NHSN HAI measures would be the 24-
month period from January 1, 2020 through December 31, 2022, which is 
advanced 1 year from the applicable period for the FY 2022 HAC 
Reduction Program. All subsequent years would advance this 24-month 
period by 1 year unless otherwise specified by the Secretary, which we 
would convey through notice and comment rulemaking. We believe that the 
automatic adoption of the applicable period each year would streamline 
the process and provide additional clarity and consistency to the 
Program.
5. HAC Reduction Program Scoring Methodology and Scoring Review and 
Corrections Period
    In FY 2019 IPPS/LTCH PPS final rule (83 FR 41484 through 41489), we 
adopted the Equal Measure Weights approach to scoring and clarified the 
``Scoring Calculations Review and Correction Period'' (83 FR 41484). 
Hospitals must register for a QualityNet Secure Portal account in order 
to access their annual hospital-specific reports. We will continue 
using this scoring methodology and the ``Scoring Calculations Review 
and Correction Period'' process in FY 2021 and for subsequent years.
6. Validation of HAC Reduction Program Data
a. Background
    In the FY 2019 IPPS/LTCH PPS final rule (83 FR 41478 through 
41484), we adopted processes to validate the CDC NHSN HAI measure data 
used in the HAC Reduction Program, because the Hospital IQR Program 
finalized its proposals to remove CDC NHSN HAI measures from its 
program. In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42406 through 
42410), we provided additional clarification to the validation 
selection and scoring methodology. We also refer readers to the 
QualityNet website for more information regarding chart-abstracted data 
validation of measures.
    In the FY 2019 IPPS/LTCH PPS final rule, we finalized our policy 
that the HAC Reduction Program will begin validation with Q3 2020 
discharges, which must be reported by February 2021 using the following 
validation schedule.

[[Page 32783]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.190

    We also adopted a policy that any nonsubstantive updates to the 
procedures for validation of chart-abstracted measures will be provided 
on the QualityNet website.
---------------------------------------------------------------------------

    \465\ The CMS Clinical Data Abstraction Center (CDAC) performs 
the validation.
---------------------------------------------------------------------------

    We are proposing several changes to the process for validation of 
HAC Reduction Program measure data to align this program with the 
proposed changes to the Hospital IQR Program measure validation 
process. Specifically, we intend to align the hospital selection and 
submission quarters beginning with FY 2024 Hospital IQR and HAC 
Reduction Programs validation so that we only require one pool of 
hospitals to submit data for validation. We believe that this would 
reduce burden and streamline processes. Our specific proposals to 
update the HAC Reduction Program validation process are described later 
in this section. For more information on the proposed updates to the 
Hospital IQR measure validation process, see section VIII.A. of the 
preamble of this proposed rule.
b. Proposed Updates to Process for Validation of HAC Reduction Program 
Measure Data
1. Aligning Submission Quarters to Hospital IQR Submissions
    To support the transition to an aligned validation program for the 
HAC Reduction Program and the Hospital IQR Program, we are proposing to 
change the quarters of data used for HAC Reduction Program measure 
validation. Under the existing validation structure, hospitals selected 
for validation for the FY 2023 program year would be required to submit 
HAC Reduction Program measure data from the third and fourth quarters 
of 2020 and the first and second quarters of 2021 (as depicted in the 
table in section IV.M.6.a. of the preamble of this proposed rule).
    In order to align the quarters used for HAC Reduction Program and 
Hospital IQR validation, we are proposing to only use measure data from 
the third and fourth quarters of 2020 for the FY 2023 program year 
(illustrated in this table). We would use measure data from only these 
quarters for both the random and targeted validation pools.
[GRAPHIC] [TIFF OMITTED] TP29MY20.191

    For the FY 2024 program year and subsequent years, we are proposing 
to use measure data from all of CY 2021 for both the HAC Reduction 
Program and the Hospital IQR Program. Under this proposal, the data 
submission deadlines for chart-abstracted measures would be in the 
middle of the month, the fifth month following the end of the reporting 
quarter.
[GRAPHIC] [TIFF OMITTED] TP29MY20.192


[[Page 32784]]


    We invite public comment on our proposal to align submission 
quarters and deadlines with the Hospital IQR Program.
2. Aligning Hospital Selection
    Currently, a total of up to 600 hospitals may be selected for 
validation under the HAC Reduction Program. This is achieved by the HAC 
Reduction Program taking an annual sample of up to 400 randomly 
selected hospitals and selecting up to 200 hospitals using targeting 
criteria. We are not proposing any changes to the hospital selection 
for validation for the FY 2023 program year. However, we are proposing 
to update the policies to reduce the total validation pool from up to 
600 hospitals to up to 400 hospitals, effective with validation for the 
FY 2024 program year. This would align with proposals being made by the 
Hospital IQR Program in section VIII.A. of the preamble of this 
proposed rule. To achieve this reduction, we propose reducing the 
randomly selected hospital pool from up to 400 hospitals to up to 200 
hospitals for validation for the FY 2024 program year and subsequent 
years. We note that these would be the same hospitals as those selected 
for validation under the Hospital IQR Program to the extent that the 
IQR program has measures for those hospitals; therefore, we would be 
selecting a total of up to 400 hospitals across both the HAC Reduction 
Program and the Hospital IQR Program. This would reduce the total 
number of hospitals selected for validation across both programs by 
approximately one third each year. We believe reducing the total number 
of hospitals randomly selected for chart-abstracted measure validation 
to ``up to 200'' would maintain a sufficient sample size for a 
statistically meaningful estimate of hospitals' reporting accuracy and 
help streamline the process for both programs. We invite public comment 
on our proposal to align hospital selection with the Hospital IQR 
Program for FY 2024 payment determination and subsequent years.
3. Requiring the Use of Digital Submissions for Medical Records 
Requests
    We are proposing to require hospitals to submit digital files when 
submitting medical records for validation of HAC Reduction Program 
measures, for the FY 2024 program year and subsequent years. Currently, 
hospitals may choose to submit paper copies of medical records for 
chart-abstracted measure validation or they may submit patient charts 
for validation by securely transmitting electronic versions of medical 
information (83 FR 41478 through 41484). Currently, submission via 
secure transmission can either entail downloading or copying the 
digital image of the patient chart onto CD, DVD, or flash drive, or 
submission of PDFs using a CMS-approved secured file transfer system.
    In this proposed rule, in alignment with proposals made for the 
Hospital IQR Program in section VIII.A. of the preamble of this 
proposed rule, we are proposing to discontinue the option of sending 
CD, DVD, or flash drives containing digital images of patient charts, 
beginning with Q1 2021 for FY 2024 program year validation. Under this 
proposal, hospitals would be required to submit PDF copies of medical 
records using direct electronic files submission via a CMS-approved 
secure file transmission process. We would continue to reimburse 
hospitals at $3.00 per chart, consistent with current reimbursement for 
electronic submissions of charts.
    We strive to provide the public with accurate quality data while 
maintaining alignment with hospital recordkeeping practices. We 
appreciate that hospitals have rapidly adopted EHR systems as their 
primary source of information about patient care, which can facilitate 
the process of producing electronic copies of medical records (78 FR 
50834). Additionally, we monitor the medical records submissions to the 
CMS Clinical Data Abstraction Center (CDAC) contractor, and have found 
almost two-thirds of providers use the option to submit PDF copies of 
medical records as electronic files. We note that paper submissions can 
be reimbursed at a higher rate than for electronic submissions, 
especially for longer records because paper submissions are reimbursed 
on a per page basis, while electronic submissions are reimbursed using 
a flat rate for each submission. In our assessment based on the 
monitoring we believe the electronic submissions can be a more 
effective and efficient process for the hospitals selected for 
validation. Requiring electronic file submissions reduces the burden of 
not only coordinating numerous paper-based pages of medical records and 
making photocopies, but also shipping it to the CDAC. Therefore, we 
believe it is appropriate to require that hospitals use electronic 
submissions via a CMS-approved secure file transmission process. We 
invite public comment on this proposal in section VIII.A of the 
preamble of this proposed rule.
7. Regulatory Updates (42 CFR 412.170)
    We are proposing to amend the definition of applicable period at 42 
CFR 412.170 to align with our proposed automatic adoption of applicable 
periods in future program years. Section 412.170 currently defines 
applicable period as the 2-year period specified by the Secretary from 
which data are collected in order to calculate the total hospital-
acquired condition score under the HAC Reduction Program. The proposed 
amendment to the definition would add language to specify: (1) The 
applicable period of the CMS PSI 90 and CDC NHSN HAI measures for the 
FY 2023 HAC Reduction Program; and (2) beginning with the FY 2023 
program year, the applicable period will be advanced by 1 year from the 
prior from the prior fiscal year's applicable period. This addition to 
the definition at 42 CFR 412.170 makes it so applicable periods for 
future program years do not need to be defined during rulemaking.

N. Payments for Indirect and Direct Graduate Medical Education Costs 
(Sec. Sec.  412.105 and 413.75 Through 413.83)

1. Overview of Medicare Direct GME and IME
    The Medicare program makes payments to teaching hospitals to 
account for two types of costs, the direct costs (direct GME) and the 
indirect costs (IME) of a hospital's graduate medical education 
program. Direct GME payments represent the direct costs of training 
residents (for example, resident salaries, fringe benefits, and 
teaching physician costs associated with an approved GME program) and 
generally are calculated by determining the product of the Medicare 
patient load (that is, the percentage of the hospital's Medicare 
inpatient days), the hospital's per resident payment amount, and the 
weighted number of FTE residents training at the hospital during the 
cost reporting period.
    The IME adjustment is made to teaching hospitals for the additional 
indirect patient care costs attributable to teaching activities. For 
example, teaching hospitals typically offer more technologically 
advanced treatments to their patients, and therefore, patients who are 
sicker and need more sophisticated treatment are more likely to go to 
teaching hospitals. Furthermore, there are additional costs related to 
the presence of inefficiencies associated with teaching residents 
resulting from the additional tests or procedures ordered by residents 
and the demands put on physicians who supervise, and staff who support, 
the residents. IME payments are made for each inpatient

[[Page 32785]]

discharge as a percentage add-on adjustment to the Hospital Inpatient 
Prospective Payment System (IPPS) payment, and are calculated based on 
the hospital's ratio of FTE residents to available beds as defined at 
Sec.  412.105(b). The statutory formula for calculating the IME 
adjustment is: c x [(1 + r)\.405\ - 1], where ``r'' represents the 
hospital's ratio of FTE residents to beds, and ``c'' represents an IME 
multiplier, which is set by the Congress.
    The amount of IME payment a hospital receives for a particular 
discharge is dependent upon the number of FTE residents the hospital 
trains, the hospital's number of available beds, the current level of 
the statutory IME multiplier, and the per discharge IPPS payment. 
Sections 1886(d)(5)(B)(v) and 1886(h)(4)(F) of the Act established 
hospital specific limits (that is, caps) on the number of allopathic 
and osteopathic FTE residents that hospitals may count for purposes of 
calculating indirect and direct GME payments, respectively.
2. Existing Regulations Related to Residency Program or Teaching 
Hospital Closure
    The regulations at 42 CFR 413.79(h) for direct GME, and 42 CFR 
412.105(f)(1)(ix) for IME provide for a hospital that is closing or 
closing its residency program(s) to volunteer to temporarily transfer a 
portion of its hospital-specific direct GME and IME FTE resident caps 
to other hospitals that are willing to accept and train the displaced 
resident(s) for the duration of the resident's training program. CMS 
first implemented regulations regarding residents displaced by teaching 
hospital closure in the July 30, 1999 IPPS final rule (64 FR 41522). We 
made the change to allow a receiving hospital to receive temporary IME 
and direct GME cap adjustments in limited circumstances due to hospital 
closure for assuming the training of displaced residents because of a 
reluctance on the part of receiving hospitals to assume these displaced 
residents without attending increases to their IME and direct GME FTE 
resident caps to ensure receipt of Medicare funding. We define 
``closure of a hospital'' at 42 CFR 413.79(h)(1)(i) as a situation in 
which ``the hospital terminates its Medicare agreement under the 
provisions of Sec.  489.52 of this chapter.'' At 42 CFR 413.79(h)(2), 
our regulations state that a hospital may receive a temporary 
adjustment to its FTE cap to reflect residents added because of another 
hospital's closure if the hospital meets the following: The hospital is 
training additional residents from a hospital that closed on or after 
July 1, 1996, and no later than 60 days after the hospital begins to 
train the residents, the hospital submits a request to its contractor 
for a temporary adjustment to its FTE cap, documents that the hospital 
is eligible for this temporary adjustment by identifying the residents 
who have come from the closed hospital and have caused the hospital to 
exceed its cap, and specifies the length of time the adjustment is 
needed.
    Subsequently, in the August 1, 2001 IPPS final rule (66 FR 39899), 
we further added to the regulations at 42 CFR 413.79(h) to also allow a 
receiving hospital to receive temporary IME and direct GME cap 
adjustments due to closure of a residency program (although the 
hospital itself would remain open) for assuming the training of 
displaced residents due to similar reluctance on the part of receiving 
hospitals to accept these displaced residents without attending 
increases to their IME and direct GME FTE resident caps to ensure 
receipt of Medicare funding. We define ``closure of a hospital 
residency training program'' at 42 CFR 413.79(h)(1)(ii) to mean the 
hospital ceases to offer training for residents in a particular 
approved medical residency training program. However, because the 
hospital with the closing program itself remains open in the case of 
program closure, it retains its full IME and direct GME FTE resident 
caps. In order to prevent the situation of double payment for the same 
FTE resident cap slots, where the originating hospital closes a program 
and fills its vacated slots with residents from a different specialty, 
while the receiving hospital also receives payment for training the 
displaced resident, we stated in regulation that a receiving hospital 
could only receive the temporary FTE resident cap adjustment if the 
originating hospital with the closed program voluntarily agreed to 
temporarily reduce its FTE resident caps for the duration of the 
displaced residents' training at the receiving hospital (see 66 FR 
39900 August 1, 2001). We revised the regulations at 42 CFR 
413.79(h)(3) to specify the responsibilities of the closing hospital or 
program and the receiving hospital.
3. Proposed Policy Change Related to Medical Residents Affected by 
Residency Program or Teaching Hospital Closure
    When teaching hospitals have closed, we receive many inquiries from 
concerned stakeholders about whether Medicare IME and direct GME 
funding could be seamlessly maintained for the medical residents that 
would have to find alternate training hospitals to complete their 
training. However, although not explicitly stated in regulations text, 
our current policy is that the definition of a displaced resident is 
one that is physically present at the hospital training on the day 
prior to or the day of hospital or program closure. This longstanding 
policy derived from the fact that in both the regulations text under 
hospital closure and program closure, there is a requirement that the 
receiving hospital identifies the residents'' who have come from the 
closed hospital,'' or ``identifies the residents who were in training 
at the time of the program's closure'' (see 42 CFR 413.79(h)(2)(ii) and 
(h)(3)(ii)(B)). We considered the residents who were physically present 
at the hospital to be those residents who were ``training at the time 
of the program or hospital closure,'' thereby granting them the status 
of ``displaced residents.'' However, stakeholders have voiced their 
concern that by limiting the ``displaced residents'' to only those 
physically present at the time of closure, it becomes much more 
administratively challenging for the following groups of residents at 
closing hospitals/programs to have their residencies continue to be 
funded by Medicare: (1) Residents who leave the program after the 
closure is publicly announced to continue training at another hospital, 
but before the actual closure; (2) residents assigned to and training 
at planned rotations at other hospitals who will be unable to return to 
their rotations at the closing hospital or program; and (3) individuals 
(such as medical students or would-be fellows) who matched into GME 
programs at the closing hospital or program but have not yet started 
training at the closing hospital or program. Other groups of residents 
who, under current policy, are already considered ``displaced 
residents'' include--(1) residents who are physically training in the 
hospital on the day prior to or day of program or hospital closure; and 
(2) residents who would have been at the closing hospital/program on 
the day prior to or of closure, but for the fact that they were on 
approved leave at that time, and will be unable to return to their 
training at the closing hospital/program.
    We are proposing to amend the Medicare policy with regard to 
closing teaching hospitals and closing residency programs to address 
the needs of residents attempting to find alternative hospitals in 
which to complete their training and the incentives of originating and 
receiving hospitals with regard to seamless Medicare IME and direct GME 
funding. We are proposing

[[Page 32786]]

to change two aspects of the current Medicare policy. First, rather 
than link the Medicare temporary funding for the affected residents to 
the day prior to or the day of program or hospital closure, we propose 
that the key day would be the day that the closure was publicly 
announced (for example, via a press release or a formal notice to the 
Accreditation Council on Graduate Medical Education (ACGME)). This 
would provide greater flexibility for the residents to transfer while 
the hospital operations or residency programs were winding down, rather 
than waiting until the last day of hospital or program operation. This 
would address the needs of the first group of residents as previously 
described: Residents who would leave the program after the closure was 
publicly announced to continue training at another hospital, but before 
the day of actual closure. Second, by removing the link between 
Medicare temporary funding for the residents, and the day prior to or 
the day of program or hospital closure, we propose to also allow 
funding to be transferred temporarily for the second and third group of 
residents who are not physically at the closing hospital/closing 
program, but had intended to train at (or return to training at, in the 
case of residents on rotation) the closing hospital/closing program.
    Thus, we are proposing to revise our policy with regard to which 
residents can be considered ``displaced'' for Medicare temporary FTE 
resident cap transfer purposes in the situation where a hospital 
announces publicly that it is closing, and/or that it is closing a 
residency program(s). Specifically, we are proposing to add the 
definition of ``displaced resident'' in new 42 CFR 413.79(h)(1)(iii) to 
read as set out in the regulatory text of this document.
    Current IME regulations at 42 CFR 412.105(f)(1)(ix) link to the 
direct GME regulations at 42 CFR 413.79(h), so this proposed regulation 
change would apply to the IME FTE cap transfers for displaced residents 
as well. In order to fully coordinate these IME regulations with the 
new proposed definition of ``displaced resident,'' we are proposing to 
slightly modify the regulations at 42 CFR 412.105(f)(1)(ix) to add the 
word ``displaced'' to describe residents added by a receiving hospital 
due to a hospital or program closure. In addition, we are proposing to 
change another detail of the policy specific to the requirements for 
the receiving hospital. To apply for the temporary increase in the 
Medicare resident cap, the receiving hospital would have to submit a 
letter to its Medicare Administrative Contractor within 60 days of 
beginning the training of the displaced residents. In the July 30, 1999 
IPPS final rule (64 FR 41523), we stated that this letter must include 
the names and social security numbers of the displaced residents, the 
hospital and programs in which the residents were training previously, 
and the amount of the cap increase needed for each resident (based on 
how much the receiving hospital is in excess of its caps and the length 
of time for which the adjustments are needed (42 CFR 413.79(h)(2)(ii)). 
To reduce the amount of personally identifiable information (PII) 
included in these agreements, we are proposing to no longer require the 
full social security number for each resident. However, in order to 
still provide enough information for the hospitals and MACs to be able 
to differentiate among many residents, some which may have similar 
names, we are proposing to require the receiving hospital to include 
the names and the last four digits of each displaced resident's social 
security number.
    We are also noting that as under current policy, the maximum number 
of FTE resident cap slots that could be transferred to all receiving 
hospitals is the number of IME and direct GME FTE resident cap slots 
belonging to the hospital that has the closed program, or that is 
closing. Therefore, if the originating hospital is training residents 
in excess of its caps, then being a displaced resident does not 
guarantee that a cap slot will be transferred along with that resident. 
A closure situation does not grant the Medicare program the authority 
to fund additional residency slots in excess of the cap amounts at the 
originating hospital. If there are more displaced residents than 
available cap slots, the slots may be apportioned, according to the 
closing hospital's discretion. The decision to transfer a cap slot if 
one is available is voluntary and made at the sole discretion of the 
originating hospital (42 CFR 413.79(h)(3)(ii)). However, if the 
originating hospital decides to do so, then it is the originating 
hospital's and/or sponsor's responsibility to determine how much of an 
available cap slot goes with a particular resident (if any). (Also note 
that only to the extent a receiving hospital would exceed its FTE cap 
by training displaced residents would it be eligible for the temporary 
adjustment (66 FR 39899, Sec.  413.79(h)(3)(i)(B)). A receiving 
hospital is paid for the displaced resident using its own direct GME 
and IME factors, that is, the same rates as those used for residents in 
its own programs (see 66 FR 39901 August 1, 2001).

O. 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 in 
this proposed rule). Section 15003 also required that, no later than 
120 days after enactment of Public Law 114-255, the Secretary had to 
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 114-148 was not exceeded. In this proposed 
rule, we are providing a description of the provisions of section 15003 
of Public Law 114-255, our final policies for implementation, and the 
finalized budget neutrality methodology for the extension period 
authorized by section 15003 of Public Law 114-255. We note that the 
periods of participation for a number of the hospitals selected prior 
to the extension period authorized by Public Law 114-255 will have 
ended by the close of FY 2021, and that the budget neutrality 
methodology for this upcoming fiscal year will take into account the 
schedule of end dates.
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) of Public Law 108-
173, 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;

[[Page 32787]]

     Has fewer than 51 beds (excluding beds in a distinct part 
psychiatric or rehabilitation unit) as reported in its most recent cost 
report;
     Provides 24-hour emergency care services; and
     Is not designated or eligible for designation as a CAH 
under section 1820 of the Act.
    Section 410A of Public Law 108-173 required a 5-year period of 
performance. Subsequently, sections 3123 and 10313 of Public Law 111-
148 required the Secretary 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. Public Law 111-148 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, Public Law 111-148 limited the 
number of hospitals participating to no more than 30. We refer readers 
to previous final rules for a summary of the selection and 
participation of these hospitals. Starting from December 2014 and 
extending through December 2016, the 21 hospitals that were still 
participating in the demonstration ended their scheduled periods of 
performance on a rolling basis, respectively, according to the end 
dates of the hospitals' cost report periods.
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 
Public Law 111-148), 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). This new 
paragraph required 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 Public Law 111-148). Section 410A(g)(6)(B) 
provided that, in determining which hospitals submitting an application 
pursuant to this solicitation were to be selected for participation in 
the demonstration, the Secretary must give priority to rural community 
hospitals located in one of the 20 States with the lowest population 
densities, as determined using the 2015 Statistical Abstract of the 
United States. The Secretary was also instructed to 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 Public Law 114-255 (December 13, 2016), as well as 
the population density of the State in which the rural community 
hospital is located.
b. Terms of Participation for the Extension Period Authorized by Public 
Law 114-255
    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 payment for services provided under the cost-
based payment methodology under section 410A of Public Law 108-173 (as 
amended by section 15003 of Public Law 114-255) on the date immediately 
after the period of performance ended under the first 5-year extension 
period.
    Seventeen of the 21 hospitals that completed their periods of 
participation under the extension period authorized by Public Law 111-
148 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). 
Therefore, 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 responding to the requirement 
in Public Law 114-255, 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 
that each of these newly participating hospitals would begin its 5-year 
period of participation effective with the start of the first cost-
reporting period on or after October 1, 2017. One of the hospitals 
selected from the solicitation in 2017 withdrew from the demonstration 
program prior to beginning participation in the demonstration on July 
1, 2018. In addition, one of the previously participating hospitals 
closed effective January 2019, and another withdrew effective October 
1, 2019. Therefore, 27 hospitals were participating in the 
demonstration as of this date--15 previously participating and 12 newly 
participating. For four of the previously participating hospitals, this 
5-year period of participation will end during FY 2020; for 8 of the 
remaining 11 hospitals among this group, participation will end during 
FY 2021, with participation ending for the other three on December 31, 
2021. The newly participating hospitals are all scheduled to end their 
participation either at the end of FY 2022 or during FY 2023.

[[Page 32788]]

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 
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, 79 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 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 
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 2015 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 this rule, as well as in the FY 
2019 and FY 2020 IPPS/LTCH PPS proposed and final rules (83 FR 20444 
and 41503, and 84 FR19452 and 42421, respectively) 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.
    In these proposed and final rules, we described several distinct 
components to the budget neutrality offset amount for the specific 
fiscal years of the extension period authorized by Public Law 114-255.
     We included 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. In the FY 2019 IPPS final rule (83 FR 41506), we included 
such an estimate of the costs of the demonstration for each of FYs 2018 
and 2019 into the budget neutrality offset amount for FY 2019. In the 
FY 2020 IPPS final rule, we included an estimate of the costs of the 
demonstration for FY 2020 for 28 hospitals.
     Similar to previous years, we continued to implement the 
policy of determining the difference between the actual costs of the 
demonstration as determined from finalized cost reports for a given 
fiscal year and the estimated costs indicated in the corresponding 
year's final rule, and including that

[[Page 32789]]

difference as a positive or negative adjustment in the upcoming year's 
final rule. (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 was applied to the date following the 
end date of its period of performance for the first extension period to 
the date of conversion). In the FY 2020 final rule, we included the 
difference between the amount determined for the cost of the 
demonstration in each of FYs 2014 and 2015 and the estimated amount 
included in the budget neutrality offset in the final rule for each of 
these respective fiscal years. For FY 2016 and subsequent years we will 
use finalized cost reports when available that detail the actual costs 
of the demonstration for each of these fiscal years and incorporate 
these amounts into the budget neutrality calculation.
(2) Methodology for Estimating Demonstration Costs for FY 2021
    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, 
that is, FY 2021. Noting again that four of the previously 
participating hospitals will end their participation during FY 2020, we 
are conducting this estimate for FY 2021 on the basis of the 23 
hospitals that will participate during that fiscal year. The 
methodology for calculating this amount for FY 2021 proceeds according 
to the following steps:
    Step 1: For each of these 23 hospitals, we identify the reasonable 
cost amount calculated under the reasonable cost-based 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 2018. We 
note that among the eight hospitals that are scheduled to end 
participation during FY 2021, five will end prior to September 30, 
2021. Therefore, consistent with previous practice, we prorate the cost 
amounts for these hospitals by the fraction of total months in the 
demonstration period of participation that fall within FY 2021 out of 
the total of 12 months in the fiscal year. For example, for a hospital 
whose period of performance ends June 30, 2021, this prorating factor 
is 0.75. We sum these hospital-specific amounts to arrive at a total 
general amount representing the costs for covered inpatient hospital 
services, including swing beds, across the total 23 hospitals 
participating during FY 2021.
    Then, we multiply this amount by the FYs 2019, 2020 and 2021 IPPS 
market basket percentage increases, which are formulated by the CMS 
Office of the Actuary. (We are using the proposed market basket 
percentage increase for FY 2021, which can be found at section II.A. of 
the Addendum to this proposed rule). The result for the 23 
participating hospitals is the general estimated reasonable cost amount 
for covered inpatient hospital services for FY 2021.
    Consistent with our methods in previous years for formulating this 
estimate, we are applying the IPPS market basket percentage increases 
for FYs 2019 through 2021 to the applicable estimated reasonable cost 
amount (previously described) in order to model the estimated FY 2021 
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 2021 under 
applicable Medicare payment methodologies for covered inpatient 
hospital services, including swing beds (as indicated on the same set 
of ``as submitted'' cost reports as in Step 1), if the demonstration 
were not implemented. (Also, similar to step 1, we are prorating the 
amounts for hospitals whose period of participation ends prior to the 
end of FY 2021 by the fraction of total months in the demonstration 
period of participation for the hospital that fall within FY 2021 out 
of the total of 12 months in the fiscal year). We sum these hospital-
specific amounts, and, in turn, multiply this sum by the FYs 2019, 2020 
and 2021 IPPS applicable percentage increases. (Again, for FY 2021, we 
are using the proposed applicable percentage increase, per section 
II.A. of the Addendum of this proposed rule). This methodology differs 
from Step 1, in which we apply 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.
    Step 3: We subtract the amount derived in Step 2 from the amount 
derived in Step 1. According to our methodology, the resulting amount 
indicates the total difference for the 23 hospitals (for covered 
inpatient hospital services, including swing beds), which will be the 
general estimated amount of the costs of the demonstration for FY 2021.
    For this proposed rule, the resulting amount is $40,804,704, which 
we are incorporating into the budget neutrality offset adjustment for 
FY 2021. This estimated amount is based on the specific assumptions 
regarding the data sources used, that is, recently available ``as 
submitted'' cost reports and historical update factors for cost and 
payment. If updated data become available prior to the final rule, we 
would use them as appropriate to estimate the costs for the 
demonstration program for FY 2021 in accordance with our methodology 
for determining the budget neutrality estimate).
(3) Reconciling Actual and Estimated Costs of the Demonstration for 
Previous Years
    As described earlier, we have calculated the difference for FYs 
2005 through 2015 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.
    At this point, not all cost reports have been finalized for the 19 
hospitals that completed cost report periods under the demonstration 
payment methodology beginning in FY 2016. If the entire set of 
finalized cost reports is available prior to the FY 2021 IPPS/LTCH 
final rule, we will include in the final budget neutrality offset 
amount for FY 2021 the difference between the actual cost as determined 
from these cost reports and the estimated amount identified in the 
final rule for FY 2016 in the final rule for the upcoming fiscal year.

[[Page 32790]]

(4) Total Proposed Budget Neutrality Offset Amount for FY 2020
    Therefore, for this FY 2021 IPPS/LTCH PPS proposed rule, the budget 
neutrality offset amount for FY 2021 is based on the amount determined 
under section II.A. of the Addendum of this proposed rule, representing 
the difference applicable to FY 2021 between the sum of the estimated 
reasonable cost amounts that would be paid under the demonstration to 
the 23 hospitals participating in the fiscal year for covered inpatient 
hospital services and the sum of the estimated amounts that would 
generally be paid if the demonstration had not been implemented. This 
estimated amount is $40,804,704.

P. Market-Based MS-DRG Relative Weight Proposed Data Collection and 
Potential Change in Methodology for Calculating MS-DRG Relative Weights

1. Overview
    On October 12, 2017, President Trump issued Executive Order (E.O.) 
13813 on Promoting Healthcare Choice and Competition Across the United 
States. E.O. 13813 directs the administration, to the extent consistent 
with law, to facilitate, ``the development and operation of a 
healthcare system that provides high-quality care at affordable prices 
for the American people,'' by increasing consumer choice and promoting 
competition in healthcare markets and by removing and revising 
government regulation.
    As a result of E.O. 13813, the Secretary published a report 
entitled, ``Reforming America's Healthcare System Through Choice and 
Competition,'' which recognized the importance of price transparency in 
bringing down the cost of healthcare. Building on the importance of 
transparency in healthcare pricing, in accordance with the President's 
E.O. on Improving Price and Quality Transparency in American Healthcare 
to Put Patients First (issued on June 24, 2019), we proposed in the CY 
2020 Proposed Changes to Hospital Outpatient Prospective Payment and 
Ambulatory Surgical Center Payment Systems (OPPS/ASC PPS) proposed rule 
to establish requirements for all hospitals in the United States to 
make available to the public their standard charges for the items and 
services they provide, including their payer-specific negotiated 
charges for all of their items and services, and a more consumer-
friendly display of their payer-specific negotiated charges for certain 
selected shoppable services (84 FR 39571). In the CY 2020 OPPS/ASC PPS, 
Price Transparency Requirements for Hospitals to Make Standard Charges 
Public final rule (CMS-1717-F2, referred to herein as the Hospital 
Price Transparency final rule) (84 FR 65538), we finalized these 
requirements for all hospitals in the United States for making hospital 
standard charges available to the public, beginning January 1, 2021, as 
well as an enforcement scheme to enforce those requirements. We also 
finalized that the term ``standard charge'' means the regular rate 
established by the hospital for an item or service provided to a 
specific group of paying patient, and includes all of the following as 
defined in our regulations at 45 CFR 180.20: (1) Gross charge; (2) 
payer-specific negotiated charge; (3) de-identified minimum negotiated 
charge; (4) de-identified maximum negotiated charge; and (5) discounted 
cash price.
    There are three broad types of hospital rates, depending on the 
patient and payer: (1) Medicaid and Medicare fee for service (FFS) 
rates; (2) negotiated rates with private insurers or health plans; and 
(3) uninsured or self-pay, as discussed in the Hospital Price 
Transparency final rule (84 FR 65538).
    Medicaid FFS rates are dictated by each State and tend to be at the 
lower end of market rates. Medicare FFS rates are determined by CMS and 
those rates tend to be higher than Medicaid rates within a state. 
Privately negotiated rates vary with the competitive structure of the 
geographic market and usually tend to be somewhat higher than Medicare 
rates, but in some areas of the country the two sets of rates tend to 
converge. Uninsured or self-pay patient rates are often the same as 
chargemaster \466\ (gross) rates, which are usually highly inflated in 
order to secure higher payments from Medicare and private payers.\467\
---------------------------------------------------------------------------

    \466\ CMS currently refers to chargemasters as a Charge 
Description Master or CDM, which means the list of all individual 
items and services maintained by a hospital for which the hospital 
has established a charge.
    \467\ Richman BD, et al. Battling the Chargemaster: A Simple 
Remedy to Balance Billing for Unavoidable Out-of-Network Care. Am J 
Manag Care. 2017;23(4):e100-e105 Available at: https://www.ajmc.com/journals/issue/2017/2017-vol23-n4/battling-the-chargemaster-a-simple-remedy-to-balance-billing-for-unavoidable-out-of-network-care.
---------------------------------------------------------------------------

    Under the old hospital reimbursement system, the more services a 
hospital provided and longer a patient's stay, the greater the 
reimbursement. Congress, recognizing that the reimbursement system 
created disincentives to provide efficient care, enacted in 1983 a 
prospective payment system. The primary objective of the prospective 
payment system 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.
    To partly compensate hospitals for certain overly costly 
hospitalizations, hospitals may receive an ``outlier'' payment which is 
based on the hospital's billed charges, adjusted to cost, in comparison 
to the payment that would otherwise be received and an outlier 
threshold (see 42 CFR 412.84). To determine whether an individual case 
would qualify for an outlier payment, the hospital's cost-to-charge 
ratio (CCR) is applied to the covered charges to estimate the costs of 
the case. In the late 1990s, many hospitals began manipulating or 
gaming that ratio to make it easier to qualify for outlier payments. 
The larger the charges, the smaller the ratio, but it takes time for 
the ratio to be updated (unless the hospital directly updated their 
cost-to-charge ratio with the MAC). Thus, by way of example, if a 
hospital had a cost-to-charge ratio 1 to 5, or 20 percent, then a pill 
which cost the hospital $1 to purchase might be billed to a patient at 
$5. However, if the hospital doubled the charge to the patient to $10, 
the corresponding change in its ratio would take time to be updated. 
Its costs might look like $2 instead of $1 in the interim. Rule changes 
such as those made in the IPPS/LTCH PPS Change in Methodology for 
Determining Payment for Extraordinarily High-Cost Cases (Cost Outliers) 
Final Rule (June 9, 2003; 68 FR 34497 through 34504), we established 
policies related to updating CCRs and the reconciliation of outlier 
payments, which reduced such manipulation (for more information 
regarding these changes we refer readers to: https://www.govinfo.gov/content/pkg/FR-2003-06-09/pdf/03-14492.pdf). Nevertheless, some 
hospitals' charges do not reflect market rates. Hospital bills that are 
generated off these chargemaster rates can be inherently unreasonable 
when judged against prevailing market rates.
    Recognizing that chargemaster (gross) rates rarely reflect the true 
market costs, we believe that by reducing our reliance on the hospital 
chargemaster, we can adjust Medicare payment rates so that they reflect 
the relative market value for inpatient items and services. 
Additionally, we have received public feedback that the Medicare 
program's use of hospital gross charges for some payments in 
ratesetting has served as the most significant barrier to hospitals' 
efforts to rebase their chargemasters.

[[Page 32791]]

These stakeholders argued that this Medicare payment process serves as 
a barrier for rebasing changes, because any reduction in charges 
requires coordination with Medicare, Medicaid and commercial health 
plans so that any changes occur in a revenue-neutral manner to the 
hospital. We continue to believe that our existing administrative 
mechanisms for hospitals to voluntarily lower their charges adequately 
address these commenters' concerns. Specifically, if a hospital is 
planning on voluntarily lowering its charges, it can request a CCR 
change pursuant to 42 CFR 412.84(i)(1) and as also discussed in prior 
rulemaking (84 FR 42630). Nevertheless, we agree in general that a 
decreased reliance on hospital chargemasters in Medicare payment would 
be desirable, if an appropriate alternative mechanism exists and is 
permitted by statute.
    Furthermore, the goal of reducing the Medicare program's reliance 
on the chargemaster and adopting payment strategies that are more 
reflective of the commercial insurance market was showcased within E.O. 
13890 on Protecting and Improving Medicare for Our Nation's Seniors, 
which President Trump issued on October 3, 2019. The E.O. described the 
market benefits provided under the Medicare Advantage program as 
providing, ``efficient and value-based care through choice and private 
competition, and has improved aspects of the Medicare program that 
previously failed seniors.'' E.O. 13890 then directed the Medicare 
program to adopt and implement those market-based recommendations 
developed pursuant to Executive Order 13813 of October 12, 2017 
(Promoting Healthcare Choice and Competition Across the United States), 
and published in the Administration's report on, ``Reforming America's 
Healthcare System Through Choice and Competition.'' Furthermore, E.O. 
13890 directed HHS to identify, ``approaches to modify Medicare FFS 
payments to more closely reflect the prices paid for services in MA and 
the commercial insurance market, to encourage more robust price 
competition, and otherwise to inject market pricing into Medicare FFS 
reimbursement.'' E.O. 13890 directed the Secretary, in consultation 
with other partners, to produce a report with approaches to achieve the 
goal of establishing more market-based pricing within Medicare FFS 
reimbursements within 180 days of the E.O.'s issuance. (For additional 
information on E.O. 13890, we refer readers to: https://www.federalregister.gov/documents/2019/10/08/2019-22073/protecting-and-improving-medicare-for-our-nations-seniors.) (For more information on 
E.O. 13813, we direct readers to: https://www.federalregister.gov/documents/2017/10/17/2017-22677/promoting-healthcare-choice-and-competition-across-the-united-states.)
    In order to reduce the Medicare program's reliance on the hospital 
chargemaster, thereby advancing the critical goals of E.O.s 13813 and 
13890, and to support the development of a market-based approach to 
payment under the Medicare FFS system, we are proposing that hospitals 
would be required to report certain market-based payment rate 
information on their Medicare cost report for cost reporting periods 
ending on or after January 1, 2021, to be used in a potential change to 
the methodology for calculating the IPPS MS-DRG relative weights to 
reflect relative market-based pricing.
    As described further in section IV.P.2.c. of the preamble of this 
proposed rule, we are specifically proposing that hospitals would 
report on the Medicare cost report two median payer-specific negotiated 
charges ``by MS-DRG.'' For a third-party payer that uses the same MS-
DRG patient classification system used by Medicare, the payer-specific 
negotiated charges that the hospital uses to calculate the median by 
MS-DRG would be the payer-specific negotiated charges the hospital 
negotiated with that third party payer for the MS-DRG to which the 
patient discharge was classified. However, we recognize that not all 
third party payers use the MS-DRG patient classification system. For 
those third party payers that do not, the payer-specific negotiated 
charges they negotiate with hospitals would be based on the system used 
by that third party payer, such as per diem rates or APR-DRGs. In that 
case, the hospital would determine and report the median payer-specific 
negotiated charges by MS-DRG using its payer-specific negotiated 
charges for the same or similar package of services that can be 
crosswalked to an MS-DRG. For simplicity, we refer to this data 
collection herein as collecting the median payer-specific negotiated 
charge by MS-DRG. We believe the use of these data in the MS-DRG 
relative weight setting methodology would represent a significant and 
important step in reducing the Medicare program's reliance on hospital 
chargemasters, and would better reflect relative market-based pricing 
in Medicare FFS inpatient reimbursements.
    Specifically, we are proposing that hospitals would report on the 
Medicare cost report: (1) The median payer-specific negotiated charge 
that the hospital has negotiated with all of its Medicare Advantage 
(MA) organizations (also referred to as MA organizations) payers, by 
MS-DRG; and (2) the median payer-specific negotiated charge the 
hospital has negotiated with all of its third-party payers, which would 
include MA organizations, by MS-DRG. The market-based rate information 
we are proposing to collect on the Medicare cost report would be the 
median of the payer-specific negotiated charges by MS-DRG, as described 
previously, for a hospital's MA organization payers and all of its 
third party payers. The payer-specific negotiated charges used by 
hospitals to calculate these medians would be the payer-specific 
negotiated charges for service packages that hospitals are required to 
make public under the requirements we finalized in the Hospital Price 
Transparency final rule (84 FR 65524) that can be cross-walked to an 
MS-DRG. If we finalize this market-based data collection proposal, 
hospitals would use the payer-specific negotiated charge data that they 
would be required to make public, as a result of the Hospital Price 
Transparency final rule, to then calculate the median payer-specific 
negotiated charges (as described further in section IV.P.2.c. of this 
proposed rule) to report on the Medicare cost report. We believe that 
because hospitals are already required to publically report payer-
specific negotiated charges, in accordance with the Hospital Price 
Transparency final rule, that the additional calculation and reporting 
of the median payer-specific negotiated charge will be less burdensome 
for hospitals.
    We are also seeking comment on a potential change to the 
methodology for calculating the IPPS MS-DRG relative weights to 
incorporate this market-based rate information, beginning in FY 2024, 
which we may consider adopting in the FY 2021 IPPS/LTCH PPS final rule. 
As described in greater detail in section IV.P.d. of the preamble of 
this proposed rule, this alternative methodology would involve using 
hospitals' reported median payer-specific negotiated charges to develop 
market-based IPPS payments to reflect the relative hospital resources 
used to provide inpatient services to patients. The use of payer-
specific negotiated charges would replace the current use of gross 
charges that are reflected on a hospital's chargemaster and cost 
information from Medicare cost reports for the development of the IPPS 
MS-DRG relative weights. CMS is requesting comment on the use of 
hospitals' reported median payer-specific

[[Page 32792]]

negotiated charge data, which would be calculated using a subset of the 
payer-specific negotiated charges that, starting January 1, 2021, 
hospitals are required to make public under 45 CFR part 180. As 
proposed, the median payer-specific negotiated charges calculated and 
submitted by hospitals for each MS-DRG would be limited to charges 
hospitals have negotiated with: (1) MA organizations; and (2) third 
party payers, including MA organizations. As noted previously, we 
believe the use of payer-specific negotiated charge data in the MS-DRG 
relative weight setting methodology would help reduce the Medicare 
program's reliance on hospital chargemasters, and would reflect 
relative market-based pricing in Medicare FFS inpatient reimbursements.
2. Market-Based MS-DRG Relative Weight Estimation
a. Overview
    Section 1886(d)(4)(A) of the Act states that the Secretary shall 
establish a classification of inpatient hospital discharges by 
diagnosis-related groups and a methodology for classifying specific 
hospital discharges within these groups. Section 1886(d)(4)(B) of the 
Act states that for each such diagnosis-related group the Secretary 
shall assign an appropriate weighting factor which reflects the 
relative hospital resources used with respect to discharges classified 
within that group compared to discharges classified within other 
groups. For the reasons discussed, we believe the use of market-based 
data, to be collected on the Medicare cost report, may support the 
development of an appropriate market-based approach to payment under 
the Medicare FFS system by incorporating such data into the estimation 
of the relative hospital resources used with respect to discharges 
classified within a single MS-DRG compared to discharges classified 
within other MS-DRGs, as required by statute.
    We currently use a cost-based methodology to estimate an 
appropriate weight for each MS-DRG. These weights reflect the relative 
hospital resources used with respect to discharges classified within 
that MS-DRG compared to discharges classified within other MS-DRGs. The 
current cost-based methodology primarily uses hospital charges from the 
MedPAR claims data and cost report data from the Healthcare Cost Report 
Information System (HCRIS) to establish the MS-DRG relative weights 
(the collection of cost report data is authorized under OMB 0938-0050, 
which is used to produce both files). (We refer readers to section 
II.E. of this proposed rule for the discussion of the methodology we 
are proposing to use to recalibrate the FY 2021 MS-DRG cost-based 
relative weights.) This cost-based methodology was originally proposed 
and finalized with revisions in the FY 2007 IPPS rulemaking (71 FR 
24006 through 24011 and 71 FR 47881 through 47898); it has since been 
modified in subsequent IPPS rulemaking. Prior to the FY 2007 IPPS 
rulemaking, we used a charge-based DRG relative weight methodology.
    Hospitals are already required to make their payer-specific 
negotiated charge data for service packages publicly available under 
the Hospital Price Transparency final rule. Consistent with the desire 
to reduce the Medicare program's reliance on the hospital chargemaster, 
as well as to inject market pricing into Medicare FFS reimbursement, we 
believe it is again appropriate to reconsider our current approach to 
calculating the MS-DRG relative weights. For these reasons, we have 
reexamined the need to continue to use the charges on IPPS hospital 
claims, in conjunction with charge and cost data on hospital cost 
reports, to estimate the MS-DRG relative weights. In particular, we are 
considering whether the payer-specific negotiated charges by MS-DRG for 
MA organizations, or alternatively the payer-specific negotiated 
charges by MS-DRG for all third party payers (we note that this would 
include MA organization data), or some other approach that would 
reflect relative market-based charges by MS-DRG, could provide an 
appropriate basis for estimating the relative hospital resources used 
with respect to discharges classified within a single MS-DRG compared 
to discharges classified within other MS-DRGs, as required by statute.
b. Research Comparing Medicare, Medicare Advantage Organization, and 
Commercial Payment Rates
    As an initial matter, we focused on the charges negotiated between 
hospitals and MA organizations given that MA plans are often paying for 
the same units and types of services as fee-for-service (FFS) Medicare. 
As part of our consideration of this issue, we looked to existing 
public research on the relationship between Medicare FFS inpatient 
payment rates and the payment rates negotiated between hospitals and MA 
organizations. Berenson et al.\468\ surveyed senior hospital and health 
plan executives and found that MA plans nominally pay only 100 to 105 
percent of traditional Medicare rates and, in real economic terms, 
possibly less. Respondents broadly identified three primary reasons for 
near payment equivalence: Statutory and regulatory provisions that 
limit out-of-network payments to traditional Medicare rates, de facto 
budget constraints that MA plans face because of the need to compete 
with traditional Medicare and other MA plans, and a market equilibrium 
that permits relatively lower MA rates as long as commercial rates 
remain well above the traditional Medicare rates.
---------------------------------------------------------------------------

    \468\ Berenson RA, Sunsine JH, Helms D, Lawton E. Why Medicare 
Advantage plans pay hospitals traditional Medicare prices. Health 
Aff (Millwood). 2015;34(8):1289-1295.
---------------------------------------------------------------------------

    We next researched empirically based comparisons of Medicare FFS 
rates, MA organization rates, and rates of other commercial payers. 
Baker et al.\469\ used data from Medicare and the Health Care Cost 
Institute (HCCI) to identify the prices paid for hospital services by 
FFS Medicare, MA plans, and commercial insurers in 2009 and 2012. They 
calculated the average price per admission, and its trend over time, in 
each of the three types of insurance for fixed baskets of hospital 
admissions across metropolitan areas. After accounting for differences 
in hospital networks, geographic areas, and case-mix between MA and FFS 
Medicare, they found that MA plans paid 5.6 percent less for hospital 
services compared to FFS Medicare. For the time period studied, the 
authors suggest that at least one channel through which MA plans paid 
lower prices was by obtaining greater discounts on types of FFS 
Medicare admissions that were known to have very short lengths-of-stay. 
They also found that the rates paid by commercial plans were much 
higher than those of either MA or FFS Medicare, and growing. At least 
some of this difference they indicated came from the much higher prices 
that commercial plans paid for profitable service lines.
---------------------------------------------------------------------------

    \469\ Baker LC, Bundorf MK, Devlin AM, Kessler DP. Medicare 
Advantage plans pay less than traditional Medicare pays. Health Aff 
(Millwood). 2016;35(8):1444-1451.
---------------------------------------------------------------------------

    Maeda and Nelson \470\ also analyzed data from the HCCI in their 
research. They compared the hospital prices paid by MA organizations 
and commercial plans with Medicare FFS prices using 2013 claims from 
the HCCI. The HCCI claims were used to calculate hospital prices for 
private insurers, and

[[Page 32793]]

Medicare's payment rules were used to estimate Medicare FFS prices. The 
authors focused on stays at acute care hospitals in metropolitan 
statistical areas (MSAs). They found MA prices to be roughly equal to 
Medicare FFS prices, on average, but commercial prices were 89 percent 
higher than FFS prices. In addition, commercial prices varied greatly 
across and within MSAs, but MA prices varied much less. The authors 
considered their results generally consistent with the Baker et al. 
study findings in that hospital payments by MA plans were much more 
similar to Medicare FFS levels than they were to commercial payment 
levels, although they noted that they used slightly different methods 
to calculate Medicare FFS prices.
---------------------------------------------------------------------------

    \470\ Maeda JLK, Nelson L. How Do the Hospital Prices Paid by 
Medicare Advantage Plans and Commercial Plans Compare with Medicare 
Fee-for-Service Prices? The Journal of Health Care Organization, 
Provision, and Financing. 2018;55(1-8).
---------------------------------------------------------------------------

    In their study, Maeda and Nelson also examined whether the ratio of 
MA prices to FFS prices varied across DRGs to assess whether there were 
certain DRGs for which MA plans tended to pay more or less than FFS. 
They ranked the ratio of MA prices to FFS prices and adjusted for 
outlier payments. The authors state that they found that, ``there were 
some DRGs where the average MA price was much higher than FFS and there 
were some DRGs where the average MA price was a bit lower than FFS.'' 
For example, for the time period in question, on average, MA plans paid 
129 percent more than FFS for rehabilitation stays (DRG 945), 33 
percent more for depressive neuroses (DRG 881), and 27 percent more for 
stays related to psychoses (DRG 885). But MA plans paid an average of 9 
percent less than FFS for stays related to pathological fractures (DRG 
542) and wound debridement and skin graft (DRG 464) (see Online 
Appendix Table 5 from their study). The authors state these results 
suggest that there may be certain services where MA plans pay more than 
FFS possibly because the FFS rates for those services are too low, but 
that there may be other services where MA plans pay less than FFS 
possibly because the FFS rates for those DRGs are too high (Maeda, 
Nelson, 2018 p. 5).
    Taken as a whole, we believe this body of research suggests that 
payer-specific charges negotiated between hospitals and MA 
organizations are generally well-correlated with Medicare IPPS payment 
rates, and payer-specific charges negotiated between hospitals and 
other commercial payers are generally not as well-correlated with 
Medicare IPPS payment rates. With respect to either type of payer-
specific negotiated charges, there may be instances where those 
negotiated charges may reflect the relative hospital resources used 
within an MS-DRG differently than our current cost-based methodology.
    Considering the public availability of payer-specific negotiated 
charges starting in CY 2021 and the desire to reduce the Medicare 
program's reliance on the hospital chargemaster to thereby address the 
directives in E.O.s 13813 and 13890, we believe we could adjust the 
methodology for calculating the MS-DRG relative weights to reflect a 
more market-based approach under our existing authority under sections 
1886(d)(4)(A) and 1886(d)(4)(B) of the Act.
c. Proposed Market-Based Data Collection
    For the reasons discussed, in order to support the development of a 
relative market-based payment methodology under the IPPS, as well as 
satisfy E.O.s 13813 and E.O. 13890 by reducing our reliance on the 
hospital chargemaster, we propose to collect market-based payment rate 
information on Medicare cost reports beginning with cost reporting 
periods ending on or after January 1, 2021. 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. We require that providers follow reasonable 
cost principles under section 1861(v)(1)(A) of the Act when completing 
the Medicare cost report. Under the regulations at 42 CFR 413.20 and 
413.24, we define adequate cost data and require cost reports from 
providers on an annual basis. As previously discussed, the collection 
of this market-based data on the Medicare cost report would allow for 
the adoption of market-based strategies in determining Medicare FFS 
payments and would reduce our reliance on the hospital chargemaster for 
ratesetting purposes, in particular for purposes of estimating the 
appropriate weighting factor to reflect the relative hospital resources 
used with respect to hospital discharges, as required under sections 
1886(d)(4)(B) and 1886(d)(4)(C) of the Act.
    First, we propose to collect on the Medicare cost report the median 
payer-specific negotiated charge that the hospital has negotiated with 
all of its MA organization payers, by MS-DRG. Second, we propose to 
collect on the Medicare cost report the median payer-specific 
negotiated charge the hospital has negotiated with all of its third-
party payers, which would include MA organizations, by MS-DRG. We 
propose to collect the median of the hospital payer-specific negotiated 
charges, because the median is a common measure of central tendency 
that is less influenced by outlier values. As described in more detail 
later in this section, we are proposing to collect the hospital's 
median payer-specific negotiated charges by MS-DRG, which would be 
calculated using the payer-specific negotiated charge data for service 
packages that hospitals are required to make public under the Hospital 
Price Transparency final rule that can be cross-walked to an MS-DRG.
    Medicare certified providers, such as Medicare certified hospitals, 
are required to submit an annual cost report to their Medicare 
Administrative Contractor (MAC). The Medicare cost report contains 
provider information such as facility characteristics, cost and charges 
by cost center, in total and for Medicare, Medicare settlement data, 
and financial statement data. The cost report must be submitted in a 
standard (ASCII) electronic cost report (ECR) format. CMS maintains the 
cost report data in the HCRIS dataset. The HCRIS data supports our 
reimbursement policymaking, congressional studies, legislative health 
care reimbursement initiatives, Medicare profit margin analysis, and 
relative weight updates. As such, every data point from hospital cost 
reports beginning on or after May 1, 2010 is reflected on the HCRIS 
dataset, and available for public access and use.
    Accordingly, if we were to finalize this proposal to collect the 
proposed market-based information (specifically, the median payer-
specific negotiated charges negotiated between a hospital and all its 
MA organization payers, by MS-DRG and the median payer-specific 
negotiated charges negotiated between a hospital and all its third 
party payers, by MS-DRG) on the cost report, this data would become 
publicly accessible on the HCRIS dataset in a de-identified manner and 
would be usable for analysis by third parties. The data would, by 
definition, be de-identified since we are proposing that the hospital 
calculate the median rate (that is, the specific rate that is 
negotiated between a hospital and a specific third party payer for an 
MS-DRG would not be reported and need to be de-identified). For more 
information or to obtain HCRIS data we refer readers to: https://www.cms.gov/Research-Statistics-Data-and-Systems/Downloadable-Public-Use-Files/Cost-Reports/Cost-Reports-by-Fiscal-Year.html.
    A payer-specific negotiated charge is the charge that a hospital 
has negotiated with a third party payer for an item or service provided 
by the hospital. We

[[Page 32794]]

note that the definition of third party payer, for the purposes of this 
proposed rule and data collection proposal, includes MA organizations. 
As described later in this section, we are proposing that the two 
median payer-specific negotiated charges by MS-DRG that hospitals would 
be required to report on the Medicare cost report for cost reporting 
periods ending on or after January 1, 2021, would be calculated using 
the payer-specific negotiated charges for service packages that 
hospitals are required to make publically available under the Hospital 
Price Transparency final rule that can be cross-walked to a MS-DRG.
    The Hospital Price Transparency final rule requires that hospitals 
make publicly available via the internet their standard charges 
(including, as applicable, gross charges, payer-specific negotiated 
charges, de-identified minimum negotiated charges, de-identified 
maximum negotiated charges, and discounted cash prices) in two 
different ways: (1) A single machine-readable file containing a list of 
standard charges for all items and services provided by the hospital 
that complies with requirements described in 45 CFR 180.50; and (2) a 
consumer-friendly list of standard charges for as many of the 70 CMS-
specified shoppable services that are provided by the hospital, and as 
many additional hospital-selected shoppable services as is necessary 
for a combined total of at least 300 shoppable services, that complies 
with requirements described in 45 CFR 180.60. For purposes of this 
proposed rule and data collection proposal, we propose that hospitals 
would calculate the median payer-specific negotiated charge by MS-DRG 
using the payer-specific negotiated charge data by MS-DRG from the 
single machine-readable file for all items and services (as required by 
the Hospital Price Transparency final rule) and not the version of 
payer-specific negotiated charge data included within the file for 
public production, in a consumer-friendly manner, of CMS-specified and 
hospital-selected shoppable services.
    The following is our proposed methodology for how each hospital 
would calculate its median payer-specific negotiated charge for MA 
organizations by MS-DRG and its median payer-specific negotiated charge 
for all third party payers by MS-DRG. As we are proposing to collect 
this data for purposes of incorporating market-based rate information 
into the IPPS payment methodologies, the median payer-specific 
negotiated charge data would be reported by MS-DRG for consistency with 
the grouping system that we currently use to classify inpatient 
hospital discharges under section 1886(d)(4)(A) of the Act. Therefore, 
as referenced previously, hospitals would report the payer-specific 
negotiated charges by MS-DRG and not by another DRG classification 
system.
    To determine the median payer-specific negotiated charge for MA 
organizations for a given MS-DRG, a hospital would list, by MS-DRG, 
each discharge in its cost reporting period that was paid for by an MA 
organization, and the corresponding payer-specific negotiated charge 
that was negotiated as payment for items and services provided for that 
discharge. The median payer-specific negotiated charge for payers that 
are MA organizations, for that MS-DRG, would be the median payer-
specific negotiated charge in that list of discharges.
    A simplified example for the purpose of illustrating this process 
is as follows. Hospital A has negotiated four different payer-specific 
charges with four MA organizations for hypothetical MS-DRG 123. The 
four payer-specific negotiated charges are $7,300, $7,400, $7,600, and 
$7,700. In its cost reporting period, Hospital A had 3 discharges for 
which $7,300 was the basis for payment for the items and services 
provided for that discharge, 2 discharges for which $7,400 was the 
basis for payment for the items and services provided for that 
discharge, 1 discharge for which $7,600 was the basis for payment for 
the items and services provided for that discharge, and 1 discharge for 
which $7,700 was the basis for payment for the items and services 
provided for that discharge. Therefore, for Hospital A, the payer-
specific negotiated charges for its list of discharges paid for by MA 
organizations in its cost reporting period for MS-DRG 123 is $7,300, 
$7,300, $7,300, $7,400, $7,400, $7,600, and $7,700. The median of this 
list is $7,400. Hospital A's median payer-specific negotiated charge 
for MS-DRG 123 for payers that are MA organizations would be $7,400.
    Our proposed methodology for how each hospital would calculate its 
median payer-specific negotiated charge for a given MS-DRG for all 
third party payers, including MA organizations, is the same as the 
process outlined above.
    For purposes of this calculation, we are proposing to define the 
term, ``payer-specific negotiated charge'' as the charge that a 
hospital has negotiated with a third party payer for an item or 
service. We propose to use this definition of the payer-specific 
negotiated charge, because it would capture the charges that are 
negotiated between hospitals and third party payers, including MA 
organizations, and can provide the data needed to evaluate the use of 
market-based information for payment purposes within the MS-DRG 
relative weight calculation. For consistency, the definition of payer-
specific negotiated charge that we are proposing to use for purposes of 
this proposal is the same definition of ``payer-specific negotiated 
charge'' that we finalized for purposes of our requirements for 
hospitals to make their standard charges available to the public under 
the Hospital Price Transparency final rule. We are also proposing to 
define, ``items and services'' as all items and services, including 
individual items and services and service packages, that could be 
provided by a hospital to a patient in connection with an inpatient 
admission for which the hospital has established a standard charge. An 
MS-DRG, as established by CMS under the MS-DRG classification system, 
is a type of service package consisting of items and services based on 
patient diagnosis and other characteristics. We propose this definition 
of items and services, because we believe it captures the types of 
items and services, including service packages, that a hospital would 
use to calculate and report the median payer-specific negotiated charge 
for each MS-DRG to support the use of market-based rate information by 
MS-DRG within the MS-DRG relative weight calculation. This proposed 
definition is also the same definition of items and services that we 
finalized for purposes of our requirements for hospitals to make their 
standard charges available to the public under the Hospital Price 
Transparency final rule, except that we have omitted the reference to 
outpatient department visits, because we would not require hospitals to 
calculate the median of their payer-specific negotiated charges for 
items and services provided in the hospital outpatient setting under 
our proposal.
    For purposes of this calculation, an MA organization is defined in 
42 CFR 422.2; namely, an MA organization means a public or private 
entity organized and licensed by a State as a risk-bearing entity (with 
the exception of provider-sponsored organizations receiving waivers) 
that is certified by CMS as meeting the MA contract requirements.
    For purposes of this calculation, we propose to define third party 
payer as an entity that is, by statute, contract, or agreement, legally 
responsible for payment of a claim for a healthcare item or service. As 
the reference to ``third party'' suggests, this definition excludes an 
individual who pays for a healthcare

[[Page 32795]]

item or service that he or she receives (such as self-pay patients). We 
propose to use this definition of third party payer, because these are 
the types of entities that contract with hospitals to reimburse for 
services on behalf of patients. This definition is also the definition 
of third party payer finalized in the Hospital Price Transparency final 
rule.
    We welcome public comment on the proposed definitions of payer-
specific negotiated charge, items and services, and third party payer. 
As discussed previously, we recognize that hospitals may negotiate 
rates in several ways and under different circumstances. For example, 
hospitals may negotiate rates with third party payers as a percent 
discount off chargemaster rates, on a per diem basis, or by MS-DRG or 
other similar DRG system. We also recognize that there may be hospitals 
that do not negotiate charges for service packages by MS-DRG or for 
service packages that may be crosswalked to an MS-DRG. Therefore, we 
seek comment on whether hospitals' median payer-specific negotiated 
charges across all types of payment methodologies should be included in 
the determination of the median payer-specific negotiated charge for 
the conditions and procedures that are classified under the MS-DRG 
system and if so, how the proposed definitions should be modified to 
encompass these other types of negotiation strategies or methodologies. 
We also seek comment on the appropriateness of using MS-DRGs or MS-DRG 
equivalents for this methodology, as well as whether we should 
potentially collect this information for payers that use MS-DRGs 
separately from payers that use other DRG systems. Furthermore, we seek 
comment on alternatives that would capture market-based information for 
the potential use in Medicare FFS payments. We also welcome comments 
and suggested refinements to our proposed definitions, as well as 
market-based alternatives that we should consider when identifying the 
market-based information that reflects the charges that a hospital 
negotiates for a specific MS-DRG.
    In order to address some of the issues noted previously, as an 
alternative, we considered requiring hospitals to submit a median 
negotiated reimbursement amount across all MA organizations and across 
all third party payers (including MA organizations) by MS-DRG (or by an 
MS-DRG equivalent, such as APR-DRG). Under this alternative approach, 
we would define the ``negotiated reimbursement amount'' as the amount 
the hospital received as payment for the services rendered for a 
patient discharge, as classified under the MS-DRG system, and for which 
the hospital negotiated payment with a third party payer, including a 
MA organization, for hospital cost reporting periods ending on or after 
January 1, 2021. Hospitals would be required to determine and submit 
the median negotiated reimbursement amount for--(1) MA organizations; 
and (2) all third party payers, which includes MA organizations.
    For example, a hospital may negotiate a case rate (that is, a 
payer-specific negotiated charge) of $30,000 with Payer A for a major 
joint replacement paid under the APR-DRG system (equivalent to MS-DRG 
470). The hospital and payer have agreed to a stop loss threshold of 
$150,000 and that the hospital will be reimbursed at 50 percent off the 
gross (chargemaster) rate for each dollar charged over the stop-loss 
amount. Additionally, the hospital will be reimbursed for 60 percent of 
the cost of the implanted hardware, an amount that, in some cases, may 
be variable depending on the type or style of hardware implanted. In 
this example, the hospital's payer-specific negotiated charge for a 
major joint replacement (MS-DRG 470 equivalent) is $30,000. However, 
the resulting payment per discharge will vary, depending upon factors 
such as whether the patient's course of treatment exceeded the agreed-
upon stoploss amount and the cost of the hardware implant.
    We considered this alternative, because the median of the 
``negotiated reimbursement amount'' is an amount that may take into 
consideration the actual and final payment amounts received by 
hospitals from third party payers, and MA organizations, for care of 
individuals, as compared to a standard charge negotiated for a 
particular service package identified by MS-DRG. We request comment on 
this alternative approach, which we believe may also provide a 
reasonable market-based estimate of the relative resources used to 
provide services for an MS-DRG, and may take into account the several 
ways that hospitals and third party payers negotiate charges.
    We also seek comment on the relative burden of calculating and 
submitting a median negotiated reimbursement amount for MA 
organizations and for all other third party payers as compared to 
calculating and submitting the median payer-specific negotiated charge 
for MA organizations and median payer-specific negotiated charge for 
third party payers by MS-DRG payment system.
    We are proposing that subsection (d) hospitals in the 50 states and 
DC, as defined at section 1886(d)(1)(B) of the Act, and subsection (d) 
Puerto Rico hospitals, as defined under section 1886(d)(9)(A) of the 
Act, would be required to report the median payer-specific negotiated 
charge information. Hospitals that do not negotiate payment rates and 
only receive non-negotiated payments for service would be exempted from 
this proposed data collection. We recognize that Critical Access 
Hospitals (CAHs) may, in some instances, negotiate payment rates; 
however, because CAHs are not subsection (d) hospitals and are not paid 
on the basis of MS-DRGs, CAHs would be excluded from this proposed data 
collection requirement. We are proposing that hospitals in Maryland, 
which are currently paid under the Maryland Total Cost of Care Model, 
would be exempt from this data collection requirement during the 
performance period of the Model. Examples of subsection (d) hospitals 
that only receive non-negotiated payment rates include hospitals 
operated by an Indian Health Program as defined in section 4(12) of the 
Indian Health Care Improvement Act or federally owned and operated 
facilities. We note that this proposed data collection requirement 
would apply to a smaller subset of hospitals as compared to the public 
reporting requirements under the Hospital Price Transparency final 
rule.
    We are proposing that for cost reporting periods ending on or after 
January 1, 2021, a hospital would report on its cost report the median 
payer-specific negotiated charge for each MS-DRG for payers that are MA 
organizations, and the median payer-specific negotiated charge for each 
MS-DRG for all third party payers, which includes MA organizations. The 
required cost report reporting changes to accomplish this will be 
proposed in more detail in the Information Collection Request approved 
under OMB No. 0938-0050.
    We are also proposing to amend 42 CFR 413.20(d)(3) to reflect this 
proposed requirement. Specifically, we are amending 42 CFR 413.20(d)(3) 
to require hospitals to report the median payer-specific negotiated 
charge by MS-DRG for payers that are MA organizations and for all third 
party payers on the Medicare cost report. We are proposing to capture 
this proposed data collection requirement in regulation at the new 
paragraph (d)(3)(i)(B). This proposed requirement would be effective 
for cost reporting periods ending on or after January 1, 2021.
    As described previously, we are proposing to require hospitals to 
report

[[Page 32796]]

on the Medicare cost report both the hospital's median payer specific 
negotiated charge by MS-DRG for all MA organizations and the hospital's 
median payer-specific negotiated charge by MS-DRG for all third party 
payers, which includes MA organizations, for cost reporting periods 
ending on or after January 1, 2021. We note that we may also consider 
finalizing the collection of alternative market-based data, such as the 
median negotiated reimbursement amount as explained previously, or any 
refinements to the definition of median payer-specific negotiated 
charge, based on review of public comments. We are also considering a 
modification to the market based data collection proposal, to require 
only the reporting of the median payer-specific negotiated charge for 
MA organizations on the Medicare cost report. We are inviting public 
comments on our proposed data collection, as well as on these or other 
alternative data collections of payer-specific negotiated charges or 
other market-based information on the Medicare cost report, which we 
may consider finalizing in the FY 2021 IPPS/LTCH PPS final rule for 
cost reporting periods ending on or after January 1, 2021, after 
consideration of the comments received.
d. Potential Market Based MS-DRG Relative Weight Methodology Beginning 
in FY 2024
    We are requesting comments on a potential new market-based 
methodology for estimating the MS-DRG relative weights, beginning in FY 
2024, and which we may consider adopting in the FY 2021 IPPS/LTCH PPS 
final rule. This potential new market-based methodology would be based 
on the proposed median payer-specific negotiated charge information 
collected on the Medicare cost report. Implementing this potential new 
market-based methodology beginning in FY 2024 would allow sufficient 
time, should we finalize our data collection proposal, to collect and 
evaluate the median payer-specific negotiated charge data submitted on 
hospital cost reports and provide the public with information regarding 
our analysis in future rulemaking. Specifically, we are considering a 
methodology for estimating the MS-DRG relative weights using the median 
payer-specific negotiated charge for each MS-DRG for payers that are MA 
organizations, as described in this section. The MA program provides 
efficient and value-based care to patients through choice and private 
competition. We believe using the median payer-specific negotiated 
charge for payers that are MA organizations within the MS-DRG relative 
weight calculation would allow for a more market-based approach to 
determining Medicare FFS reimbursement and reduce our reliance on the 
hospital chargemaster.
    We are also considering alternatives to this approach, such as the 
use of the median payer-specific negotiated charge for all third-party 
payers (instead of the median payer-specific negotiated charge for all 
MA organizations), or other alternative collections of payer-specific 
negotiated charges or other market-based information such as a median 
negotiated reimbursement amount that a hospital negotiates with its MA 
organizations or third party payers (as described further in section 
IV.P.2.c of the preamble of this proposed rule), within the MS-DRG 
relative weight methodology.
    The same relative weight calculation described in this section 
would be used if an alternative to the median payer-specific negotiated 
charge was finalized to be collected on the Medicare cost report, as 
described in section IV.P.2.c. of the preamble of this proposed rule. 
We are inviting public comment on this potential change to the relative 
weight methodology beginning in FY 2024 to use the median payer-
specific negotiated charge for MA organizations, as well as the other 
potential alternative data collections as described in section IV.P.2.c 
of the preamble of this proposed rule, which we may consider finalizing 
in the FY 2021 IPPS/LTCH PPS final rule. If we were to finalize a 
change in the IPPS FY 2021 rulemaking to incorporate payer-specific 
negotiated charges within the MS-DRG relative weight methodology, 
effective for FY 2024, we are open to adjusting any finalized policy, 
through future rulemaking, prior to the FY 2024 effective date. Should 
we finalize our data collection proposal, we would conduct further 
analysis based on the data received and provide an opportunity for 
public comment on that analysis, prior to the FY 2024 effective date.
 Step One: Standardize the Median MA Organizations Payer-
Specific Negotiated Charges
    In order to make the median MA organization payer-specific 
negotiated charges from the cost reports more comparable among 
hospitals, we would standardize the median payer-specific negotiated 
charges by removing the effects of differences in area wage levels, and 
cost-of living adjustments for hospital claims from Alaska and Hawaii, 
in the same manner as under the current MS-DRG relative weight 
calculation for those effects. We seek comment on the appropriate 
standardization for the median MA organization payer-specific 
negotiated charges, and any differences that should be taken into 
account in standardizing the median payer-specific negotiated charges 
for all third party payers.
 Step Two: Create a Single Weighted Average Standardized Median 
MA Organization Payer-Specific Negotiated Charge by MS-DRG Across 
Hospitals
    For each MS-DRG, we would create a single weighted average across 
hospitals of the standardized median payer-specific negotiated charges. 
We would weight the standardized payer-specific negotiated charge for 
each MS-DRG for each hospital using that hospital's Medicare transfer-
adjusted case count for that MS-DRG, with transfer adjusted case counts 
calculated exactly the same way as under the current MS-DRG relative 
weight methodology (84 FR 42621). We believe that using the Medicare 
transfer-adjusted case counts would be a reasonable approach to 
combining the data across hospitals because it would reflect relative 
volume and transfer activity (that is, larger hospitals responsible for 
more discharges would be weighted more heavily in the calculation, 
hospitals that transfer more often would be weighted less heavily), 
however, we may also consider alternative approaches, such as using the 
unadjusted Medicare case counts, or other alternative approaches based 
on the review of public comments. We seek comment on the most 
appropriate weighting factor for purposes of calculating a single 
weighted average standardized median MA organization payer-specific 
negotiated charge across hospitals.
 Step Three: Create a Single National Weighted Average 
Standardized Payer-Specific Negotiated Charge Across All MS-DRGs
    We would create a single national weighted average across MS-DRGs 
of the results of Step Two, where the weights are the national Medicare 
transfer adjusted case counts by MS-DRG. If we were to use an 
alternative weighting factor to the Medicare transfer adjusted case 
counts in Step Two, as described previously, we would use that same 
alternative weighting factor here in Step Three.
 Step Four: Calculate the Market-Based Relative Weights
    For each MS-DRG, the market-based relative weight would be 
calculated as the ratio of the single weighted average standardized 
median MA organization

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payer-specific negotiated charge for that MS-DRG across hospitals from 
Step Two to the single national weighted average standardized median MA 
organization payer-specific negotiated charge across all MS-DRGs from 
Step Three.
 Step Five: Normalize the Market-Based Relative Weights
    As under the current cost-based MS-DRG relative weight methodology, 
the market-based relative weights would be normalized by an adjustment 
factor so that the average case weight after recalibration would be 
equal to the average case weight before recalibration. As under the 
current cost-based relative weight estimation methodology, the 
normalization adjustment is intended to help 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.
    We are requesting comments on this potential new market-based 
methodology for estimating the MS-DRG relative weights beginning in FY 
2024, including comments on any suggested refinements to this potential 
methodology or alternative approaches, which we may consider adopting 
in the FY 2021 IPPS/LTCH final rule. We note that some stakeholders 
have requested that we take a measured approach to any changes to adopt 
more market-based methods within Medicare IPPS reimbursements. We are 
therefore also interested in comments on whether, if we were to adopt 
some form of a market-based approach to the MS-DRG relative weight 
calculation, we should, for some period of time, continue to estimate 
and publicly provide the MS-DRG relative weights as calculated using 
our current cost-based estimation methodology. We are also interested 
in comments on whether we should provide a transition to any new 
market-based MS-DRG methodology, and, if so, on the appropriate design 
of any such transition. When we adopted the cost-based MS-DRG 
methodology for FY 2007 IPPS payments, we provided a 3-year transition 
from the charge-based MS-DRG relative weight calculation to the cost-
based MS-DRG relative weight calculation (71 FR 47898). For the first 
year of the 3-year transition of the relative weights, the relative 
weights were based on a blend of 33 percent of the cost-based weights 
and 67 percent of the charge weights. In the second year of the 
transition, the relative weights were based on a blend of 33 percent of 
the charge weights and 67 percent of the cost-based weights. In the 
third year of the transition, the relative weights were based on 100 
percent of the cost-based weights. We are requesting comments on 
whether CMS should provide a similar type of transition from a cost-
based weight methodology to a market-based weight methodology, should 
we finalize the use of market-based data within the MS-DRG relative 
weight methodology.
    Lastly, in future rulemaking, we may consider ways to further 
reduce the role of hospital chargemasters in Medicare IPPS payments and 
further reflect market-based approaches in Medicare FFS payments. In 
particular, we are requesting comments on alternatives to the current 
use of hospital charges in determining other inpatient hospital 
payments, including outlier payments and new technology add-on 
payments, to the extent permitted by law.

V. Proposed Changes to the IPPS for Capital-Related Costs

A. Overview

    Section 1886(g) of the Act requires the Secretary to pay for the 
capital-related costs of inpatient acute hospital services in 
accordance with a prospective payment system established by the 
Secretary. Under the statute, the Secretary has broad authority in 
establishing and implementing the IPPS for acute care hospital 
inpatient capital-related costs. We initially implemented the IPPS for 
capital-related costs in the FY 1992 IPPS final rule (56 FR 43358). In 
that final rule, we established a 10-year transition period to change 
the payment methodology for Medicare hospital inpatient capital-related 
costs from a reasonable cost-based payment methodology to a prospective 
payment methodology (based fully on the Federal rate).
    FY 2001 was the last year of the 10-year transition period that was 
established to phase in the IPPS for hospital inpatient capital-related 
costs. For cost reporting periods beginning in FY 2002, capital IPPS 
payments are based solely on the Federal rate for almost all acute care 
hospitals (other than hospitals receiving certain exception payments 
and certain new hospitals). (We refer readers to the FY 2002 IPPS final 
rule (66 FR 39910 through 39914) for additional information on the 
methodology used to determine capital IPPS payments to hospitals both 
during and after the transition period.)
    The basic methodology for determining capital prospective payments 
using the Federal rate is set forth in the regulations at 42 CFR 
412.312. For the purpose of calculating capital payments for each 
discharge, the standard Federal rate is adjusted as follows: (Standard 
Federal Rate) x (DRG Weight) x (Geographic Adjustment Factor (GAF)) x 
(COLA for hospitals located in Alaska and Hawaii) x (1 + Capital DSH 
Adjustment Factor + Capital IME Adjustment Factor, if applicable).
    In addition, under Sec.  412.312(c), hospitals also may receive 
outlier payments under the capital IPPS for extraordinarily high-cost 
cases that qualify under the thresholds established for each fiscal 
year.

B. Additional Provisions

1. Exception Payments
    The regulations at 42 CFR 412.348 provide for certain exception 
payments under the capital IPPS. The regular exception payments 
provided under Sec.  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

[[Page 32798]]

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

C. Proposed Annual Update for FY 2021

    The proposed annual update to the national capital Federal rate, as 
provided for in 42 CFR 412.308(c), for FY 2021 is discussed in section 
III. of the Addendum to this FY 2021 IPPS/LTCH PPS proposed rule.
    In section II.D. of the preamble of this FY 2021 IPPS/LTCH PPS 
proposed rule, we present a discussion of the MS-DRG documentation and 
coding adjustment, including previously finalized policies and 
historical adjustments, as well as the adjustment to the standardized 
amount under section 1886(d) of the Act that we are proposing for FY 
2021, in accordance with the amendments made to section 7(b)(1)(B) of 
Public Law 110-90 by section 414 of the MACRA. Because these provisions 
require us to make an adjustment only to the operating IPPS 
standardized amount, we are not proposing to make a similar adjustment 
to the national capital Federal rate (or to the hospital-specific 
rates).
    We also note that in section II.D.2.b. of the preamble of this 
proposed rule, we are proposing to create new MS-DRG 018 for cases that 
include procedures describing CAR T-cell therapies, and in section 
II.E.2.b. of this proposed rule, we are proposing to modify our 
relative weight methodology for proposed new MS-DRG 018 in order to 
develop a relative weight that is reflective of the typical costs of 
providing CAR T-cell therapies relative to other IPPS services. In 
addition, in section IV.I. of the preamble of this proposed rule, we 
discuss our proposal to apply an adjustment to the payment amount for 
clinical trial cases that would group to proposed new MS-DRG 018 for 
both operating IPPS payments and capital IPPS payments. We refer 
readers to section IV.I. of this preamble for additional details on the 
proposed payment adjustment for CAR T-cell therapy clinical trial 
cases.

VI. Proposed Changes for Hospitals Excluded From the IPPS

A. Proposed Rate-of-Increase in Payments to Excluded Hospitals for FY 
2021

    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) and 413.40(a)(2)(ii)(A) and 
(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 2021, the rate-of-increase percentage to be 
applied to the target amount for these hospitals would be the FY 2021 
percentage increase in the 2014-based IPPS operating market basket.
    For this FY 2021 IPPS/LTCH PPS proposed rule, based on IGI's 2019 
fourth quarter forecast, we estimated that the 2014-based IPPS 
operating market basket update for FY 2021 would be 3.0 percent (that 
is, the estimate of the market basket rate-of-increase). Based on this 
estimate, the FY 2021 rate-of-increase percentage that would be applied 
to the FY 2020 target amounts in order to calculate the FY 2021 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 3.0 percent, in 
accordance with the applicable regulations at 42 CFR 413.40. However, 
we are proposing that if more recent data become available for the 
final rule, we would use such data, if appropriate, to calculate the 
final IPPS operating market basket update for FY 2021.
    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

[[Page 32799]]

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 Sec.  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 2021, in accordance with Sec. Sec.  412.22(i) and 
412.526(c)(2)(ii) of the regulations, for cost reporting periods 
beginning during FY 2021, the proposed update to the target amount for 
extended neoplastic disease care 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 2021, which 
would be equal to the percentage increase in the hospital market basket 
index, which is estimated to be the percentage increase in the 2014-
based IPPS operating market basket (that is, the estimate of the market 
basket rate-of-increase). Accordingly, the proposed update to an 
extended neoplastic disease care hospital's target amount for FY 2021 
is 3.0 percent, which is based on IGI's 2019 fourth quarter forecast. 
Furthermore, we are proposing that if more recent data become available 
for the final rule, we would use such data, if appropriate, to 
calculate the IPPS operating market basket update for FY 2021.

B. 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
a. Background and Overview
    As discussed in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42044 
through 42701), 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, authorized 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 
was titled ``Demonstration Project on Community Health Integration 
Models in Certain Rural Counties,'' and commonly known as the Frontier 
Community Health Integration Project (FCHIP) demonstration.
    The authorizing statute stated 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 stipulated several other requirements for 
the demonstration. Section 123(d)(2)(B) of Public Law 110-275, as 
amended, limited participation in the demonstration to eligible 
entities in not more than 4 States. Section 123(f)(1) of Public Law 
110-275 required the demonstration project to be conducted for a 3-year 
period. In addition, section 123(g)(1)(B) of Public Law 110-275 
required that the demonstration be budget neutral. Specifically, this 
provision stated 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 stated 
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, we released a request for applications (RFA) for 
the FCHIP demonstration. Using 2013 data from the U.S. Census Bureau, 
CMS identified Alaska, Montana, Nevada, North Dakota, and Wyoming as 
meeting the statutory eligibility requirement for participation in the 
demonstration. The RFA solicited CAHs in these five States to 
participate in the demonstration, stating that participation would be 
limited to CAHs in four of the States. To apply, CAHs were required to 
meet the eligibility requirements in the authorizing legislation, and, 
in addition, to describe a proposal to enhance health-related services 
that would complement those currently provided by the CAH and better 
serve the community's needs. In addition, in the RFA, CMS interpreted 
the eligible entity definition in the statute as meaning a CAH that 
receives funding through the MHRFP. The RFA identified four 
interventions, under which specific waivers of Medicare payment rules 
would allow for enhanced payment for telehealth, skilled nursing 
facility/nursing facility beds, ambulance services, and home health 
services, respectively. These waivers were formulated with the goal of 
increasing access to care with no net increase in costs.
    Ten CAHs were selected for participation in the demonstration, 
which started on August 1, 2016 and concluded on July 31, 2019. The 
selected CAHs were located in Montana, Nevada, and North Dakota, and 
participated in three of the four interventions identified in the FY 
2017 IPPS/LTCH PPS final rule (81 FR 57064 through 57065), the FY 2018 
IPPS/LTCH PPS final rule (82 FR 38294 through 38296), and the FY 2019 
IPPS/LTCH PPS final rule (83 FR 41516 through 41517), and the FY 2020 
IPPS/LTCH PPS final rule (84 FR 42044 through 42701). Eight CAHs 
participated in the telehealth intervention, three CAHs participated in 
the skilled nursing facility/nursing facility bed intervention, and two 
CAHs participated in the ambulance services intervention. Each CAH was 
allowed to participate in more than one of the interventions. None of 
the selected CAHs were 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), we

[[Page 32800]]

finalized a policy to address the budget neutrality requirement for the 
demonstration. We also discussed this policy in the FY 2018 IPPS/LTCH 
PPS final rule (82 FR 38294 through 38296), the FY 2019 IPPS/LTCH PPS 
final rule (83 FR 41516 through 41517), and the FY 2020 IPPS/LTCH PPS 
final rule (84 FR 42044 through 42701), but did not make any changes to 
the policy that was adopted in FY 2017. As explained in the FY 2017 
IPPS/LTCH PPS final rule, we based our selection of CAHs for 
participation in the demonstration with the goal of maintaining the 
budget neutrality of the demonstration on its own terms (that is, the 
demonstration would produce savings from reduced transfers and 
admissions to other health care providers, thus offsetting any increase 
in Medicare payments as a result of the demonstration). However, 
because of the small size of the demonstration and uncertainty 
associated with the projected Medicare utilization and costs, the 
policy we adopted in the FY 2017 IPPS/LTCH PPS final rule provides 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 was 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 FCHIP demonstration is projected to satisfy the 
budget neutrality requirement and likely yield a total net savings. As 
we estimated for the FY 2020 IPPS/LTCH PPS final rule, for this FY 2021 
IPPS/LTCH PPS proposed rule, we estimate that the total impact of the 
payment recoupment (if needed) will be no greater than 0.03 percent of 
CAHs' total Medicare payments (that is, Medicare Part A and Part B) 
within 1 fiscal year. The final budget neutrality estimates for the 
FCHIP demonstration will be based on costs incurred during the entire 
demonstration period, which is August 1, 2016 through July 31, 2019.
b. FCHIP Budget Neutrality Methodology and Analytical Approach
    As explained in the FY 2020 IPPS/LTCH PPS final rule, our goal was 
to maintain the budget neutrality of the demonstration on its own terms 
(that is, the demonstration would produce savings from reduced 
transfers and admissions to other health care providers, thus 
offsetting any increase in payments to the participating CAHs resulting 
from the demonstration). The budget neutrality assessment will seek to 
determine if this goal has been met by examining expenditures for 
beneficiaries who received an intervention-related service(s) at a 
demonstration CAH or a comparison CAH. The demonstration and comparison 
groups will be identified as Medicare beneficiaries receiving an 
intervention-related service (that is, telemedicine, SNF/NF or 
ambulance) at participating CAHs and non-participating CAHs, 
respectively. To ensure that there is no cross contamination between 
the groups, the demonstration and comparison groups will be mutually 
exclusive so beneficiaries who received intervention-related services 
at both participating and non-participating CAHs will be included in 
the demonstration (intervention) group only. The analysis of budget 
neutrality will seek to identify both the costs related to providing 
the intervention-related services under the demonstration and any 
potential downstream effects of these services, including any savings 
that may have accrued.
    We intend to incorporate two components into the budget neutrality 
analytical approach: (1) Medicare cost reports; and (2) Medicare 
administrative claims. We propose to estimate the cost of the 
demonstration for each fiscal year of the demonstration period using 
Medicare cost reports for the participating hospitals, and Medicare 
administrative claims and enrollment data for beneficiaries who 
received demonstration intervention related services.
    First, using Medicare administrative claims and enrollment data, a 
difference-in-difference (DID) regression analysis will be used to 
compute the impact of the demonstration interventions on Medicare 
expenditures, relative to what expenditures would have looked like 
without the demonstration. The DID regression analysis will compare the 
direct cost and potential downstream effects of intervention services, 
including any savings that may have accrued, during the baseline and 
performance period for both the demonstration and comparison groups.
    Second, the Medicare administrative claims analysis will be 
reconciled using data obtained from auditing the participating CAHs' 
Medicare cost reports. We will estimate the costs of the demonstration 
using ``as submitted'' cost reports for each hospital's financial 
fiscal year participation within each demonstration performance year. 
While the majority of demonstration participants had cost reporting 
years that aligned with the demonstration period start date of July 1, 
2016, several participating CAHs did not have cost reporting years that 
coincided with the demonstration start date. The cost report is 
structured to gather costs, revenues and statistical data on the 
provider's financial fiscal period. As a result, when a CAH's cost 
reporting year does not align with the timeframes used under the 
demonstration, additional calculations are necessary to carve-out data 
that relates to the portion of a cost reporting year when the 
demonstration was not in effect. We will determine the final budget 
neutrality results for the demonstration once complete data is 
available for the demonstration period. While this discussion 
represents CMS' anticipated approach to assessing the financial impact 
of the demonstration based on the data available to date, upon 
receiving data for the full demonstration period, CMS may update and/or 
modify the FCHIP budget neutrality methodology and analytical approach 
to ensure that they

[[Page 32801]]

appropriately capture the full impact of the demonstration.
    Under the policy finalized in the FY 2017 IPPS/LTCH PPS final rule, 
in the event the demonstration is found not to have been budget 
neutral, any excess costs will be recouped over a period of 3 cost 
reporting years. The 3-year period for recoupment will allow for a 
reasonable timeframe for the payment reduction and minimize any impact 
on CAHs' operations. Under the policy adopted in FY 2017 IPPS/LTCH PPS 
final rule, in the event the demonstration is found not to have been 
budget neutral, any excess costs will be recouped beginning in CY 2020. 
Based on the currently available data, the determination of budget 
neutrality results is preliminary and the amount of any reduction to 
CAH payments that would be needed in order to recoup excess costs under 
the demonstration remain uncertain. Therefore, we are proposing to 
revise the policy originally adopted in the FY 2017 IPPS/LTCH PPS final 
rule, to delay the implementation of any budget neutrality adjustment 
and will revisit this policy in rulemaking for FY 2022 when we expect 
to have complete data for the demonstration period. Since our data 
analysis is incomplete, it is not possible to determine the impact of 
this policy for any national payment system for FY 2021.

VII. Changes to the Long-Term Care Hospital Prospective Payment System 
(LTCH PPS) for FY 2021

A. Background of the LTCH PPS

1. Legislative and Regulatory Authority
    Section 123 of the Medicare, Medicaid, and SCHIP (State Children's 
Health Insurance Program) Balanced Budget Refinement Act of 1999 (BBRA) 
(Pub. L. 106-113), as amended by section 307(b) of the Medicare, 
Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 
(BIPA) (Pub. L. 106-554), provides for payment for both the operating 
and capital-related costs of hospital inpatient stays in long-term care 
hospitals (LTCHs) under Medicare Part A based on prospectively set 
rates. The Medicare prospective payment system (PPS) for LTCHs applies 
to hospitals that are described in section 1886(d)(1)(B)(iv) of the 
Act, effective for cost reporting periods beginning on or after October 
1, 2002.
    Section 1886(d)(1)(B)(iv)(I) of the Act originally defined an LTCH 
as a hospital which has an average inpatient length of stay (as 
determined by the Secretary) of greater than 25 days. Section 
1886(d)(1)(B)(iv)(II) of the Act (``subclause II'' LTCHs) also provided 
an alternative definition of LTCHs. However, section 15008 of the 21st 
Century Cures Act (Pub. L. 114-255) amended section 1886 of the Act to 
exclude former ``subclause II'' LTCHs from being paid under the LTCH 
PPS and created a new category of IPPS-excluded hospitals, which we 
refer to as ``extended neoplastic disease care hospitals''), to be paid 
as hospitals that were formally classified as ``subclause (II)'' LTCHs 
(82 FR 38298).
    Section 123 of the BBRA requires the PPS for LTCHs to be a ``per 
discharge'' system with a diagnosis-related group (DRG) based patient 
classification system that reflects the differences in patient 
resources and costs in LTCHs.
    Section 307(b)(1) of the BIPA, among other things, mandates that 
the Secretary shall examine, and may provide for, adjustments to 
payments under the LTCH PPS, including adjustments to DRG weights, area 
wage adjustments, geographic reclassification, outliers, updates, and a 
disproportionate share adjustment.
    In the August 30, 2002 Federal Register, we issued a final rule 
that implemented the LTCH PPS authorized under the BBRA and BIPA (67 FR 
55954). For the initial implementation of the LTCH PPS (FYs 2003 
through FY 2007), the system used information from LTCH patient records 
to classify patients into distinct long-term care diagnosis-related 
groups (LTC-DRGs) based on clinical characteristics and expected 
resource needs. Beginning in FY 2008, we adopted the Medicare severity 
long-term care diagnosis-related groups (MS-LTC-DRGs) as the patient 
classification system used under the LTCH PPS. Payments are calculated 
for each MS-LTC-DRG and provisions are made for appropriate payment 
adjustments. Payment rates under the LTCH PPS are updated annually and 
published in the Federal Register.
    The LTCH PPS replaced the reasonable cost-based payment system 
under the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) 
(Pub. L. 97-248) for payments for inpatient services provided by an 
LTCH with a cost reporting period beginning on or after October 1, 
2002. (The regulations implementing the TEFRA reasonable cost-based 
payment provisions are located at 42 CFR part 413.) With the 
implementation of the PPS for acute care hospitals authorized by the 
Social Security Amendments of 1983 (Pub. L. 98-21), which added section 
1886(d) to the Act, certain hospitals, including LTCHs, were excluded 
from the PPS for acute care hospitals and were paid their reasonable 
costs for inpatient services subject to a per discharge limitation or 
target amount under the TEFRA system. For each cost reporting period, a 
hospital-specific ceiling on payments was determined by multiplying the 
hospital's updated target amount by the number of total current year 
Medicare discharges. (Generally, in this section of the preamble of 
this proposed rule, when we refer to discharges, we describe Medicare 
discharges.) The August 30, 2002 final rule further details the payment 
policy under the TEFRA system (67 FR 55954).
    In the August 30, 2002 final rule, we provided for a 5-year 
transition period from payments under the TEFRA system to payments 
under the LTCH PPS. During this 5-year transition period, an LTCH's 
total payment under the PPS was based on an increasing percentage of 
the Federal rate with a corresponding decrease in the percentage of the 
LTCH PPS payment that is based on reasonable cost concepts, unless an 
LTCH made a one-time election to be paid based on 100 percent of the 
Federal rate. Beginning with LTCHs' cost reporting periods beginning on 
or after October 1, 2006, total LTCH PPS payments are based on 100 
percent of the Federal rate.
    In addition, in the August 30, 2002 final rule, we presented an in-
depth discussion of the LTCH PPS, including the patient classification 
system, relative weights, payment rates, additional payments, and the 
budget neutrality requirements mandated by section 123 of the BBRA. The 
same final rule that established regulations for the LTCH PPS under 42 
CFR part 412, subpart O, also contained LTCH provisions related to 
covered inpatient services, limitation on charges to beneficiaries, 
medical review requirements, furnishing of inpatient hospital services 
directly or under arrangement, and reporting and recordkeeping 
requirements. We refer readers to the August 30, 2002 final rule for a 
comprehensive discussion of the research and data that supported the 
establishment of the LTCH PPS (67 FR 55954).
    In the FY 2016 IPPS/LTCH PPS final rule (80 FR 49601 through 
49623), we implemented the provisions of the Pathway for Sustainable 
Growth Rate (SGR) Reform Act of 2013 (Pub. L. 113-67), which mandated 
the application of the ``site neutral'' payment rate under the LTCH PPS 
for discharges that do not meet the statutory criteria for exclusion 
beginning in FY 2016. For cost reporting periods beginning on or after 
October 1, 2015, discharges that do not meet certain statutory criteria 
for exclusion

[[Page 32802]]

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. (For more information on these 
provisions, we refer readers to 82 FR 38299.)
    In the FY 2019 IPPS/LTCH PPS final rule (83 FR 41529), we made 
conforming changes to our regulations to implement the provisions of 
section 51005 of the Bipartisan Budget Act of 2018 (Pub. L. 115-123), 
which extends the transitional blended payment rate for site neutral 
payment rate cases for an additional 2 years. We refer readers to 
section VII.C. of the preamble of the FY 2019 IPPS/LTCH PPS final rule 
for a discussion of our final policy. In addition, in the FY 2019 IPPS/
LTCH PPS final rule, we removed the 25-percent threshold policy under 
42 CFR 412.538.
    In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42439), we further 
revised our regulations to implement the provisions of the Pathway for 
SGR Reform Act of 2013 (Pub. L. 113-67) that relate to the payment 
adjustment for discharges from LTCHs that do not maintain the requisite 
discharge payment percentage and the process by which such LTCHs may 
have the payment adjustment discontinued.
2. Criteria for Classification as an LTCH
a. Classification as an LTCH
    Under the regulations at Sec.  412.23(e)(1), to qualify to be paid 
under the LTCH PPS, a hospital must have a provider agreement with 
Medicare. Furthermore, Sec.  412.23(e)(2)(i), which implements section 
1886(d)(1)(B)(iv) of the Act, requires that a hospital have an average 
Medicare inpatient length of stay of greater than 25 days to be paid 
under the LTCH PPS. In accordance with section 1206(a)(3) of the 
Pathway for SGR Reform Act of 2013 (Pub. L. 113-67), as amended by 
section 15007 of Public Law 114-255, we amended our regulations to 
specify that Medicare Advantage plans' and site neutral payment rate 
discharges are excluded from the calculation of the average length of 
stay for all LTCHs, for discharges occurring in cost reporting period 
beginning on or after October 1, 2015.
b. Hospitals Excluded From the LTCH PPS
    The following hospitals are paid under special payment provisions, 
as described in Sec.  412.22(c) and, therefore, are not subject to the 
LTCH PPS rules:
     Veterans Administration hospitals.
     Hospitals that are reimbursed under State cost control 
systems approved under 42 CFR part 403.
     Hospitals that are reimbursed in accordance with 
demonstration projects authorized under section 402(a) of the Social 
Security Amendments of 1967 (Pub. L. 90-248) (42 U.S.C. 1395b-1), 
section 222(a) of the Social Security Amendments of 1972 (Pub. L. 92-
603) (42 U.S.C. 1395b-1 (note)) (Statewide all-payer systems, subject 
to the rate-of-increase test at section 1814(b) of the Act), or section 
3201 of the Patient Protection and Affordable Care Act (Pub. L. 111-
148) (42 U.S.C. 1315a).
     Nonparticipating hospitals furnishing emergency services 
to Medicare beneficiaries.
3. Limitation on Charges to Beneficiaries
    In the August 30, 2002 final rule, we presented an in-depth 
discussion of beneficiary liability under the LTCH PPS (67 FR 55974 
through 55975). This discussion was further clarified in the RY 2005 
LTCH PPS final rule (69 FR 25676). In keeping with those discussions, 
if the Medicare payment to the LTCH is the full LTC-DRG payment amount, 
consistent with other established hospital prospective payment systems, 
Sec.  412.507 currently provides that an LTCH may not bill a Medicare 
beneficiary for more than the deductible and coinsurance amounts as 
specified under Sec. Sec.  409.82, 409.83, and 409.87, and for items 
and services specified under Sec.  489.30(a). However, under the LTCH 
PPS, Medicare will only pay for services furnished during the 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 (in 
accordance with Sec.  412.529), and that payment was less than the full 
LTC-DRG payment amount because the beneficiary had insufficient 
coverage as a result of the remaining Medicare days, the LTCH also is 
currently permitted to charge the beneficiary for services delivered on 
those uncovered days (in accordance with 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 upon beneficiaries 
whose LTCHs' 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, an LTCH's payment for discharges occurring in cost 
reporting periods beginning in FYs 2016 through 2019) are considered to 
be site neutral payment rate payments.

B. Proposed Medicare Severity Long-Term Care Diagnosis-Related Group 
(MS-LTC-DRG) Classifications and Relative Weights for FY 2021

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

[[Page 32803]]

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 761 MS-DRG 
groupings. For FY 2021, there would be 767 MS-DRG groupings based on 
the proposed changes, as discussed in section II.E. of the preamble of 
this proposed rule. Consistent with section 123 of the BBRA, as amended 
by section 307(b)(1) of the BIPA, and Sec.  412.515 of the regulations, 
we use information derived from LTCH PPS patient records to classify 
LTCH discharges into distinct MS-LTC-DRGs based on clinical 
characteristics and estimated resource needs. Then we 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 this proposed rule, we provide a general summary 
of our existing methodology for determining the FY 2021 MS-LTC-DRG 
relative weights under the LTCH PPS.
    In this proposed rule, in general, for FY 2021, we are proposing to 
continue 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 proposed rule). As we established when we 
implemented the dual rate LTCH PPS payment structure codified under 
Sec.  412.522, which began in FY 2016, we are proposing that the annual 
recalibration of the MS-LTC-DRG relative weights are determined: (1) 
Using only data from available LTCH PPS claims that would have 
qualified for payment under the new LTCH PPS standard Federal payment 
rate if that rate had been in effect at the time of discharge when 
claims data from time periods before the dual rate LTCH PPS payment 
structure applies are used to calculate the relative weights; and (2) 
using only data from available LTCH PPS claims that qualify for payment 
under the new LTCH PPS standard Federal payment rate when claims data 
from time periods after the dual rate LTCH PPS payment structure 
applies are used to calculate the relative weights (80 FR 49624). That 
is, under our current methodology, our MS-LTC-DRG relative weight 
calculations 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 proposed rule). In addition, for FY 2021, we are proposing to 
continue to exclude the data from all-inclusive rate providers and 
LTCHs paid in accordance with demonstration projects, as well as any 
Medicare Advantage claims from the MS-LTC-DRG relative weight 
calculations for the reasons discussed in section VII.B.3.c. of the 
preamble of this proposed rule.
    Furthermore, for FY 2021, in using data from applicable LTCH cases 
to establish MS-LTC-DRG relative weights, we are proposing to continue 
to establish low-volume MS-LTC-DRGs (that is, MS-LTC-DRGs with less 
than 25 cases) using our quintile methodology in determining the MS-
LTC-DRG relative weights because LTCHs do not typically treat the full 
range of diagnoses as do acute care hospitals. Therefore, for purposes 
of determining the relative weights for the large number of low-volume 
MS-LTC-DRGs, we 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 proposed rule.)
2. Patient Classifications Into MS-LTC-DRGs
a. Background
    The MS-DRGs (used under the IPPS) and the MS-LTC-DRGs (used under 
the LTCH PPS) are based on the CMS DRG structure. As noted previously 
in this section, we refer to the DRGs under the LTCH PPS as MS-LTC-DRGs 
although they are structurally identical to the MS-DRGs used under the 
IPPS.
    The MS-DRGs are organized into 25 major diagnostic categories 
(MDCs), most of which are based on a particular organ system of the 
body; the remainder involve multiple organ systems (such as MDC 22, 
Burns). Within most MDCs, cases are then divided into surgical DRGs and 
medical DRGs. Surgical DRGs are assigned based on a surgical hierarchy 
that orders operating room (O.R.) procedures or groups of O.R. 
procedures by resource intensity. The GROUPER software program does not 
recognize all ICD-10-PCS procedure codes as procedures affecting DRG 
assignment. That is, procedures that are not surgical (for example, 
EKGs), or minor surgical procedures (for example, a biopsy of skin and 
subcutaneous tissue (procedure code 0JBH3ZX)) do not affect the MS-LTC-
DRG assignment based on their presence on the claim.
    Generally, under the LTCH PPS, a Medicare payment is made at a 
predetermined specific rate for each discharge that varies based on the 
MS-LTC-DRG to which a beneficiary's discharge is assigned. Cases are 
classified into MS-LTC-DRGs for payment based on the following six data 
elements:
     Principal diagnosis.
     Additional or secondary diagnoses.
     Surgical procedures.
     Age.
     Sex.
     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).)

[[Page 32804]]

    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 preamble of the FY 2017 IPPS/LTCH PPS final rule (81 FR 
56787 through 56790) and section II.E.1. of the preamble of this 
proposed rule. Additional coding instructions and examples are 
published in the AHA's Coding Clinic for ICD-10-CM/PCS.
    To create the MS-DRGs (and by extension, the MS-LTC-DRGs), base 
DRGs were subdivided according to the presence of specific secondary 
diagnoses designated as complications or comorbidities (CCs) into one, 
two, or three levels of severity, depending on the impact of the CCs on 
resources used for those cases. Specifically, there are sets of MS-DRGs 
that are split into 2 or 3 subgroups based on the presence or absence 
of a CC or a major complication or comorbidity (MCC). We refer readers 
to section II.D. of the preamble of the FY 2008 IPPS final rule with 
comment period for a detailed discussion about the creation of MS-DRGs 
based on severity of illness levels (72 FR 47141 through 47175).
    MACs enter the clinical and demographic information submitted by 
LTCHs into their claims processing systems and subject this information 
to a series of automated screening processes called the Medicare Code 
Editor (MCE). These screens are designed to identify cases that require 
further review before assignment into a MS-LTC-DRG can be made. During 
this process, certain cases are selected for further explanation (74 FR 
43949).
    After screening through the MCE, each claim is classified into the 
appropriate MS-LTC-DRG by the Medicare LTCH GROUPER software on the 
basis of diagnosis and procedure codes and other demographic 
information (age, sex, and discharge status). The GROUPER software used 
under the LTCH PPS is the same GROUPER software program used under the 
IPPS. Following the MS-LTC-DRG assignment, the MAC determines the 
prospective payment amount by using the Medicare PRICER program, which 
accounts for hospital-specific adjustments. Under the LTCH PPS, we 
provide an opportunity for LTCHs to review the MS-LTC-DRG assignments 
made by the MAC and to submit additional information within a specified 
timeframe as provided in Sec.  412.513(c).
    The GROUPER software is used both to classify past cases to measure 
relative hospital resource consumption to establish the MS-LTC-DRG 
relative weights and to classify current cases for purposes of 
determining payment. The records for all Medicare hospital inpatient 
discharges are maintained in the MedPAR file. The data in this file are 
used to evaluate possible MS-DRG and MS-LTC-DRG classification changes 
and to recalibrate the MS-DRG and MS-LTC-DRG relative weights during 
our annual update under both the IPPS (Sec.  412.60(e)) and the LTCH 
PPS (Sec.  412.517), respectively.
b. Proposed Changes to the MS-LTC-DRGs for FY 2021
    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 proposed rule, we are proposing to update the MS-LTC-DRG 
classifications effective October 1, 2020 through September 30, 2021 
(FY 2021), consistent with the proposed changes to specific MS-DRG 
classifications presented in section II.F. of the preamble of this 
proposed rule. Accordingly, the proposed MS-LTC-DRGs for FY 2021 
presented in section II.F. of the preamble of this proposed rule are 
the same as the MS-DRGs that are being used under the IPPS for FY 2021. 
In addition, because the proposed MS-LTC-DRGs for FY 2021 are the same 
as the proposed MS-DRGs for FY 2021, the other proposed changes that 
affect MS-DRG (and by extension MS-LTC-DRG) assignments under proposed 
GROUPER Version 38 as discussed in section II.E. of the preamble of 
this proposed rule, including the proposed changes to the MCE software 
and the ICD-10-CM/PCS coding system, also are applicable under the LTCH 
PPS for FY 2021.
3. Development of the Proposed FY 2021 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 costlier (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

[[Page 32805]]

standard Federal payment rate cases (or LTCH PPS cases that would have 
qualified for payment under the LTCH PPS standard Federal payment rate 
if the dual rate LTCH PPS payment structure had been in effect at the 
time of the discharge). (For details on the modifications to our 
historical procedures for assigning relative weights in cases of zero 
volume and/or nonmonotonicity, we refer readers to the FY 2008 IPPS 
final rule with comment period (72 FR 47289 through 47295) and the FY 
2009 IPPS final rule (73 FR 48542 through 48550).) For details on the 
change in our historical methodology to use LTCH claims data only from 
LTCH PPS standard Federal payment rate cases (or cases that would have 
qualified for such payment had the LTCH PPS dual payment rate structure 
been in effect at the time) to determine the MS-LTC-DRG relative 
weights, we refer readers to the FY 2016 IPPS/LTCH PPS final rule (80 
FR 49614 through 49617). Under the LTCH PPS, relative weights for each 
MS-LTC-DRG are a primary element used to account for the variations in 
cost per discharge and resource utilization among the payment groups 
(Sec.  412.515). To ensure that Medicare patients classified to each 
MS-LTC-DRG have access to an appropriate level of services and to 
encourage efficiency, we calculate a relative weight for each MS-LTC-
DRG that represents the resources needed by an average inpatient LTCH 
case in that MS-LTC-DRG. For example, cases in an MS-LTC-DRG with a 
relative weight of 2 would, on average, cost twice as much to treat as 
cases in an MS-LTC-DRG with a relative weight of 1.
b. Development of the Proposed MS-LTC-DRG Relative Weights for FY 2021
    In this proposed rule, we are proposing to continue to use our 
current methodology to determine the MS-LTC-DRG relative weights for FY 
2021, 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 proposed application of our 
existing methodology for determining the proposed MS-LTC-DRG relative 
weights for FY 2021, and we discuss the effects of our proposals 
concerning the data used to determine the FY 2021 MS-LTC-DRG relative 
weights on the various components of our existing methodology in the 
discussion that follows.
    We generally provide the low-volume quintiles and no-volume 
crosswalk 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.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 IPPS Table 11 and to 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 (83 FR 41522). 
We refer readers to the CMS website for the low-volume quintiles and 
no-volume crosswalk data previously furnished via Tables 13A and 13B.
c. Data
    For this FY 2021 IPPS/LTCH PPS proposed rule, consistent with our 
proposals regarding the calculation of the proposed MS-LTC-DRG relative 
weights for FY 2021, we obtained total charges from FY 2019 Medicare 
LTCH claims data from the December 2019 update of the FY 2019 MedPAR 
file, which are the best available data at this time, and we are 
proposing to use Version 38 of the GROUPER to classify LTCH cases. 
Consistent with our historical practice, we are proposing that if more 
recent data become available, we would use those data and the finalized 
Version 38 of the GROUPER in establishing the FY 2021 MS-LTC-DRG 
relative weights in the final rule.
    To calculate the proposed FY 2021 MS-LTC-DRG relative weights under 
the dual rate LTCH PPS payment structure, we are proposing to continue 
to use applicable LTCH data, which includes our policy of only using 
cases that meet the criteria for exclusion from the site neutral 
payment rate (or would have met the criteria had they been in effect at 
the time of the discharge) (80 FR 49624). Specifically, we began by 
first evaluating the LTCH claims data in the December 2019 update of 
the FY 2019 MedPAR file to determine which LTCH cases would meet the 
criteria for exclusion from the site neutral payment rate under Sec.  
412.522(b) or had the dual rate LTCH PPS payment structure applied to 
those cases at the time of discharge. We identified the FY 2019 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 2019 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 MS-LTC-DRG relative weights we have 
previously addressed the treatment 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 spinal cord specialty 
hospitals or for certain severe wound care discharges from certain 
LTCHs provided by sections 15009 and 15010 of Public Law 114-255, 
respectively. The temporary exception from the site neutral payment 
rate for certain spinal cord specialty hospitals is effective for 
discharges in cost reporting periods beginning during FYs 2018 and 
2019, and the temporary exception from the site neutral payment rate 
for certain severe wound care discharges from certain LTCHs was 
effective for a discharge in cost reporting period beginning during FY 
2018. These statutory provisions will no longer be in effective for any 
discharges

[[Page 32806]]

occurring in FY 2021 (that is, an LTCH with a cost reporting period 
that begins on the last day of FY 2019, on September 30, 2019, would 
end on September 29, 2020, the day prior to the start of FY 2021 on 
October 1, 2020). Therefore, we no longer need to address the treatment 
of these cases for purposes of developing the MS-LTC-DRG relative 
weights for FY 2021 and subsequent years.)
    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 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 MS-LTC-DRG relative weights for FY 2021.
    In summary, in general, we identified the claims data used in the 
development of the proposed FY 2021 MS-LTC-DRG relative weights in this 
proposed rule, 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. Finally, we propose to 
trim the claims data of all-inclusive rate providers reported in the 
December 2019 update of the FY 2019 MedPAR file and any Medicare 
Advantage claims data. There were no data from any LTCHs that are paid 
in accordance with a demonstration project reported in the December 
2019 update of the FY 2019 MedPAR file, but, had there been any, we 
would have trimmed the claims data from those LTCHs as well, in 
accordance with our established policy. We are proposing to use the 
remaining data (that is, the applicable LTCH data) to calculate the 
relative weights for FY 2021.
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 2021 IPPS/LTCH PPS 
proposed rule, we are proposing to continue to use a hospital-specific 
relative value (HSRV) methodology to calculate the MS-LTC-DRG relative 
weights for FY 2021. 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 reduce the impact of 
the variation in charges across providers on any particular MS-LTC-DRG 
relative weight by converting each LTCH's charge for an applicable LTCH 
case to a relative value based on that LTCH's average charge for such 
cases.
    Under the HSRV methodology, we standardize charges for each LTCH by 
converting its charges for each applicable LTCH case to hospital-
specific relative charge values and then adjusting those values for the 
LTCH's case-mix. The adjustment for case-mix is needed to rescale the 
hospital-specific relative charge values (which, by definition, average 
1.0 for each LTCH). The average relative weight for an LTCH is its 
case-mix; therefore, it is reasonable to scale each LTCH's average 
relative charge value by its case-mix. In this way, each LTCH's 
relative charge value is adjusted by its case-mix to an average that 
reflects the complexity of the applicable LTCH cases it treats relative 
to the complexity of the applicable LTCH cases treated by all other 
LTCHs (the average LTCH PPS case-mix of all applicable LTCH cases 
across all LTCHs).
    In accordance with our established methodology, for FY 2021, we are 
proposing to continue to standardize charges for each applicable LTCH 
case by first dividing the adjusted charge for the case (adjusted for 
SSOs under Sec.  412.529 as described in section VII.B.3.g. of the 
preamble of this proposed rule (Step 3) of the preamble of this 
proposed rule) by the average adjusted charge for all applicable LTCH 
cases at the LTCH in which the case was treated. SSO cases are cases 
with a length of stay that is less than or equal to five-sixths the 
average length of stay of the MS-LTC-DRG (Sec. Sec.  412.529 and 
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 Proposed MS-LTC-DRG 
Relative Weights
    For purposes of determining the MS-LTC-DRG relative weights, under 
our historical methodology, there are three different categories of MS-
DRGs based on volume of cases within specific MS-LTC-DRGs: (1) MS-LTC-
DRGs with at least 25 applicable LTCH cases in the data used to 
calculate the relative weight, which are each assigned a unique 
relative weight; (2) low-volume MS-LTC-DRGs (that is, MS-LTC-DRGs that 
contain between 1 and 24 applicable LTCH cases that are grouped into 
quintiles (as described later in this section of this proposed rule) 
and assigned the relative weight of the quintile); and (3) no-volume 
MS-LTC-DRGs that are cross-walked to other MS-LTC-DRGs based on the 
clinical similarities and assigned the relative weight of the cross-
walked MS-LTC-DRG (as described in greater detail in this proposed 
rule). For FY 2021, we are proposing to continue to use applicable LTCH 
cases to establish the same volume-based categories to calculate the FY 
2021 MS-LTC-DRG relative weights.
    In determining the proposed FY 2021 MS-LTC-DRG relative weights, 
when necessary, as is our longstanding practice, we are proposing to 
make adjustments to account for nonmonotonicity, as discussed in 
greater detail later in Step 6 of section VII.B.3.g. of the preamble of 
this

[[Page 32807]]

proposed rule. We refer readers to the discussion in the FY 2010 IPPS/
RY 2010 LTCH PPS final rule for our rationale for including an 
adjustment for nonmonotonicity (74 FR 43953 through 43954).
f. Proposed Low-Volume MS-LTC-DRGs
    In order to account for proposed MS-LTC-DRGs with low-volume (that 
is, with fewer than 25 applicable LTCH cases), consistent with our 
existing methodology, we are proposing to continue to employ the 
quintile methodology for low-volume MS-LTC-DRGs, such that we grouped 
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, we are proposing to make 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 proposed rule.
    In this proposed rule, based on the best available data (that is, 
the December 2019 update of the FY 2019 MedPAR files), we identified 
252 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 50 MS-LTC-DRGs (252/5 = 50 with a 
remainder of 2). 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 proposed rule, the number of 
proposed MS-LTC-DRGs with less than 25 applicable LTCH cases was not 
evenly divisible by 5 and, therefore, we are proposing to employ our 
historical methodology for determining which of the low-volume 
quintiles would contain the additional low-volume MS-LTC-DRG. 
Specifically for this proposed rule, after organizing the proposed MS-
LTC-DRGs by ascending order by average charge, we assigned the first 50 
(1st through 50th) of proposed low-volume MS-LTC-DRGs (with the lowest 
average charge) into Quintile 1. Because the average charge of the 51 
low-volume MS-LTC-DRG in the sorted list was closer to the average 
charge of the 50 low-volume MS-LTC-DRG (assigned to Quintile 1) than to 
the average charge of the 52 low-volume MS-LTC-DRG (assigned to 
Quintile 2), we assigned it to Quintile 1 (such that Quintile 1 
contains 51 low-volume MS-LTC-DRGs before any adjustments for 
nonmonotonicity, as discussed in this proposed rule). The 50 MS-LTC-
DRGs with the highest average charge were assigned into Quintile 5. 
Because the average charge of the 202nd low-volume MS-LTC-DRG in the 
sorted list was closer to the average charge of the 203rd low-volume 
MS-LTC-DRG (assigned to Quintile 5) than to the average charge of the 
201st low-volume MS-LTC-DRG (assigned to Quintile 4), we assigned it to 
Quintile 5 (such that Quintile 5 contains 51 low-volume MS-LTC-DRGs 
before any adjustments for nonmonotonicity, as discussed in this 
proposed rule). This resulted in 3 of the 5 low-volume quintiles 
containing 50 MS-LTC-DRGs (Quintiles 2 through 4) and 2 low-volume 
quintiles containing 51 MS-LTC-DRGs (Quintiles 1 and 5). As discussed 
earlier, for this proposed rule, we are providing the list of the 
composition of the proposed low-volume quintiles for proposed low-
volume MS-LTC-DRGs for FY 2021 in a supplemental data file for public 
use posted via the internet on the CMS website for this proposed rule 
at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html in order to streamline the information 
made available to the public that is used in the annual development of 
Table 11.
    In order to determine the proposed FY 2021 relative weights for the 
proposed low-volume MS-LTC-DRGs, consistent with our historical 
practice, we are proposing to use the five low-volume quintiles 
described previously. We determined a proposed relative weight and 
(geometric) average length of stay for each of the five proposed low-
volume quintiles using the methodology described in section VII.B.3.g. 
of the preamble of this proposed rule. We are proposing to assign the 
same proposed relative weight and average length of stay to each of the 
proposed low-volume MS-LTC-DRGs that make up an individual low-volume 
quintile. We note that, as this system is dynamic, it is possible that 
the number and specific type of MS-LTC-DRGs with a low-volume of 
applicable LTCH cases will vary in the future. Furthermore, we note 
that we continue to monitor the volume (that is, the number of 
applicable LTCH cases) in the low-volume quintiles to ensure that our 
quintile assignments used in determining the MS-LTC-DRG relative 
weights result in appropriate payment for LTCH cases grouped to 
proposed low-volume MS-LTC-DRGs and do not result in an unintended 
financial incentive for LTCHs to inappropriately admit these types of 
cases.
g. Steps for Determining the Proposed FY 2021 MS-LTC-DRG Relative 
Weights
    In this proposed rule, we are proposing to continue to use our 
current methodology to determine the proposed FY 2021 MS-LTC-DRG 
relative weights.
    In summary, to determine the proposed FY 2021 MS-LTC-DRG relative 
weights, we are proposing to group applicable LTCH cases to the 
appropriate proposed MS-LTC-DRG, while taking into account the proposed 
low-volume quintiles (as described previously) and cross-walked 
proposed no-volume MS-LTC-DRGs (as described later in this section). 
After establishing the appropriate proposed MS-LTC-DRG (or proposed 
low-volume quintile), we are proposing to calculate the proposed FY 
2021 relative weights by first removing cases with a length of stay of 
7 days or less and statistical outliers (Steps 1 and 2). Next, we are 
proposing to adjust the number of applicable LTCH cases in each 
proposed MS-LTC-DRG (or proposed low-volume quintile) for the effect of 
SSO cases (Step 3). After removing applicable LTCH cases with a length 
of stay of 7 days or less (Step 1) and statistical outliers (Step 2), 
which are the SSO-adjusted applicable LTCH cases and corresponding 
charges (Step 3), we are proposing to calculate proposed ``relative 
adjusted weights'' for each proposed MS-LTC-DRG (or proposed low-volume 
quintile) using the HSRV method.
    Step 1--Remove cases with a length of stay of 7 days or less.
    The first step in our proposed calculation of the proposed FY 2021 
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 2021 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

[[Page 32808]]

payment determination for those LTCH cases that actually benefit from 
and receive a full course of treatment at an LTCH by including data 
from these very short stays. Therefore, consistent with our existing 
relative weight methodology, in determining the proposed FY 2021 MS-
LTC-DRG relative weights, we are proposing to remove LTCH cases with a 
length of stay of 7 days or less from applicable LTCH cases. (For 
additional information on what is removed in this step of the relative 
weight methodology, we refer readers to 67 FR 55989 and 74 FR 43959.)
    Step 2--Remove statistical outliers.
    The next step in our proposed calculation of the proposed FY 2021 
MS-LTC-DRG relative weights is to remove statistical outlier cases from 
the LTCH cases with a length of stay of at least 8 days. Consistent 
with our existing relative weight methodology, we are proposing to 
continue to define statistical outliers as cases that are outside of 
3.0 standard deviations from the mean of the log distribution of both 
charges per case and the charges per day for each MS-LTC-DRG. These 
statistical outliers are removed prior to calculating the proposed 
relative weights because we believe that they may represent aberrations 
in the data that distort the measure of average resource use. Including 
those LTCH cases in the calculation of the proposed relative weights 
could result in an inaccurate relative weight that does not truly 
reflect relative resource use among those MS-LTC-DRGs. (For additional 
information on what is removed in this step of the proposed relative 
weight methodology, we refer readers to 67 FR 55989 and 74 FR 43959.) 
After removing cases with a length of stay of 7 days or less and 
statistical outliers, we were left with applicable LTCH cases that have 
a length of stay greater than or equal to 8 days. In this proposed 
rule, we refer to these cases as ``trimmed applicable LTCH cases.''
    Step 3--Adjust charges for the effects of SSOs.
    As the next step in the calculation of the proposed FY 2021 MS-LTC-
DRG relative weights, consistent with our historical approach, we are 
proposing to adjust each LTCH's charges per discharge for those 
remaining cases (that is, trimmed applicable LTCH cases) for the 
effects of SSOs (as defined in Sec.  412.529(a) in conjunction with 
Sec.  412.503). Specifically, we are proposing to make this adjustment 
by counting an SSO case as a fraction of a discharge based on the ratio 
of the length of stay of the case to the average length of stay for the 
MS-LTC-DRG for non-SSO cases. This has the effect of proportionately 
reducing the impact of the lower charges for the SSO cases in 
calculating the average charge for the MS-LTC-DRG. This process 
produces the same result as if the actual charges per discharge of an 
SSO case were adjusted to what they would have been had the patient's 
length of stay been equal to the average length of stay of the MS-LTC-
DRG.
    Counting SSO cases as full LTCH cases with no adjustment in 
determining the proposed FY 2021 MS-LTC-DRG relative weights would 
lower the proposed FY 2021 MS-LTC-DRG relative weight for affected MS-
LTC-DRGs because the relatively lower charges of the SSO cases would 
bring down the average charge for all cases within a MS-LTC-DRG. This 
would result in an ``underpayment'' for non-SSO cases and an 
``overpayment'' for SSO cases. Therefore, we are proposing to continue 
to adjust for SSO cases under Sec.  412.529 in this manner because it 
would result in more appropriate payments for all LTCH PPS standard 
Federal payment rate cases. (For additional information on this step of 
the relative weight methodology, we refer readers to 67 FR 55989 and 74 
FR 43959.)
    Step 4--Calculate the proposed FY 2021 MS-LTC-DRG relative weights 
on an iterative basis.
    Consistent with our historical relative weight methodology, we are 
proposing to calculate the proposed FY 2021 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 is then multiplied by the LTCH's 
case-mix index to produce an adjusted hospital-specific relative charge 
value for the case. We used an initial case-mix index value of 1.0 for 
each LTCH.
    For each proposed MS-LTC-DRG, we calculated the proposed FY 2021 
relative weight by dividing the SSO-adjusted average of the hospital-
specific relative charge values for applicable LTCH cases for the 
proposed MS-LTC-DRG (that is, the sum of the hospital-specific relative 
charge value from above divided by the sum of equivalent cases from 
Step 3 for each proposed MS-LTC-DRG) by the overall SSO-adjusted 
average hospital-specific relative charge value across all applicable 
LTCH cases for all LTCHs (that is, the sum of the hospital-specific 
relative charge value from above divided by the sum of equivalent 
applicable LTCH cases from Step 3 for each proposed MS-LTC-DRG). Using 
these recalculated MS-LTC-DRG relative weights, each LTCH's average 
relative weight for all of its SSO-adjusted trimmed applicable LTCH 
cases (that is, its case-mix) was calculated by dividing the sum of all 
the LTCH's MS-LTC-DRG relative weights by its total number of SSO-
adjusted trimmed applicable LTCH cases. The LTCHs' hospital-specific 
relative charge values (from previous) are then multiplied by the 
hospital-specific case-mix indexes. The hospital-specific case-mix 
adjusted relative charge values are then used to calculate a new set of 
proposed MS-LTC-DRG relative weights across all LTCHs. This iterative 
process continued until there was convergence between the relative 
weights produced at adjacent steps, for example, when the maximum 
difference was less than 0.0001.
    Step 5--Determine a proposed FY 2021 relative weight for MS-LTC-
DRGs with no applicable LTCH cases.
    Using the trimmed applicable LTCH cases, consistent with our 
historical methodology, we identified the proposed MS-LTC-DRGs for 
which there were no claims in the December 2019 update of the FY 2019 
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 proposed 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.)
    Consistent with our existing methodology, we are proposing to 
cross-walk each no-volume proposed MS-LTC-DRG to another proposed MS-
LTC-DRG for which we calculated a proposed relative weight (determined 
in accordance with the methodology as previously described). Then, the 
``no-volume'' proposed MS-LTC-DRG is assigned the same proposed 
relative weight (and average length of stay) of

[[Page 32809]]

the proposed MS-LTC-DRG to which it was cross-walked (as described in 
greater detail in this section of this proposed rule).
    Of the 767 proposed MS-LTC-DRGs for FY 2021, we identified 375 MS-
LTC-DRGs for which there were no trimmed applicable LTCH cases. This 
number includes the 11 ``transplant'' MS-LTC-DRGs, the 2 ``error'' MS-
LTC-DRGs, and the 15 ``psychiatric or rehabilitation'' MS-LTC-DRGs, 
which are discussed in this section of this rule, such that we 
identified 347 MS-LTC-DRGs that for which we would propose to assign a 
relative weight using our existing ``no-volume'' proposed MS-LTC-DRG 
methodology (that is, 375-11-2-15 = 347). We are proposing to assign 
proposed relative weights to each of the 347 no-volume proposed MS-LTC-
DRGs based on clinical similarity and relative costliness to 1 of the 
remaining 392 (767-375 = 392) proposed MS-LTC-DRGs for which we 
calculated proposed relative weights based on the trimmed applicable 
LTCH cases in the FY 2019 MedPAR file data using the steps described 
previously. (For the remainder of this discussion, we refer to the 
``cross-walked'' proposed MS-LTC-DRGs as one of the 392 proposed MS-
LTC-DRGs to which we cross-walked each of the 347 ``no-volume'' 
proposed MS-LTC-DRGs.) Then, we are generally proposing to assign the 
347 no-volume proposed MS-LTC-DRGs the proposed relative weight of the 
cross-walked proposed MS-LTC-DRG. (As explained in Step 6, when 
necessary, we made adjustments to account for nonmonotonicity.)
    We cross-walked the no-volume proposed MS-LTC-DRG to a proposed MS-
LTC-DRG for which we calculated proposed relative weights based on the 
December 2019 update of the FY 2019 MedPAR file, and to which it is 
similar clinically in intensity of use of resources and relative 
costliness as determined by criteria such as care provided during the 
period of time surrounding surgery, surgical approach (if applicable), 
length of time of surgical procedure, postoperative care, and length of 
stay. (For more details on our process for evaluating relative 
costliness, we refer readers to the FY 2010 IPPS/RY 2010 LTCH PPS final 
rule (73 FR 48543).) We believe in the rare event that there would be a 
few LTCH cases grouped to one of the no-volume proposed MS-LTC-DRGs in 
FY 2021, the proposed relative weights assigned based on the cross-
walked proposed MS-LTC-DRGs would result in an appropriate LTCH PPS 
payment because the crosswalks, which are based on clinical similarity 
and relative costliness, would be expected to generally require 
equivalent relative resource use.
    Then we assigned the proposed relative weight of the cross-walked 
proposed MS-LTC-DRG as the proposed relative weight for the no-volume 
proposed MS-LTC-DRG such that both of these proposed MS-LTC-DRGs (that 
is, the no-volume proposed MS-LTC-DRG and the cross-walked proposed MS-
LTC-DRG) have the same proposed relative weight (and average length of 
stay) for FY 2021. We note that, if the cross-walked proposed MS-LTC-
DRG had 25 applicable LTCH cases or more, its proposed relative weight 
(calculated using the methodology as previously described in Steps 1 
through 4) is assigned to the no-volume proposed MS-LTC-DRG as well. 
Similarly, if the proposed MS-LTC-DRG to which the no-volume proposed 
MS-LTC-DRG was cross-walked had 24 or less cases and, therefore, was 
designated to 1 of the proposed low-volume quintiles for purposes of 
determining the proposed relative weights, we assigned the proposed 
relative weight of the applicable proposed low-volume quintile to the 
no-volume proposed MS-LTC-DRG such that both of these proposed MS-LTC-
DRGs (that is, the no-volume proposed MS-LTC-DRG and the cross-walked 
proposed MS-LTC-DRG) have the same proposed relative weight for FY 
2021. (As we noted previously, in the infrequent case where 
nonmonotonicity involving a no-volume proposed MS-LTC-DRG resulted, 
additional adjustments as described in Step 6 are required in order to 
maintain monotonically increasing proposed relative weights.)
    As discussed earlier, for this proposed rule, we are providing the 
list of the no-volume proposed MS-LTC-DRGs and the proposed MS-LTC-DRGs 
to which each was cross-walked (that is, the cross-walked proposed MS-
LTC-DRGs) for FY 2021 in a supplemental data file for public use posted 
via the internet on the CMS website for this proposed rule at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html in order to streamline the information 
made available to the public that is used in the annual development of 
Table 11.
    To illustrate this methodology for determining the proposed 
relative weights for the proposed FY 2021 MS-LTC-DRGs with no 
applicable LTCH cases, we are providing the following example, which 
refers to the no-volume proposed MS-LTC-DRGs crosswalk information for 
FY 2021 (which, as previously stated, we are providing in a 
supplemental data file posted via the internet on the CMS website for 
this proposed rule).
    Example: There were no trimmed applicable LTCH cases in the FY 2019 
MedPAR file that we are using for this proposed rule for proposed MS-
LTC-DRG 061 (Acute Ischemic Stroke with Use of Thrombolytic Agent with 
MCC). We determined that proposed MS-LTC-DRG 070 (Nonspecific 
Cerebrovascular Disorders with MCC) is similar clinically and based on 
resource use to proposed MS-LTC-DRG 061. Therefore, we assigned the 
same proposed relative weight (and average length of stay) of proposed 
MS-LTC-DRG 70 of 0.6954 for FY 2021 to proposed MS-LTC-DRG 061 (we 
refer readers to Table 11, which is listed in section VI. of the 
Addendum to this proposed rule and is available via the internet on the 
CMS website).
    Again, we note that, as this system is dynamic, it is entirely 
possible that the number of proposed MS-LTC-DRGs with no volume will 
vary in the future. Consistent with our historical practice, we are 
proposing to use the most recent available claims data to identify the 
trimmed applicable LTCH cases from which we determine the relative 
weights in the final rule.
    For FY 2021, consistent with our historical relative weight 
methodology, we are proposing to establish a proposed relative weight 
of 0.0000 for the following transplant proposed 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); Simultaneous Pancreas/Kidney Transplant with 
Hemodialysis (proposed MS-LTC-DRG 019); Pancreas Transplant (MS-LTC-DRG 
010); Kidney Transplant (MS-LTC-DRG 652); Kidney Transplant with 
Hemodialysis with MCC (proposed MS-LTC-DRG 650), and Kidney Transplant 
with Hemodialysis without MCC (proposed MS LTC DRG 651). 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 11 proposed transplant MS-LTC-DRGs in the 
GROUPER program for administrative purposes only. Because we use the 
same GROUPER program for LTCHs as is used under the IPPS,

[[Page 32810]]

removing these MS-LTC-DRGs would be administratively burdensome. (For 
additional information regarding our treatment of transplant MS-LTC-
DRGs, we refer readers to the RY 2010 LTCH PPS final rule (74 FR 
43964).) In addition, consistent with our historical policy, we are 
proposing to establish a relative weight of 0.0000 for the 2 ``error'' 
MS-LTC-DRGs (that is, MS-LTC-DRG 998 (Principal Diagnosis Invalid as 
Discharge Diagnosis) and MS-LTC-DRG 999 (Ungroupable)) because 
applicable LTCH cases grouped to these MS-LTC-DRGs cannot be properly 
assigned to an MS-LTC-DRG according to the grouping logic.
    Additionally, we are proposing to establish a relative weight of 
0.0000 for the following ``psychiatric or rehabilitation'' MS-LTC-DRGs: 
MS-LTC-DRG 876 (O.R. Procedure with Principal Diagnoses of Mental 
Illness); MS-LTC-DRG 880 (Acute Adjustment Reaction & Psychosocial 
Dysfunction); MS-LTC-DRG 881 (Depressive Neuroses); MS-LTC-DRG 882 
(Neuroses Except Depressive); MS-LTC-DRG 883 (Disorders of Personality 
& Impulse Control); MS-LTC-DRG 884 (Organic Disturbances & Mental 
Retardation); MS-LTC-DRG 885 (Psychoses); MS-LTC-DRG 886 (Behavioral & 
Developmental Disorders); MS-LTC-DRG 887 (Other Mental Disorder 
Diagnoses); MS-LTC-DRG 894 (Alcohol/Drug Abuse or Dependence, Left 
Ama); MS-LTC-DRG 895 (Alcohol/Drug Abuse or Dependence, with 
Rehabilitation Therapy); MS-LTC-DRG 896 (Alcohol/Drug Abuse or 
Dependence, without Rehabilitation Therapy with MCC); MS-LTC-DRG 897 
(Alcohol/Drug Abuse or Dependence, without Rehabilitation Therapy 
without MCC); MS-LTC-DRG 945 (Rehabilitation with CC/MCC); and MS-LTC-
DRG 946 (Rehabilitation without CC/MCC). We are proposing a relative 
weight 0.0000 for these 15 ``psychiatric or rehabilitation'' MS LTC 
DRGs because the blended payment rate and temporary exceptions to the 
site neutral payment rate will not be applicable for any LTCH 
discharges occurring in FY 2021, and as such payment under the LTCH PPS 
will be no longer be made in part based on the LTCH PPS standard 
Federal payment rate for any discharges assigned to those MS-DRGs.
    Step 6--Adjust the proposed FY 2021 MS-LTC-DRG relative weights to 
account for nonmonotonically increasing relative weights.
    The MS-DRGs contain base DRGs that have been subdivided into one, 
two, or three severity of illness levels. Where there are three 
severity levels, the most severe level has at least one secondary 
diagnosis code that is referred to as an MCC (that is, major 
complication or comorbidity). The next lower severity level contains 
cases with at least one secondary diagnosis code that is a CC (that is, 
complication or comorbidity). Those cases without an MCC or a CC are 
referred to as ``without CC/MCC.'' When data do not support the 
creation of three severity levels, the base MS-DRG is subdivided into 
either two levels or the base MS-DRG is not subdivided. The two-level 
subdivisions may consist of the MS-DRG with CC/MCC and the MS-DRG 
without CC/MCC. Alternatively, the other type of two-level subdivision 
may consist of the MS-DRG with MCC and the MS-DRG without MCC.
    In those base MS-LTC-DRGs that are split into either two or three 
severity levels, cases classified into the ``without CC/MCC'' MS-LTC-
DRG are expected to have a lower resource use (and lower costs) than 
the ``with CC/MCC'' MS-LTC-DRG (in the case of a two-level split) or 
both the ``with CC'' and the ``with MCC'' MS-LTC-DRGs (in the case of a 
three-level split). That is, theoretically, cases that are more severe 
typically require greater expenditure of medical care resources and 
would result in higher average charges. Therefore, in the three 
severity levels, relative weights should increase by severity, from 
lowest to highest. If the relative weights decrease as severity 
increases (that is, if within a base MS-LTC-DRG, an MS-LTC-DRG with CC 
has a higher relative weight than one with MCC, or the MS-LTC-DRG 
``without CC/MCC'' has a higher relative weight than either of the 
others), they are nonmonotonic. We continue to believe that utilizing 
nonmonotonic relative weights to adjust Medicare payments would result 
in inappropriate payments because the payment for the cases in the 
higher severity level in a base MS-LTC-DRG (which are generally 
expected to have higher resource use and costs) would be lower than the 
payment for cases in a lower severity level within the same base MS-
LTC-DRG (which are generally expected to have lower resource use and 
costs). Therefore, in determining the proposed FY 2021 MS-LTC-DRG 
relative weights, consistent with our historical methodology, we are 
proposing to continue to combine MS-LTC-DRG severity levels within a 
base MS-LTC-DRG for the purpose of computing a relative weight when 
necessary to ensure that monotonicity is maintained. For a 
comprehensive description of our existing methodology to adjust for 
nonmonotonicity, we refer readers to the FY 2010 IPPS/RY 2010 LTCH PPS 
final rule (74 FR 43964 through 43966). Any adjustments for 
nonmonotonicity that were made in determining the proposed FY 2021 MS-
LTC-DRG relative weights in this proposed rule by applying this 
methodology are denoted in Table 11, which is listed in section VI. of 
the Addendum to this proposed rule and is available via the internet on 
the CMS website.
    Step 7-- Calculate the proposed FY 2021 MS-LTC-DRG reclassification 
and recalibration budget neutrality factor.
    In accordance with the regulations at Sec.  412.517(b) (in 
conjunction with Sec.  412.503), the annual update to the MS-LTC-DRG 
classifications and relative weights is done in a budget neutral manner 
such that estimated aggregate LTCH PPS payments would be unaffected, 
that is, would be neither greater than nor less than the estimated 
aggregate LTCH PPS payments that would have been made without the MS-
LTC-DRG classification and relative weight changes. (For a detailed 
discussion on the establishment of the budget neutrality requirement 
for the annual update of the MS-LTC-DRG classifications and relative 
weights, we refer readers to the RY 2008 LTCH PPS final rule (72 FR 
26881 and 26882).)
    The MS-LTC-DRG classifications and relative weights are updated 
annually based on the most recent available LTCH claims data to reflect 
changes in relative LTCH resource use (Sec.  412.517(a) in conjunction 
with Sec.  412.503). To achieve the budget neutrality requirement at 
Sec.  412.517(b), under our established methodology, for each annual 
update, the MS-LTC-DRG relative weights are uniformly adjusted to 
ensure that estimated aggregate payments under the LTCH PPS would not 
be affected (that is, decreased or increased). Consistent with that 
provision, we are proposing to update the MS-LTC-DRG classifications 
and relative weights for FY 2021 based on the most recent available 
LTCH data for applicable LTCH cases, and continue to apply a budget 
neutrality adjustment in determining the FY 2021 MS-LTC-DRG relative 
weights.
    In this proposed rule, to ensure budget neutrality in the update to 
the MS-LTC-DRG classifications and relative weights under Sec.  
412.517(b), we are proposing to continue to use our established two-
step budget neutrality methodology.
    To calculate the proposed normalization factor for FY 2021, we are 
proposing to group applicable LTCH cases using the proposed FY 2021 
Version 38 GROUPER, and the recalibrated proposed FY 2021 MS-

[[Page 32811]]

LTC-DRG relative weights to calculate the average case-mix index (CMI); 
we grouped the same applicable LTCH cases using the FY 2020 GROUPER 
Version 37 and MS-LTC-DRG relative weights and calculated the average 
CMI; and computed the ratio by dividing the average CMI for FY 2020 by 
the average CMI for proposed FY 2021. That ratio is the proposed 
normalization factor. Because the calculation of the proposed 
normalization factor involves the proposed relative weights for the 
proposed MS-LTC-DRGs that contained applicable LTCH cases to calculate 
the average CMIs, any low-volume proposed MS-LTC-DRGs are included in 
the calculation (and the proposed MS-LTC-DRGs with no applicable LTCH 
cases are not included in the calculation).
    To calculate the proposed budget neutrality adjustment factor, we 
simulated estimated total FY 2021 LTCH PPS standard Federal payment 
rate payments for applicable LTCH cases using the proposed FY 2021 
normalized relative weights and proposed GROUPER Version 38; simulated 
estimated total FY 2021 LTCH PPS standard Federal payment rate payments 
for applicable LTCH cases using the FY 2020 MS-LTC-DRG relative weights 
and the FY 2020 GROUPER Version 37; and calculated the ratio of these 
estimated total payments by dividing the simulated estimated total LTCH 
PPS standard Federal payment rate payments using the FY 2020 MS-LTC-DRG 
relative weights and the GROUPER Version 37 by the simulated estimated 
total LTCH PPS standard Federal payment rate payments using the 
proposed FY 2021 MS-LTC-DRG relative weights and the proposed GROUPER 
Version 38. The resulting ratio is the proposed budget neutrality 
adjustment factor. The calculation of the proposed budget neutrality 
factor involves the proposed relative weights for the LTCH cases used 
in the payment simulation, which includes any cases grouped to low-
volume proposed MS-LTC-DRGs or to proposed MS-LTC-DRGs with no 
applicable LTCH cases, and generally does not include payments for 
cases grouped to a proposed MS-LTC-DRG with no applicable LTCH cases. 
(Occasionally, a few LTCH cases (that is, those with a covered length 
of stay of 7 days or less), which are removed from the proposed 
relative weight calculation in step 2 that are grouped to a proposed 
MS-LTC-DRG with no applicable LTCH cases are included in the payment 
simulations used to calculate the proposed budget neutrality factor. 
However, the number and payment amount of such cases have a negligible 
impact on the proposed budget neutrality factor calculation).
    In this proposed rule, to ensure budget neutrality in the update to 
the MS-LTC-DRG classifications and relative weights under Sec.  
412.517(b), we are proposing to continue to use our established two-
step budget neutrality methodology. Therefore, in this proposed rule, 
in the first step of our MS-LTC-DRG budget neutrality methodology, for 
FY 2021, we are proposing to calculate and apply a proposed 
normalization factor to the recalibrated proposed relative weights (the 
result of Steps 1 through 6 discussed previously) to ensure that 
estimated payments are not affected by changes in the composition of 
case types or the proposed changes to the classification system. That 
is, the proposed normalization adjustment is intended to ensure that 
the recalibration of the proposed MS-LTC-DRG relative weights (that is, 
the process itself) neither increases nor decreases the average case-
mix index.
    To calculate the proposed normalization factor for FY 2021 (the 
first step of our budget neutrality methodology), we used the following 
three steps: (1.a.) Use the most recent available applicable LTCH cases 
from the most recent available data (that is, LTCH discharges from the 
FY 2019 MedPAR file) and grouped them using the proposed FY 2021 
GROUPER (that is, proposed Version 38 for FY 2021) and the recalibrated 
proposed FY 2021 MS-LTC-DRG relative weights (determined in Steps 1 
through 6 discussed previously) to calculate the average case-mix 
index; (1.b.) group the same applicable LTCH cases (as are used in Step 
1.a.) using the FY 2020 GROUPER (Version 37) and FY 2020 MS-LTC-DRG 
relative weights and calculated the average case-mix index; and (1.c.) 
compute the ratio of these average case-mix indexes by dividing the 
average CMI for FY 2021 (determined in Step 1.a.) by the average case-
mix index for FY 2020 (determined in Step 1.b.). As a result, in 
determining the proposed MS-LTC-DRG relative weights for FY 2021, each 
recalibrated proposed MS-LTC-DRG relative weight is multiplied by the 
proposed normalization factor of 1.25878 (determined in Step 1.c.) in 
the first step of the proposed budget neutrality methodology, which 
produced ``normalized relative weights.''
    In the second step of our MS-LTC-DRG budget neutrality methodology, 
we calculated a second budget neutrality factor consisting of the ratio 
of estimated aggregate FY 2021 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 2021 LTCH PPS 
standard Federal payment rate payments for applicable LTCH cases before 
reclassification and recalibration (that is, the sum of all 
calculations under Step 1.b. mentioned previously).
    That is, for this proposed rule, for FY 2021, under the second step 
of the budget neutrality methodology, we are proposing to determine the 
proposed budget neutrality adjustment factor using the following three 
steps: (2.a.) Simulate estimated total FY 2021 LTCH PPS standard 
Federal payment rate payments for applicable LTCH cases using the 
proposed normalized relative weights for FY 2021 and proposed GROUPER 
Version 38 (as described previously); (2.b.) simulate estimated total 
FY 2021 LTCH PPS standard Federal payment rate payments for applicable 
LTCH cases using the FY 2020 GROUPER (Version 37) and the FY 2020 MS-
LTC-DRG relative weights in Table 11 of the FY 2020 IPPS/LTCH PPS final 
rule available on the internet, as described in section VI. of the 
Addendum of that final rule; and (2.c.) calculate the ratio of these 
estimated total payments by dividing the value determined in Step 2.b. 
by the value determined in Step 2.a. In determining the proposed FY 
2021 MS-LTC-DRG relative weights, each normalized proposed relative 
weight is then multiplied by a budget neutrality factor of 0.9993445 
(the value determined in Step 2.c.) in the second step of the budget 
neutrality methodology to achieve the budget neutrality requirement at 
Sec.  412.517(b).
    Accordingly, in determining the proposed FY 2021 MS-LTC-DRG 
relative weights in this proposed rule, consistent with our existing 
methodology, we are proposing to apply a normalization factor of 
1.25878 and a budget neutrality factor of 0.9993445. Table 11, which is 
listed in section VI. of the Addendum to this proposed rule and is 
available via the internet on the CMS website, lists the proposed MS-
LTC-DRGs and their respective proposed relative weights, geometric mean 
length of stay, and five-sixths of the geometric mean length of stay 
(used to identify SSO cases under Sec.  412.529(a)) for FY 2021.

[[Page 32812]]

C. Proposed Changes to the LTCH PPS Payment Rates and Other Changes to 
the LTCH PPS for FY 2021

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 412.533 
and 412.535. In this section, we discuss the factors that we are 
proposing to use to update the LTCH PPS standard Federal payment rate 
for FY 2021, that is, effective for LTCH discharges occurring on or 
after October 1, 2020 through September 30, 2021. 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 LTCH discharges were paid similarly to those now exempt from 
the site neutral payment rate. That legacy payment rate was called the 
standard Federal rate. For details on the development of the initial 
standard Federal rate for FY 2003, we refer readers to the August 30, 
2002 LTCH PPS final rule (67 FR 56027 through 56037). For subsequent 
updates to the standard Federal rate (FYs 2003 through 2015)/LTCH PPS 
standard Federal payment rate (FY 2016 through present) as implemented 
under Sec.  412.523(c)(3), we refer readers to the FY 2020IPPS/LTCH PPS 
final rule (84 FR 42445 through 42446).
    In this FY 2021 IPPS/LTCH PPS proposed rule, we present our 
proposals related to the annual update to the LTCH PPS standard Federal 
payment rate for FY 2021.
    The proposed update to the LTCH PPS standard Federal payment rate 
for FY 2021 is presented in section V.A. of the Addendum to this 
proposed rule. The components of the proposed annual update to the LTCH 
PPS standard Federal payment rate for FY 2021 are discussed in this 
section, including the statutory reduction to the annual update for 
LTCHs that fail to submit quality reporting data for FY 2021 as 
required by the statute (as discussed in section VII.C.2.c. of the 
preamble of this proposed rule). We are also proposing to make an 
adjustment to the LTCH PPS standard Federal payment rate to account for 
the estimated effect of the changes to the area wage level for FY 2021 
on estimated aggregate LTCH PPS payments, in accordance with Sec.  
412.523(d)(4) (as discussed in section V.B. of the Addendum to this 
proposed rule).
    In addition, as discussed in the FY 2019 IPPS/LTCH PPS final rule 
(83 FR 41532 through 41537), we eliminated the 25-percent threshold 
policy in a budget neutral manner. The budget neutrality requirements 
are codified in the regulations at Sec.  412.523(d)(6). Under these 
regulations, a temporary, one-time factor is applied to the standard 
Federal payment rate in FY 2019 and FY 2020, and a permanent, one-time 
factor in FY 2021. These factors as established in the correction to 
the FY 2019 IPPS/LTCH PPS final rule (83 FR 41536) are--
     For FY 2019, a temporary, one-time factor of 0.990878;
     For FY 2020, a temporary, one-time factor of 0.990737; and
     For FY 2021 and subsequent years, a permanent, one-time 
factor of 0.991249.
    Therefore, in determining the FY 2021 LTCH PPS standard Federal 
payment rate, we are proposing to--
     Remove the temporary, one-time factor of 0.990737 for the 
estimated cost of the elimination of the 25-percent threshold policy in 
FY 2020 by applying a factor of (1/0.990737);
     Apply a permanent, one-time factor of 0.991249 for the 
estimated cost of the elimination of the 25-percent threshold policy in 
FY 2021;
2. Proposed FY 2021 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). As discussed in 
section VII.D. of the preamble of this proposed rule, we are proposing 
to rebase and revise the 2013-based LTCH market basket to reflect a 
2017 base year. 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. Proposed Annual Update to the LTCH PPS Standard Federal Payment Rate 
for FY 2021
    CMS has used an estimated market basket increase to update the LTCH 
PPS. As previously noted, for FY 2021 we are proposing to rebase and 
revise the 2013-based LTCH market basket to reflect a 2017 base year. 
The proposed 2017-based LTCH market basket is primarily based on the 
Medicare cost report data submitted by LTCHs and, therefore, 
specifically reflects the cost structures of only LTCHs. We are 
proposing to use data from cost reports beginning in FY 2017 because 
these data are the latest available complete data at the time of 
rulemaking for purposes of calculating cost weights for the market 
basket. We believe that the proposed 2017-based LTCH market basket 
appropriately reflects the cost structure of LTCHs, as discussed in 
greater detail in section VII.D. of the preamble of this proposed rule. 
In this proposed rule, we are proposing to use the proposed 2017-

[[Page 32813]]

based LTCH market basket to update the LTCH PPS standard Federal 
payment rate for FY 2021.
    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 provided 
for a reduction, for each of FYs 2010 through 2019, by the ``other 
adjustment'' described in section 1886(m)(4)(F) of the Act; therefore, 
it is not applicable for FY 2021.
    Section 1886(m)(3)(B) of the Act provides that the application of 
paragraph (3) of section 1886(m) of the Act may result in the annual 
update being less than zero for a rate year, and may result in payment 
rates for a rate year being less than such payment rates for the 
preceding rate year.
c. Proposed Adjustment to the LTCH PPS Standard Federal Payment Rate 
Under the Long-Term Care Hospital Quality Reporting Program (LTCH QRP)
    In accordance with section 1886(m)(5) of the Act, the Secretary 
established the Long-Term Care Hospital Quality Reporting Program (LTCH 
QRP). The reduction in the annual update to the LTCH PPS standard 
Federal payment rate for failure to report quality data under the LTCH 
QRP for FY 2014 and subsequent fiscal years is codified under 42 CFR 
412.523(c)(4). The LTCH QRP, as required for FY 2014 and subsequent 
fiscal years by section 1886(m)(5)(A)(i) of the Act, applies a 2.0 
percentage point reduction to any update under Sec.  412.523(c)(3) for 
an LTCH that does not submit quality reporting data to the Secretary in 
accordance with section 1886(m)(5)(C) of the Act with respect to such a 
year (that is, in the form and manner and at the time specified by the 
Secretary under the LTCH QRP) (Sec.  412.523(c)(4)(i)). Section 
1886(m)(5)(A)(ii) of the Act provides that the application of the 2.0 
percentage points reduction may result in an annual update that is less 
than 0.0 for a year, and may result in LTCH PPS payment rates for a 
year being less than such LTCH PPS payment rates for the preceding 
year. Furthermore, section 1886(m)(5)(B) of the Act specifies that the 
2.0 percentage points reduction is applied in a noncumulative manner, 
such that any reduction made under section 1886(m)(5)(A) of the Act 
shall apply only with respect to the year involved, and shall not be 
taken into account in computing the LTCH PPS payment amount for a 
subsequent year. These requirements are codified in the regulations at 
Sec.  412.523(c)(4). (For additional information on the history of the 
LTCH QRP, including the statutory authority and the selected measures, 
we refer readers to section VIII.C. of the preamble of this proposed 
rule.)
d. Proposed Annual Market Basket Update Under the LTCH PPS for FY 2021
    Consistent with our historical practice and our proposal, we 
estimate the market basket increase and the MFP adjustment based on 
IGI's forecast using the most recent available data. Based on IGI's 
fourth quarter 2019 forecast, the FY 2021 full market basket estimate 
for the LTCH PPS using the proposed 2017-based LTCH market basket is 
2.9 percent. The current estimate of the MFP adjustment for FY 2021 
based on IGI's fourth quarter 2019 forecast is 0.4 percent.
    For FY 2021, section 1886(m)(3)(A)(i) of the Act requires that any 
annual update to the LTCH PPS standard Federal payment rate be reduced 
by the productivity adjustment (``the MFP adjustment'') described in 
section 1886(b)(3)(B)(xi)(II) of the Act. Consistent with the statute, 
we are proposing to reduce the full estimated FY 2021 market basket 
increase by the FY 2021 MFP adjustment. To determine the proposed 
market basket increase for LTCHs for FY 2021, as reduced by the 
proposed MFP adjustment, consistent with our established methodology, 
we are subtracting the proposed FY 2021 MFP adjustment from the 
estimated FY 2021 market basket increase. (We note that sections 
1886(m)(3)(A)(ii) and 1886(m)(4)(F) of the Act required an additional 
reduction each year only for FYs 2010 through 2019.) (For additional 
details on our established methodology for adjusting the market basket 
increase by the MFP adjustment, we refer readers to the FY 2012 IPPS/
LTCH PPS final rule (76 FR 51771).)
    For FY 2021, 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, 
for LTCHs that fail to submit quality reporting data under the LTCH 
QRP, the proposed 2.9 percent update to the LTCH PPS standard Federal 
payment rate for FY 2021 would be reduced by the 0.4 percentage point 
MFP adjustment as required under section 1886(m)(3)(A)(i) of the Act 
and the additional 2.0 percentage points reduction required by section 
1886(m)(5) of the Act.
    In this FY 2021 IPPS/LTCH PPS proposed rule, in accordance with the 
statute, we are proposing to reduce the proposed FY 2021 full market 
basket estimate of 2.9 percent (based on IGI's fourth quarter 2019 
forecast of the proposed 2017-based LTCH market basket) by the proposed 
FY 2021 MFP adjustment of 0.4 percentage point (based on IGI's fourth 
quarter 2019 forecast). Therefore, under the authority of section 123 
of the BBRA as amended by section 307(b) of the BIPA, we are proposing 
to establish an annual market basket update to the LTCH PPS standard 
Federal payment rate for FY 2021 of 2.5 percent (that is, the most 
recent estimate of the LTCH PPS market basket increase of 2.9 percent 
less the MFP adjustment of 0.4 percentage point). While we have 
historically implemented the payment updates to the LTCH PPS in 
individual amendments to the regulations, given existing statutory 
provisions affecting the LTCH update are constant going forward, we are 
proposing to revise Sec.  412.523(c)(3) by adding a new paragraph 
(xvii), which would specify that the LTCH PPS standard Federal payment 
rate for FY 2021 and subsequent fiscal years is the LTCH PPS standard 
Federal payment rate for the previous LTCH PPS payment year updated by 
the market basket (as determined by CMS), less a multifactor 
productivity adjustment (as determined by CMS), and further adjusted, 
as appropriate, as described in Sec.  412.523(d) (including the 
application of the adjustment factor for the cost of the elimination of 
the 25-percent threshold policy under Sec.  412.523(d)(6) as previously 
discussed) rather than codifying specific numerical updates annually as 
was our historical practice. For LTCHs that fail to submit quality 
reporting data under the LTCH QRP, under Sec.  412.523(c)(3)(xvi) in 
conjunction with Sec.  412.523(c)(4), we are proposing to further 
reduce 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 proposing to establish an annual update to the 
LTCH PPS standard Federal payment rate of 0.5 percent (that is, 2.5 
percent minus 2.0 percentage points) for FY 2021 for LTCHs that fail to 
submit quality reporting data as required under the LTCH QRP.

[[Page 32814]]

Consistent with our historical practice, we are proposing to use a more 
recent estimate of the market basket and the MFP adjustment, if 
appropriate, in the final rule to establish an annual update to the 
LTCH PPS standard Federal payment rate for FY 2021 under proposed Sec.  
412.523(c)(3)(xvii). (We note that, consistent with historical 
practice, we are also proposing to adjust the FY 2021 LTCH PPS standard 
Federal payment rate by an area wage level budget neutrality factor in 
accordance with Sec.  412.523(d)(4) (as discussed in section V.B.5. of 
the Addendum to this proposed rule).)

D. Proposed Rebasing of the LTCH Market Basket

1. Background
    The input price index (that is, the market basket) that was used to 
develop the LTCH PPS for FY 2003 was the ``excluded hospital with 
capital'' market basket. That market basket was based on 1997 Medicare 
cost report data and included data for Medicare-participating IRFs, 
IPFs, LTCHs, cancer hospitals, and children's hospitals. Although the 
term ``market basket'' technically describes the mix of goods and 
services used in providing hospital care, this term is also commonly 
used to denote the input price index (that is, cost category weights 
and price proxies combined) derived from that mix. Accordingly, the 
term ``market basket,'' as used in this section, refers to an input 
price index.
    Beginning with rate year (RY) 2007, LTCH PPS payments were updated 
using a 2002-based market basket reflecting the operating and capital 
cost structures for IRFs, IPFs, and LTCHs (hereafter referred to as the 
rehabilitation, psychiatric, and long-term care (RPL) market basket). 
We excluded cancer and children's hospitals from the RPL market basket 
because their payments are based entirely on reasonable costs subject 
to rate-of-increase limits established under the authority of section 
1886(b) of the Act, which are implemented in regulations at 42 CFR 
413.40. Those types of hospitals are not paid under a PPS. Also, the 
2002 cost structures for cancer and children's hospitals are noticeably 
different from the cost structures for freestanding IRFs, freestanding 
IPFs, and LTCHs. A complete discussion of the 2002-based RPL market 
basket can be found in the RY 2007 LTCH PPS final rule (71 FR 27810 
through 27817).
    In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51756), we finalized 
the rebasing and revising of the 2002-based RPL market basket by 
creating and implementing a 2008-based RPL market basket. We also 
discussed the creation of a stand-alone LTCH market basket and received 
several public comments, all of which supported deriving a standalone 
LTCH market basket (76 FR 51756 through 51757). In the FY 2013 IPPS/
LTCH PPS final rule, we finalized the adoption of a stand-alone 2009-
based LTCH-specific market basket that reflects the cost structures of 
LTCHs only (77 FR 53467 through 53479). In the FY 2017 IPPS/LTCH PPS 
final rule (81 FR 57085 through 57099), we finalized the rebasing and 
revising of the 2009-based LTCH market basket to reflect a 2013 base 
year (the 2013-based LTCH market basket).
    For this FY 2021 IPPS/LTCH PPS proposed rule, we propose to rebase 
and revise the 2013-based LTCH market basket to reflect a 2017 base 
year. The proposed 2017-based LTCH market basket is primarily based on 
Medicare cost report data for LTCHs for 2017, which are for cost 
reporting periods beginning on and after October 1, 2016, and prior to 
October 1, 2017. We propose to use data from cost reports beginning in 
FY 2017 because these data are the latest available complete data for 
purposes of calculating cost weights for the market basket at the time 
of rulemaking.
    In the following discussion, we provide an overview of the proposed 
LTCH market basket, describe the proposed methodologies for developing 
the operating and capital portions of the 2017-based LTCH market 
basket, and provide information on the proposed price proxies. Then, we 
present the FY 2021 market basket update and labor-related share based 
on the proposed 2017-based LTCH market basket.
2. Overview of the Proposed 2017-Based LTCH Market Basket
    Similar to the 2013-based LTCH market basket, the proposed 2017-
based LTCH market basket is a fixed-weight, Laspeyres-type price index. 
A Laspeyres price index measures the change in price, over time, of the 
same mix of goods and services purchased in the base period. Any 
changes in the quantity or mix (that is, intensity) of goods and 
services purchased over time are not measured. The index itself is 
constructed using three steps. First, a base period is selected (in 
this proposed rule, we propose to use 2017 as the base period) and 
total base period expenditures are estimated for a set of mutually 
exclusive and exhaustive spending categories, with the proportion of 
total costs that each category represents being calculated. These 
proportions are called ``cost weights'' or ``expenditure weights.'' 
Second, each expenditure category is matched to an appropriate price or 
wage variable, referred to as a ``price proxy.'' In almost every 
instance, these price proxies are derived from publicly available 
statistical series that are published on a consistent schedule 
(preferably at least on a quarterly basis). Finally, the expenditure 
weight for each cost category is multiplied by the level of its 
respective price proxy. The sum of these products (that is, the 
expenditure weights multiplied by their price levels) for all cost 
categories yields the composite index level of the market basket in a 
given period. Repeating this step for other periods produces a series 
of market basket levels over time. Dividing an index level for a given 
period by an index level for an earlier period produces a rate of 
growth in the input price index over that timeframe. As previously 
noted, the market basket is described as a fixed-weight index because 
it represents the change in price over time of a constant mix (quantity 
and intensity) of goods and services needed to furnish hospital 
services. The effects on total expenditures resulting from changes in 
the mix of goods and services purchased subsequent to the base period 
are not measured. For example, a hospital hiring more nurses to 
accommodate the needs of patients would increase the volume of goods 
and services purchased by the hospital, but would not be factored into 
the price change measured by a fixed-weight hospital market basket. 
Only when the index is rebased would changes in the quantity and 
intensity be captured, with those changes being reflected in the cost 
weights. Therefore, we rebase the market basket periodically so that 
the cost weights reflect a recent mix of goods and services that 
hospitals purchase (hospital inputs) to furnish inpatient care.
3. Development of the Proposed 2017-Based LTCH Market Basket Cost 
Categories and Weights
    We are inviting public comments on our proposed methodology, 
discussed in this section of this rule, for deriving the proposed 2017-
based LTCH market basket.
a. Use of Medicare Cost Report Data
    We are proposing a 2017-based LTCH market basket that consists of 
seven major cost categories and a residual derived from the 2017 
Medicare cost reports (CMS Form 2552-10, OMB Control Number 0938-0050) 
for LTCHs. The seven cost categories are Wages and Salaries, Employee 
Benefits, Contract Labor, Pharmaceuticals, Professional

[[Page 32815]]

Liability Insurance (PLI), Home Office/Related Organization Contract 
Labor, and Capital. The residual category reflects all remaining costs 
not captured in the seven cost categories. The 2013-based LTCH market 
basket did not use the Medicare cost reports to calculate the Home 
Office/Related Organization Contract Labor cost weight.
    Medicare cost report data include costs for all patients, including 
Medicare, Medicaid, and private payer. Because our goal is to measure 
cost shares for facilities that serve Medicare beneficiaries, and are 
reflective of case mix and practice patterns associated with providing 
services to Medicare beneficiaries in LTCHs, we propose to limit our 
selection of Medicare cost reports to those from LTCHs that have a 
Medicare average length of stay (LOS) that is within a comparable range 
of their total facility average LOS. We define the Medicare average LOS 
based on data reported on the Medicare cost report (CMS Form 2552-10, 
OMB Control Number 0938-0050) Worksheet S-3, Part I, line 14. We 
believe that applying the LOS edit results in a more accurate 
reflection of the structure of costs for Medicare covered days as our 
proposed edit excludes those LTCHs that had an average total facility 
LOS that was much different than the average Medicare LOS. For the 
2013-based LTCH market basket, we used the cost reports submitted by 
LTCHs with Medicare average LOS within 25 percent (that is, 25 percent 
higher or lower) of the total facility average LOS for the hospital. 
Based on our analysis of the 2017 Medicare cost reports, for the 
proposed 2017-based LTCH market basket, we propose to again use the 
cost reports submitted by LTCHs with Medicare average LOS within 25 
percent (that is, 25 percent higher or lower) of the total facility 
average LOS for the hospital. The universe of LTCHs had an average 
Medicare LOS of 26 days, an average total facility LOS of 31 days, and 
aggregate Medicare utilization (as measured by Medicare inpatient LTCH 
days as a percentage of total facility inpatient LTCH days) of 49 
percent in 2017. Applying the proposed trim excludes 9 percent of LTCH 
providers and results in a subset of LTCH Medicare cost reports with an 
average Medicare LOS of 25 days, average facility LOS of 27 days, and 
aggregate Medicare utilization (based on days) of 58 percent. The 9 
percent of providers that are excluded from the proposed 2017-based 
LTCH market basket had an average Medicare LOS of 27 days, average 
facility LOS of 70 days, and aggregate Medicare utilization of 15 
percent.
    We are proposing to use the cost reports for LTCHs that meet this 
requirement to calculate the costs for the seven major cost categories 
(Wages and Salaries, Employee Benefits, Contract Labor, Professional 
Liability Insurance, Pharmaceuticals, Home Office/Related Organization 
Contract Labor, and Capital) for the market basket. For comparison, the 
2013-based LTCH market basket utilized the Bureau of Economic Analysis 
Benchmark Input-Output data rather than Medicare cost report data to 
derive the Home Office/Related Organization Contract Labor cost weight. 
A more detailed discussion of this methodological change is provided in 
section VII.D.3.a.(6). of the preamble of this proposed rule.
(1) Wages and Salaries Costs
    We propose to derive Wages and Salaries costs as the sum of routine 
inpatient salaries, ancillary salaries, and a proportion of overhead 
(or general service cost center) salaries as reported on Worksheet A, 
column 1. Because overhead salary costs are attributable to the entire 
LTCH, we propose to only include the proportion attributable to the 
Medicare allowable cost centers. For the 2017-based LTCH market basket, 
we propose that routine and ancillary Wages and Salaries costs would be 
equal to salary costs as reported on Worksheet A, column 1, lines 30 
through 35, 50 through 76 (excluding 52, 61, and 75), 90 through 91, 
and 93. Then, we are proposing to estimate the proportion of overhead 
salaries that are attributed to Medicare allowable costs centers by 
multiplying the ratio of these routine and ancillary Wages and Salaries 
to total salaries (Worksheet A, column 1, line 200) times total 
overhead salaries (Worksheet A, column 1, lines 4 through 18). A 
similar methodology was used to derive Wages and Salaries costs in the 
2013-based LTCH market basket.
(2) Employee Benefits Costs
    Similar to the 2013-based LTCH market basket, we propose to 
calculate Employee Benefits costs using Worksheet S-3, part II data. 
Specifically, we propose to use data from Worksheet S-3, part II, 
column 4, lines 17, 18, 20, and 22, to derive Employee Benefits costs. 
The completion of Worksheet S-3, part II is only required for IPPS 
hospitals. For 2017, we found that approximately 20 percent of LTCHs 
voluntarily reported these data, which has fallen from the roughly 35 
percent that reported these data for 2013. Our analysis of the 
Worksheet S-3, part II data submitted by these LTCHs indicates that we 
continue to have a large enough sample to enable us to produce a 
reasonable Employee Benefits cost weight. Specifically, we found that 
when we recalculated the cost weight after weighting to reflect the 
characteristics of the universe of LTCHs (type of control (nonprofit, 
for-profit, and government) and by region), the recalculation did not 
have a material effect on the resulting cost weight. Therefore, we 
propose to use Worksheet S-3, part II data (as was done for the 2013-
based LTCH market basket) to calculate the Employee Benefits cost 
weight in the proposed 2017-based LTCH market basket.
    We note that, effective with the implementation of CMS Form 2552-
10, OMB Control Number 0938-0050, we began collecting Employee Benefits 
and Contract Labor data on Worksheet S-3, part V, which is applicable 
to LTCHs. However, approximately 17 percent of LTCHs reported data on 
Worksheet S-3, part V for 2017, with most of these providers also 
reporting data on Worksheet S-3, part II. Because a greater percentage 
of LTCHs continue to report data on Worksheet S-3, part II than 
Worksheet S-3, part V for 2017, we are not proposing to use the 
Employee Benefits and Contract Labor data reported on Worksheet S-3, 
part V to calculate the Employee Benefits cost weight in the proposed 
2017-based LTCH market basket. We continue to encourage all providers 
to report these data on Worksheet S-3, Part V.
(3) Contract Labor Costs
    Contract Labor costs are primarily associated with direct patient 
care services. Contract Labor costs for services such as accounting, 
billing, and legal are estimated using other government data sources as 
described in this section of this proposed rule. Approximately 44 
percent of LTCHs voluntarily reported Contract Labor costs on Worksheet 
S-3, part II, which was similar to the percentage obtained from 2013 
Medicare cost reports. Only about 18 percent of LTCHs reported Contract 
Labor costs data on Worksheet S-3, part V.
    As was done for the 2013-based LTCH market basket, we propose to 
derive the Contract Labor costs for the proposed 2017-based LTCH market 
basket using voluntarily reported data from Worksheet S-3, part II. Our 
analysis of these data indicates that we have a large enough sample to 
enable us to produce a reasonable Contract Labor cost weight. 
Specifically, we found that when we recalculated the cost weight after 
weighting to reflect the characteristics of

[[Page 32816]]

the universe of LTCHs (type of control (nonprofit, for-profit, and 
government) and by region), the recalculation did not have a material 
effect on the resulting cost weight. Therefore, we propose to use data 
from Worksheet S-3, part II, column 4, lines 11 and 13 to calculate the 
Contract Labor cost weight in the proposed 2017-based LTCH market 
basket.
(4) Pharmaceuticals Costs
    We propose to calculate Pharmaceuticals costs using nonsalary costs 
for the pharmacy cost center (line 15) and drugs charged to patients 
cost center (line 73). We propose to estimate these costs using total 
pharmaceutical costs reported on Worksheet B, part I, column 0, lines 
15 and 73 and then removing a portion of these costs attributable to 
salaries. We are proposing to estimate the proportion of costs for 
removal as Worksheet A, column 1, lines 15 and 73 divided by the sum of 
Worksheet A, columns 1 and 2, lines 15 and 73. A similar methodology 
was used for the 2013-based LTCH market basket.
(5) Professional Liability Insurance Costs
    We propose that Professional Liability Insurance (PLI) costs (often 
referred to as malpractice costs) be equal to premiums, paid losses and 
self-insurance costs reported on Worksheet S-2, part I, columns 1 
through 3, line 118. A similar methodology was used for the 2013-based 
LTCH market basket.
(6) Home Office/Related Organization Contract Labor Costs
    For the 2017-based LTCH market basket, we propose to determine the 
Home Office/Related Organization Contract Labor costs using Medicare 
cost report data. Specifically, we propose to calculate the Home 
Office/Related Organization Contract Labor costs using data reported on 
Worksheet S-3, part II, column 4, lines 14, 1401, 1402, 2550, and 2551 
for those LTCH providers reporting total salaries on Worksheet S-3, 
part II, line 1.
    The 2013-based LTCH market basket used the 2007 Benchmark Input-
Output (I-O) expense data published by the Bureau of Economic Analysis 
(BEA) to derive these costs (81 FR 57089). A more detailed explanation 
of the general methodology using the BEA I-O data is provided in 
section VII.D.3.c. of the preamble of this proposed rule. We calculated 
the Home Office/Related Organization Contract Labor cost weight using 
expense data for North American Industry Classification System (NAICS) 
code 55, Management of Companies and Enterprises (81 FR 57098). We 
believe the proposed methodology for the 2017-based LTCH market basket 
is a technical improvement over the prior methodology because it 
represents more recent data that is representative compositionally and 
geographically of LTCHs.
(7) Capital Costs
    We propose that Capital costs be equal to Medicare allowable 
capital costs as reported on Worksheet B, part II, column 26, lines 30 
through 35, 50 through 76 (excluding 52, 61, and 75), 90 through 91 and 
93. A similar methodology was used for the 2013-based LTCH market 
basket.
b. Final Major Cost Category Computation
    After we derive costs for the major cost categories for each 
provider using the Medicare cost report data as previously described, 
we propose to trim the data for outliers. For each of the seven major 
cost categories, we first are proposing to divide the calculated costs 
for the category by total Medicare allowable costs calculated for the 
provider to obtain cost weights for the universe of LTCH providers. For 
the 2017-based LTCH market basket (similar to the 2013-based LTCH 
market basket), we propose that total Medicare allowable costs would be 
equal to the total costs as reported on Worksheet B, part I, column 26, 
lines 30 through 35, 50 through 76 (excluding 52, 61 and 75), 90 
through 91, and 93.
    For the Wages and Salaries, Employee Benefits, Contract Labor, 
Pharmaceuticals, Professional Liability Insurance, and Capital cost 
weights, after excluding cost weights that are less than or equal to 
zero, we propose to then remove those providers whose derived cost 
weights fall in the top and bottom 5 percent of provider specific 
derived cost weights to ensure the exclusion of outliers. After the 
outliers have been excluded, we sum the costs for each category across 
all remaining providers. We are proposing to divide this by the sum of 
total Medicare allowable costs across all remaining providers to obtain 
a cost weight for the 2017-based LTCH market basket for the given 
category. This trimming process is done for each cost weight 
separately.
    For the Home Office/Related Organization Contract Labor cost 
weight, we propose to apply a 1-percent top only trimming methodology. 
This allows all providers' Medicare allowable costs to be included, 
even if their Home Office/Related Organization Contract Labor costs 
were zero. We believe, as the Medicare cost report data (Worksheet S-2, 
part I, line 140) indicate, that not all LTCHs have a home office. 
LTCHs without a home office can incur these expenses directly by having 
their own staff, for which the costs would be included in the Wages and 
Salaries and Employee Benefits cost weights. Alternatively, LTCHs 
without a home office could also purchase related services from 
external contractors for which these expenses would be captured in the 
residual ``All Other'' cost weight. We believe this 1-percent top-only 
trimming methodology is appropriate as it addresses outliers while 
allowing providers with zero Home Office/Related Organization Contract 
Labor costs to be included in the Home Office/Related Organization 
Contract Labor cost weight calculation. If we applied both the top and 
bottom 5 percent trimming methodology, we would exclude providers who 
have zero Home Office/Related Organization Contract Labor costs.
    Finally, we propose to calculate the residual ``All Other'' cost 
weight that reflects all remaining costs that are not captured in the 
seven cost categories listed. We refer readers to Table E1 for the 
resulting proposed cost weights for these major cost categories.

[[Page 32817]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.193

    The Wages and Salaries cost weight calculated from the Medicare 
cost reports for the proposed 2017-based LTCH market basket is 
approximately 1 percentage point higher than the Wages and Salaries 
cost weight for the 2013-based LTCH market basket, while the Contract 
Labor cost weight is 1.5 percentage point lower. The proposed 2017-
based Pharmaceuticals cost weight also is roughly 1.5 percentage point 
lower than the cost weight for the 2013-based LTCH market basket.
    As we did for the 2013-based LTCH market basket, we propose to 
allocate the Contract Labor cost weight to the Wages and Salaries and 
Employee Benefits cost weights based on their relative proportions 
under the assumption that Contract Labor costs are comprised of both 
Wages and Salaries and Employee Benefits. The Contract Labor allocation 
proportion for Wages and Salaries is equal to the Wages and Salaries 
cost weight as a percent of the sum of the Wages and Salaries cost 
weight and the Employee Benefits cost weight. This rounded percentage 
is 87 percent. Therefore, we propose to allocate 87 percent of the 
Contract Labor cost weight to the Wages and Salaries cost weight and 13 
percent to the Employee Benefits cost weight. We refer readers to Table 
E2 that shows the proposed Wages and Salaries and Employee Benefits 
cost weights after Contract Labor cost weight allocation for both the 
proposed 2017-based LTCH market basket and the 2013-based LTCH market 
basket.
[GRAPHIC] [TIFF OMITTED] TP29MY20.194

    After the allocation of the Contract Labor cost weight, the 
proposed 2017-based Wages and Salaries cost weight is 0.2 percentage 
point lower and the Employee Benefits cost weight is 0.5 percentage 
point lower, relative to the respective cost weights for the 2013-based 
LTCH market basket. As a result, in the proposed 2017-based LTCH market 
basket, the compensation cost weight is 0.7 percentage point lower than 
the Compensation cost weight for the 2013-based LTCH market basket.
c. Derivation of the Detailed Operating Cost Weights
    To further divide the residual ``All Other'' cost weight estimated 
from the 2017 Medicare cost report data into more detailed cost 
categories, we propose to use the 2012 Benchmark I-O ``Use Tables/
Before Redefinitions/Purchaser Value'' for NAICS 622000, Hospitals, 
published by the Bureau of Economic Analysis (BEA). These data are 
publicly available at the following website: https://www.bea.gov/industry/input-output-accounts-data. For the 2013-based LTCH market 
basket, we used the 2007 Benchmark I-O data, the most recent data 
available at the time (81 FR 57089).
    The BEA Benchmark I-O data are scheduled for publication every 5 
years with the most recent data available for 2012. The 2012 Benchmark 
I-O data are derived from the 2012 Economic Census and are the building 
blocks for BEA's economic accounts. Therefore, they represent the most 
comprehensive and complete set of data on the economic processes or 
mechanisms by which output is produced and distributed.\471\ BEA also 
produces Annual I-O estimates. However, while based on a similar 
methodology, these estimates reflect less comprehensive and less 
detailed data sources and are subject to revision when benchmark data 
becomes available. Instead of using the less detailed Annual I-O data, 
we propose to

[[Page 32818]]

inflate the 2012 Benchmark I-O data forward to 2017 by applying the 
annual price changes from the respective price proxies to the 
appropriate market basket cost categories that are obtained from the 
2012 Benchmark I-O data. We repeated this practice for each year. Then, 
we calculated the cost shares that each cost category represents of the 
2012 data inflated to 2017. These resulting 2017 cost shares were 
applied to the residual ``All Other'' cost weight to obtain the 
detailed cost weights for the proposed 2017-based LTCH market basket. 
For example, the cost for Food: Direct Purchases represents 4.9 percent 
of the sum of the residual ``All Other'' 2012 Benchmark I-O Hospital 
Expenditures inflated to 2017. Therefore, the Food: Direct Purchases 
cost weight represents 4.9 percent of the proposed 2017-based LTCH 
market basket's residual ``All Other'' cost category (28.3 percent), 
yielding a ``final'' Food: Direct Purchases proposed cost weight of 1.4 
percent in the proposed 2017-based LTCH market basket (0.049 x 28.3 
percent = 1.4 percent).
---------------------------------------------------------------------------

    \471\ http://www.bea.gov/papers/pdf/IOmanual_092906.pdf.
---------------------------------------------------------------------------

    Using this methodology, we propose to derive 17 detailed LTCH 
market basket cost category weights from the proposed 2017-based LTCH 
market basket residual ``All Other'' cost weight (28.3 percent). These 
categories are: (1) Electricity; (2) Fuel, Oil, and Gasoline; (3) Food: 
Direct Purchases; (4) Food: Contract Services; (5) Chemicals; (6) 
Medical Instruments; (7) Rubber and Plastics; (8) Paper and Printing 
Products; (9) Miscellaneous Products; (10) Professional Fees: Labor-
Related; (11) Administrative and Facilities Support Services; (12) 
Installation, Maintenance, and Repair Services; (13) All Other Labor-
Related Services; (14) Professional Fees: Nonlabor-Related; (15) 
Financial Services; (16) Telephone Services; and (17) All Other 
Nonlabor-Related Services. We note that for the 2013-based LTCH market 
basket, we had a Water and Sewerage cost weight. For the proposed 2017-
based LTCH market basket, we propose to include Water and Sewerage 
costs in the Electricity cost weight due to the small amount of costs 
in this category.
    For the 2013-based LTCH market basket, we used the I-O data for 
NAICS 55 Management of Companies to derive the Home Office/Related 
Organization Contract Labor cost weight, which were classified in the 
Professional Fees: Labor-related and Professional Fees: Nonlabor-
related cost weights. As previously discussed, we propose to use the 
Medicare cost report data to derive the Home Office/Related 
Organization Contract Labor cost weight, which we would further 
classify into the Professional Fees: Labor-related or Professional 
Fees: Nonlabor-related categories which we discuss in section VII.D.6. 
of the preamble of this proposed rule.
d. Derivation of the Detailed Capital Cost Weights
    As described in section VII.D.3.b. of the preamble of this proposed 
rule, we are proposing a Capital-related cost weight of 9.9 percent as 
calculated from the 2017 Medicare cost reports for LTCHs after applying 
the proposed trims as previously described. We propose to then separate 
this total Capital-related cost weight into more detailed cost 
categories. Using 2017 Medicare cost reports, we are able to group 
Capital-related costs into the following categories: Depreciation, 
Interest, Lease, and Other Capital-Related costs, as shown in Table E3. 
For each of these categories, we propose to determine what proportion 
of total Capital-related costs the category represents using the data 
reported by the LTCH on Worksheet A-7, which is the same methodology 
used for the 2013-based LTCH market basket.
    We also are proposing to allocate lease costs across each of the 
remaining detailed Capital-related cost categories as was done in the 
2013-based LTCH market basket. This would result in three primary 
Capital-related cost categories in the proposed 2017-based LTCH market 
basket: Depreciation, Interest, and Other Capital-Related costs. Lease 
costs are unique in that they are not broken out as a separate cost 
category in the proposed 2017-based LTCH market basket. Rather we 
propose to proportionally distribute these costs among the cost 
categories of Depreciation, Interest, and Other Capital-Related, 
reflecting the assumption that the underlying cost structure of leases 
is similar to that of Capital-related costs in general. As was done for 
the 2013-based LTCH market basket, we propose to assume that 10 percent 
of the lease costs as a proportion of total Capital-related costs (63.0 
percent) represents overhead and to assign those costs to the Other 
Capital-Related cost category accordingly. Therefore, we are assuming 
that approximately 6.3 percent (63.0 percent x 0.1) of total Capital-
related costs represent lease costs attributable to overhead, and we 
propose to add this 6.3 percentage points to the 6.7 percent Other 
Capital-Related cost category weight. We are also proposing to 
distribute the remaining lease costs (56.7 percent, or 63.0 percent 
less 6.3 percentage points) proportionally across the three cost 
categories (Depreciation, Interest, and Other Capital-Related) based on 
the proportion that these categories comprise of the sum of the 
Depreciation, Interest, and Other Capital-Related cost categories 
(excluding lease expenses). For example, the Other Capital-Related cost 
category represented 18.2 percent of all three cost categories 
(Depreciation, Interest, and Other Capital-Related) prior to any lease 
expenses being allocated. This 18.2 percent is applied to the 56.7 
percent of remaining lease expenses so that another 10.3 percentage 
points of lease expenses as a percent of total Capital-related costs is 
allocated to the Other Capital-Related cost category. Therefore, the 
resulting proposed Other Capital-Related cost weight is 23.3 percent 
(6.7 percent + 6.3 percent + 10.3 percent). This is the same 
methodology used for the 2013-based LTCH market basket. The proposed 
allocation of these lease expenses are shown in Table E3.
    Finally, we propose to further divide the Depreciation and Interest 
cost categories. We propose to separate Depreciation cost category into 
the following two categories: (1) Building and Fixed Equipment and (2) 
Movable Equipment. We also propose to separate the Interest cost 
category into the following two categories: (1) Government/Nonprofit; 
and (2) For profit.
    To disaggregate the Depreciation cost weight, we needed to 
determine the percent of total depreciation costs for LTCHs (after the 
allocation of lease costs) that are attributable to Building and Fixed 
equipment, which we hereafter refer to as the ``fixed percentage.'' We 
propose to use depreciation and lease data from Worksheet A-7 of the 
2017 Medicare cost reports, which is the same methodology used for the 
2013-based LTCH market basket. Based on the 2017 LTCH Medicare cost 
report data, we have determined that depreciation costs for building 
and fixed equipment account for 44 percent of total depreciation costs, 
while depreciation costs for movable equipment account for 56 percent 
of total depreciation costs. As previously mentioned, we propose to 
allocate lease expenses among the Depreciation, Interest, and Other 
Capital-Related cost categories. We determined that leasing building 
and fixed equipment expenses account for 88 percent of total leasing 
expenses, while leasing movable equipment expenses account for 12 
percent of total leasing expenses. We propose to sum the depreciation 
and leasing expenses for building and fixed equipment, as

[[Page 32819]]

well as sum the depreciation and leasing expenses for movable 
equipment. This results in the proposed Building and Fixed Equipment 
Depreciation cost weight (after leasing costs are included) 
representing 76 percent of total depreciation costs and the Movable 
Equipment Depreciation cost weight (after leasing costs are included) 
representing 24 percent of total depreciation costs.
    To disaggregate the Interest cost weight, we determine the percent 
of total interest costs for LTCHs that are attributable to government 
and nonprofit facilities, which we hereafter refer to as the 
``nonprofit percentage,'' because price pressures associated with these 
types of interest costs tend to differ from those for for-profit 
facilities. We propose to use interest costs data from Worksheet A-7 of 
the 2017 Medicare cost reports for LTCHs, which is the same methodology 
used for the 2013-based LTCH market basket. The nonprofit percentage 
determined using this method is 21 percent.
    Table E3 provides the proposed detailed capital cost shares 
obtained from the Medicare cost reports. Ultimately, if finalized, 
these detailed capital cost shares would be applied to the total 
Capital-related cost weight determined in section VII.D.3.b. of the 
preamble of this proposed rule to separate the total Capital-related 
cost weight of 9.9 percent into more detailed cost categories and 
weights.
[GRAPHIC] [TIFF OMITTED] TP29MY20.195

e. Proposed 2017-Based LTCH Market Basket Cost Categories and Weights
    Table E4 shows the proposed cost categories and weights for the 
proposed 2017-based LTCH market basket compared to the 2013-based LTCH 
market basket.
BILLING CODE 4120-01-P

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BILLING CODE 4120-01-C
4. Selection of Proposed Price Proxies
    After developing the proposed cost weights for the 2017-based LTCH 
market basket, we selected the most appropriate wage and price proxies 
currently available to represent the rate of price change for each 
expenditure category. For the majority of the cost weights, we base the 
price proxies on U.S. Bureau of Labor Statistics (BLS) data and group 
them into one of the following BLS categories:
     Employment Cost Indexes. Employment Cost Indexes (ECIs) 
measure the rate of change in employment wage rates and employer costs 
for employee benefits per hour worked. These indexes are fixed-weight 
indexes and strictly measure the change in wage rates and employee 
benefits per hour. ECIs are superior to Average Hourly Earnings (AHE) 
as price proxies for input price indexes because they are

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not affected by shifts in occupation or industry mix, and because they 
measure pure price change and are available by both occupational group 
and by industry. The industry ECIs are based on the NAICS and the 
occupational ECIs are based on the Standard Occupational Classification 
System (SOC).
     Producer Price Indexes. Producer Price Indexes (PPIs) 
measure the average change over time in the selling prices received by 
domestic producers for their output. The prices included in the PPI are 
from the first commercial transaction for many products and some 
services (https://www.bls.gov/ppi/).
     Consumer Price Indexes. Consumer Price Indexes (CPIs) 
measure the average change over time in the prices paid by urban 
consumers for a market basket of consumer goods and services (https://www.bls.gov/cpi/). CPIs are only used when the purchases are similar to 
those of retail consumers rather than purchases at the producer level, 
or if no appropriate PPIs are available.
    We evaluate the price proxies using the criteria of reliability, 
timeliness, availability, and relevance:
     Reliability. Reliability indicates that the index is based 
on valid statistical methods and has low sampling variability. Widely 
accepted statistical methods ensure that the data were collected and 
aggregated in a way that can be replicated. Low sampling variability is 
desirable because it indicates that the sample reflects the typical 
members of the population. (Sampling variability is variation that 
occurs by chance because only a sample was surveyed rather than the 
entire population.)
     Timeliness. Timeliness implies that the proxy is published 
regularly, preferably at least once a quarter. The market baskets are 
updated quarterly, and therefore, it is important for the underlying 
price proxies to be up-to-date, reflecting the most recent data 
available. We believe that using proxies that are published regularly 
(at least quarterly, whenever possible) helps to ensure that we are 
using the most recent data available to update the market basket. We 
strive to use publications that are disseminated frequently, because we 
believe that this is an optimal way to stay abreast of the most current 
data available.
     Availability. Availability means that the proxy is 
publicly available. We prefer that our proxies are publicly available 
because this will help ensure that our market basket updates are as 
transparent to the public as possible. In addition, this enables the 
public to be able to obtain the price proxy data on a regular basis.
     Relevance. Relevance means that the proxy is applicable 
and representative of the cost category weight to which it is applied.
    We believe that the CPIs, PPIs, and ECIs that we have selected meet 
these criteria. Therefore, we believe that they continue to be the best 
measure of price changes for the cost categories to which they would be 
applied.
    Table E7 lists all price proxies that we propose to use for the 
2017-based LTCH market basket. In this section of this rule is a 
detailed explanation of the price proxies we are proposing for each 
cost category weight.
a. Price Proxies for the Operating Portion of the Proposed 2017-Based 
LTCH Market Basket
(1) Wages and Salaries
    We propose to continue to use the ECI for Wages and Salaries for 
All Civilian workers in Hospitals (BLS series code CIU1026220000000I) 
to measure the wage rate growth of this cost category. This is the same 
price proxy used in the 2013-based LTCH market basket (81 FR 57092).
(2) Employee Benefits
    We propose to continue to use the ECI for Total Benefits for All 
Civilian workers in Hospitals to measure price growth of this category. 
This ECI is calculated using the ECI for Total Compensation for All 
Civilian workers in Hospitals (BLS series code CIU1016220000000I) and 
the relative importance of wages and salaries within total 
compensation. This is the same price proxy used in the 2013-based LTCH 
market basket (81 FR 57092).
(3) Electricity
    We propose to continue to use the PPI Commodity Index for 
Commercial Electric Power (BLS series code WPU0542) to measure the 
price growth of this cost category. This is the same price proxy used 
in the 2013-based LTCH market basket (81 FR 57092).
(4) Fuel, Oil, and Gasoline
    Similar to the 2013-based LTCH market basket, for the 2017-based 
LTCH market basket, we propose to use a blend of the PPI Industry for 
Petroleum Refineries and the PPI Commodity for Natural Gas. Our 
analysis of the Bureau of Economic Analysis' 2012 Benchmark I-O data 
(use table before redefinitions, purchaser's value for NAICS 622000 
[Hospitals]), shows that Petroleum Refineries expenses account for 
approximately 90 percent and Natural Gas expenses account for 
approximately 10 percent of Hospitals' (NAICS 622000) total Fuel, Oil, 
and Gasoline expenses. Therefore, we propose to use a blend of 90 
percent of the PPI Industry for Petroleum Refineries (BLS series code 
PCU324110324110) and 10 percent of the PPI Commodity Index for Natural 
Gas (BLS series code WPU0531) as the price proxy for this cost 
category. The 2013-based LTCH market basket used a 70/30 blend of these 
price proxies, reflecting the 2007 I-O data (81 FR 57092). We believe 
that these two price proxies continue to be the most technically 
appropriate indices available to measure the price growth of the Fuel, 
Oil, and Gasoline cost category in the 2017-based LTCH market basket.
(5) Professional Liability Insurance
    We propose to continue to use the CMS Hospital Professional 
Liability Index as the price proxy for PLI costs in the proposed 2017-
based LTCH market basket. To generate this index, we collect commercial 
insurance medical liability premiums for a fixed level of coverage 
while holding non-price factors constant (such as a change in the level 
of coverage). This is the same proxy used in the 2013-based LTCH market 
basket (81 FR 57092).
(6) Pharmaceuticals
    We propose to continue to use the PPI Commodity for Pharmaceuticals 
for Human Use, Prescription (BLS series code WPUSI07003) to measure the 
price growth of this cost category. This is the same proxy used in the 
2013-based LTCH market basket (81 FR 57092).
(7) Food: Direct Purchases
    We propose to continue to use the PPI Commodity for Processed Foods 
and Feeds (BLS series code WPU02) to measure the price growth of this 
cost category. This is the same price proxy used in the 2013-based LTCH 
market basket (81 FR 57092).
(8) Food: Contract Purchases
    We propose to continue to use the CPI for Food Away From Home (BLS 
series code CUUR0000SEFV) to measure the price growth of this cost 
category. This is the same proxy used in the 2013-based LTCH market 
basket (81 FR 57092).
(9) Chemicals
    Similar to the 2013-based LTCH market basket, we propose to use a 
four-part blended PPI as the proxy for the chemical cost category in 
the 2017-based LTCH market basket. The proposed blend is composed of 
the PPI Industry for Industrial Gas Manufacturing, Primary Products 
(BLS series code PCU325120325120P), the PPI Industry for Other Basic 
Inorganic

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Chemical Manufacturing (BLS series code PCU32518-32518-), the PPI 
Industry for Other Basic Organic Chemical Manufacturing (BLS series 
code PCU32519-32519-), and the PPI Industry for Other Miscellaneous 
Chemical Product Manufacturing (BLS series code PCU325998325998). We 
note that the four part blended PPI used in the 2013-based LTCH market 
basket is composed of the PPI Industry for Industrial Gas Manufacturing 
(BLS series code PCU325120325120P), the PPI Industry for Other Basic 
Inorganic Chemical Manufacturing (BLS series code PCU32518-32518-), the 
PPI Industry for Other Basic Organic Chemical Manufacturing (BLS series 
code PCU32519-32519-), and the PPI Industry for Soap and Cleaning 
Compound Manufacturing (BLS series code PCU32561-32561-). For the 2017-
based LTCH market basket, we propose to derive the weights for the PPIs 
using the 2012 Benchmark I-O data. The 2013-based LTCH market basket 
used the 2007 Benchmark I-O data to derive the weights for the four 
PPIs (81 FR 57092). Table E5 shows the weights for each of the four 
PPIs used to create the proposed blended Chemical proxy for the 2017-
based LTCH market basket compared to the 2013-based blended Chemical 
proxy. We note that in the 2012 I-O data, the share of total chemicals 
expenses that the Soap and Cleaning Compound Manufacturing (NAICS 
325610) represents decreased relative to the 2007 I-O data (from 5 
percent to 2 percent), while the share of the total chemicals expenses 
that the All Other Chemical Product and Preparation manufacturing 
(NAICS 3259A0) categories represents increased (from 5 percent to 7 
percent). As a result, we are proposing to remove the PPI Industry for 
Soap and Cleaning Compound Manufacturing from the proposed blend for 
the 2017-based LTCH market basket and replace it with the PPI Industry 
for Other Miscellaneous Chemical Product Manufacturing.
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(10) Medical Instruments
    We propose to continue to use a blend of two PPIs for the Medical 
Instruments cost category. The 2012 Benchmark I-O data shows an 
approximate 57/43 split between Surgical and Medical Instruments and 
Medical and Surgical Appliances and Supplies for this cost category. 
Therefore, we propose a blend composed of 57 percent of the commodity-
based PPI Commodity for Surgical and Medical Instruments (BLS series 
code WPU1562) and 43 percent of the PPI Commodity for Medical and 
Surgical Appliances and Supplies (BLS series code WPU1563). The 2013-
based LTCH market basket used a 50/50 blend of these PPIs based on the 
2007 Benchmark I-O data (81 FR 57093).
(11) Rubber and Plastics
    We propose to continue to use the PPI Commodity for Rubber and 
Plastic Products (BLS series code WPU07) to measure price growth of 
this cost category. This is the same proxy used in the 2013-based LTCH 
market basket (81 FR 57093).
(12) Paper and Printing Products
    We propose to continue to use the PPI Commodity for Converted Paper 
and Paperboard Products (BLS series code WPU0915) to measure the price 
growth of this cost category. This is the same proxy used in the 2013-
based LTCH market basket (81 FR 57093).
(13) Miscellaneous Products
    We propose to continue to use the PPI Commodity for Finished Goods 
Less Food and Energy (BLS series code WPUFD4131) to measure the price 
growth of this cost category. This is the same proxy used in the 2013-
based LTCH market basket (81 FR 57093).
(14) Professional Fees: Labor-Related
    We propose to continue to use the ECI for Total Compensation for 
Private Industry workers in Professional and Related (BLS series code 
CIU2010000120000I) to measure the price growth of this category. This 
is the same proxy used in the 2013-based LTCH market basket (81 FR 
57093).
(15) Administrative and Facilities Support Services
    We propose to continue to use the ECI for Total Compensation for 
Private Industry workers in Office and Administrative Support (BLS 
series code CIU2010000220000I) to measure the price growth of this 
category. This is the same proxy used in the 2013-based LTCH market 
basket (81 FR 57093).
(16) Installation, Maintenance, and Repair Services
    We propose to continue to use the ECI for Total Compensation for 
All Civilian workers in Installation, Maintenance, and Repair (BLS 
series code CIU1010000430000I) to measure the price growth of this cost 
category. This is the same proxy used in the 2013-based LTCH market 
basket (81 FR 57093).
(17) All Other: Labor-Related Services
    We propose to continue to use the ECI for Total Compensation for 
Private Industry workers in Service Occupations (BLS series code 
CIU2010000300000I) to measure the price growth of this cost category. 
This is the same proxy used in the 2013-based LTCH market basket (81 FR 
57093).
(18) Professional Fees: Nonlabor-Related
    We propose to continue to use the ECI for Total Compensation for 
Private Industry workers in Professional and Related (BLS series code 
CIU2010000120000I) to measure the price growth of this category. This 
is the same proxy used in the 2013-based LTCH market basket (81 FR 
57093).

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(19) Financial Services
    We propose to continue to use the ECI for Total Compensation for 
Private Industry workers in Financial Activities (BLS series code 
CIU201520A000000I) to measure the price growth of this cost category. 
This is the same proxy used in the 2013-based LTCH market basket (81 FR 
57093).
(20) Telephone Services
    We propose to continue to use the CPI for Telephone Services (BLS 
series code CUUR0000SEED) to measure the price growth of this cost 
category. This is the same proxy used in the 2013-based LTCH market 
basket (81 FR 57093).
(21) All Other: Nonlabor-Related Services
    We propose to continue to use the CPI for All Items Less Food and 
Energy (BLS series code CUUR0000SA0L1E) to measure the price growth of 
this cost category. This is the same proxy used in the 2013-based LTCH 
market basket (81 FR 57093).
b. Price Proxies for the Capital Portion of the Proposed 2017-Based 
LTCH Market Basket
(1) Capital Price Proxies Prior to Vintage Weighting
    We propose to continue to use the same price proxies for the 
capital-related cost categories as were applied in the 2013-based LTCH 
market basket, which are provided in Table E7 and described in this 
section of this rule. Specifically, we propose to proxy:
     Depreciation: Building and Fixed Equipment cost category 
by BEA's Chained Price Index for Nonresidential Construction for 
Hospitals and Special Care Facilities (BEA Table 5.4.4. Price Indexes 
for Private Fixed Investment in Structures by Type).
     Depreciation: Movable Equipment cost category by the PPI 
Commodity for Machinery and Equipment (BLS series code WPU11).
     Nonprofit Interest cost category by the average yield on 
domestic municipal bonds (Bond Buyer 20-bond index).
     For-profit Interest cost category by the average yield on 
Moody's Aaa bonds (Federal Reserve).
     Other Capital-Related cost category by the CPI-U for Rent 
of Primary Residence (BLS series code CUUS0000SEHA).
    We believe these are the most appropriate proxies for LTCH capital-
related costs that meet our selection criteria of relevance, 
timeliness, availability, and reliability. We are also proposing to 
continue to vintage weight the capital price proxies for Depreciation 
and Interest in order to capture the long-term consumption of capital. 
This vintage weighting method is similar to the method used for the 
2013-based LTCH market basket and is described in section 
VII.D.4.b.(2). of the preamble of this proposed rule.
(2) Vintage Weights for Price Proxies
    Because capital is acquired and paid for over time, capital-related 
expenses in any given year are determined by both past and present 
purchases of physical and financial capital. The vintage-weighted 
capital-related portion of the proposed 2017-based LTCH market basket 
is intended to capture the long-term consumption of capital, using 
vintage weights for depreciation (physical capital) and interest 
(financial capital). These vintage weights reflect the proportion of 
capital-related purchases attributable to each year of the expected 
life of building and fixed equipment, movable equipment, and interest. 
We propose to use vintage weights to compute vintage-weighted price 
changes associated with depreciation and interest expenses.
    Capital-related costs are inherently complicated and are determined 
by complex capital-related purchasing decisions, over time, based on 
such factors as interest rates and debt financing. In addition, capital 
is depreciated over time instead of being consumed in the same period 
it is purchased. By accounting for the vintage nature of capital, we 
are able to provide an accurate and stable annual measure of price 
changes. Annual nonvintage price changes for capital are unstable due 
to the volatility of interest rate changes and, therefore, do not 
reflect the actual annual price changes for LTCH capital-related costs. 
The capital-related component of the proposed 2017-based LTCH market 
basket reflects the underlying stability of the capital-related 
acquisition process.
    The methodology used to calculate the vintage weights for the 
proposed 2017-based LTCH market basket is the same as that used for the 
2013-based LTCH market basket with the only difference being the 
inclusion of more recent data. To calculate the vintage weights for 
depreciation and interest expenses, we first need a time series of 
capital-related purchases for building and fixed equipment and movable 
equipment. We found no single source that provides an appropriate time 
series of capital-related purchases by hospitals for all of the 
previously mentioned components of capital purchases. The early 
Medicare cost reports did not have sufficient capital-related data to 
meet this need. Data we obtained from the American Hospital Association 
(AHA) do not include annual capital-related purchases. However, the AHA 
does provide a consistent database of total expenses back to 1963. 
Consequently, we propose to use data from the AHA Panel Survey and the 
AHA Annual Survey to obtain a time series of total expenses for 
hospitals. We are also proposing to use data from the AHA Panel Survey 
supplemented with the ratio of depreciation to total hospital expenses 
obtained from the Medicare cost reports to derive a trend of annual 
depreciation expenses for 1963 through 2017. We propose to separate 
these depreciation expenses into annual amounts of building and fixed 
equipment depreciation and movable equipment depreciation as previously 
determined. From these annual depreciation amounts we derive annual 
end-of-year book values for building and fixed equipment and movable 
equipment using the expected life for each type of asset category. 
While data are not available that are specific to LTCHs, we believe 
this information for all hospitals serves as a reasonable proxy for the 
pattern of depreciation for LTCHs.
    To continue to calculate the vintage weights for depreciation and 
interest expenses, we also needed to account for the expected lives for 
building and fixed equipment, movable equipment, and interest for the 
proposed 2017-based LTCH market basket. We propose to calculate the 
expected lives using Medicare cost report data for LTCHs. The expected 
life of any asset can be determined by dividing the value of the asset 
(excluding fully depreciated assets) by its current year depreciation 
amount. This calculation yields the estimated expected life of an asset 
if the rates of depreciation were to continue at current year levels, 
assuming straight-line depreciation. Using this proposed method, we 
determined the average expected life of building and fixed equipment to 
be equal to 18 years, and the average expected life of movable 
equipment to be equal to 9 years. For the expected life of interest, we 
believe that vintage weights for interest should represent the average 
expected life of building and fixed equipment because, based on 
previous research described in the FY 1997 IPPS final rule (61 FR 
46198), the expected life of hospital debt instruments and the expected 
life of buildings and fixed equipment are similar. We note that for the 
2013-based LTCH-specific market basket, we derived an expected average 
life of building and fixed equipment of 18

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years and an expected average life of movable equipment of 8 years (81 
FR 57094).
    Multiplying these expected lives by the annual depreciation amounts 
results in annual year-end asset costs for building and fixed equipment 
and movable equipment. Then we calculated a time series, beginning in 
1964, of annual capital purchases by subtracting the previous year's 
asset costs from the current year's asset costs.
    For the building and fixed equipment and movable equipment vintage 
weights, we propose to use the real annual capital-related purchase 
amounts for each asset type to capture the actual amount of the 
physical acquisition, net of the effect of price inflation. These real 
annual capital-related purchase amounts are produced by deflating the 
nominal annual purchase amount by the associated price proxy as 
previously provided. For the interest vintage weights, we propose to 
use the total nominal annual capital-related purchase amounts to 
capture the value of the debt instrument (including, but not limited 
to, mortgages and bonds). Using these capital-related purchase time 
series specific to each asset type, we propose to calculate the vintage 
weights for building and fixed equipment, for movable equipment, and 
for interest.
    The vintage weights for each asset type are deemed to represent the 
average purchase pattern of the asset over its expected life (in the 
case of building and fixed equipment and interest, 18 years, and in the 
case of movable equipment, 9 years). For each asset type, we used the 
time series of annual capital-related purchase amounts available from 
2017 back to 1964. These data allow us to derive thirty-seven 18-year 
periods of capital-related purchases for building and fixed equipment 
and interest, and forty-six 9-year periods of capital-related purchases 
for movable equipment. For each 18-year period for building and fixed 
equipment and interest, or 9-year period for movable equipment, we 
propose to calculate annual vintage weights by dividing the capital-
related purchase amount in any given year by the total amount of 
purchases over the entire 18-year or 9-year period. This calculation is 
done for each year in the 18-year or 9-year period and for each of the 
periods for which we have data. Then we are proposing to calculate the 
average vintage weight for a given year of the expected life by taking 
the average of these vintage weights across the multiple periods of 
data.
    The vintage weights for the capital-related portion of the proposed 
2017-based LTCH market basket and the 2013-based LTCH market basket are 
presented in Table E6.
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    The process of creating vintage-weighted price proxies requires 
applying the vintage weights to the price proxy index where the last 
applied vintage weight in Table E6 is applied to the most recent data 
point. We have provided on the CMS website an example of how the 
vintage weighting price proxies are calculated, using example vintage 
weights and example price indices. The example can be found at the 
following link: http://

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www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/MedicareProgramRatesStats/MarketBasketResearch.html in the zip 
file titled ``Weight Calculations as described in the IPPS FY 2010 
Proposed Rule.''
c. Summary of Price Proxies of the Proposed 2017-Based LTCH Market 
Basket
    Table E7 shows both the operating and capital price proxies for the 
proposed 2017-based LTCH market basket.
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[[Page 32827]]


BILLING CODE 4120-01-C
5. Proposed FY 2021 Market Basket Update for LTCHs
    For FY 2021 (that is, October 1, 2020 through September 30, 2021), 
we propose to use an estimate of the proposed 2017-based LTCH market 
basket to update payments to LTCHs based on the best available data. 
Consistent with historical practice, we estimate the LTCH market basket 
update for the LTCH PPS based on IHS Global, Inc.'s (IGI's) forecast 
using the most recent available data. IGI is a nationally recognized 
economic and financial forecasting firm with which we contract to 
forecast the components of the market baskets and multifactor 
productivity (MFP).
    Based on IGI's fourth quarter 2019 forecast with history through 
the third quarter of 2019, the projected market basket update for FY 
2021 is 2.9 percent. Therefore, consistent with our historical practice 
of estimating market basket increases based on the best available data, 
we are proposing a market basket update of 2.9 percent for FY 2021. 
Furthermore, because the proposed FY 2021 annual update is based on the 
most recent market basket estimate for the 12-month period (currently 
2.9 percent), we also are proposing that if more recent data become 
subsequently available (for example, a more recent estimate of the 
market basket), we would use such data, if appropriate, to determine 
the FY 2021 annual update in the final rule. (The proposed annual 
update to the LTCH PPS standard payment rate for FY 2021 is discussed 
in greater detail in section V.A.2. of the Addendum to this proposed 
rule.)
    Using the current 2013-based LTCH market basket and IGI's fourth 
quarter 2019 forecast for the market basket components, the FY 2021 
market basket update would be 3.0 percent (before taking into account 
any statutory adjustment). Therefore, the update based on the proposed 
2017-based LTCH market basket is currently 0.1 percentage point lower. 
This lower update is primarily due to the lower Pharmaceuticals cost 
weight in the proposed 2017-based market basket (6.2 percent) compared 
to the 2013-based LTCH market basket (7.6 percent). This is partially 
offset by the higher cost weights associated with All Other Services 
(such as Professional Fees and Installation, Maintenance, and Repair 
Services) for the proposed 2017-based LTCH market basket relative to 
the 2013-based LTCH market basket. Table E8 compares the proposed 2017-
based LTCH market basket and the 2013-based LTCH market basket percent 
changes.
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    Over the time period covering FY 2016 through FY 2019, the average 
growth rate of the proposed 2017-based LTCH market basket is roughly 
0.1 percentage point lower than the 2013-based LTCH market basket. The 
lower growth rate is primarily a result of the lower Pharmaceuticals 
cost weight in the proposed 2017-based market basket compared to the 
2013-based LTCH market basket. Historically, the price growth of 
pharmaceutical costs has exceeded the price growth rates for most of 
the other market basket cost categories. Therefore, a lower 
Pharmaceuticals cost weight would, all else equal, result in a lower 
market basket update. As previously stated, the Pharmaceuticals cost 
weights for the proposed 2017-based LTCH market basket and the 2013-
based LTCH market basket are based on the 2017 and 2013 Medicare cost 
report data for LTCHs, respectively.
6. Proposed FY 2021 Labor-Related Share
    As discussed in section V.B. of the Addendum to this proposed rule, 
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 
payments to account for differences in LTCH area wage levels (Sec.  
412.525(c)). The labor-related portion of the LTCH PPS standard Federal 
payment rate, hereafter referred to as the

[[Page 32828]]

labor-related share, is adjusted to account for geographic differences 
in area wage levels by applying the applicable LTCH PPS wage index. The 
labor-related share is determined by identifying the national average 
proportion of total costs that are related to, influenced by, or vary 
with the local labor market. As discussed in more detail in this 
section of this rule and similar to the 2013-based LTCH market basket, 
we classify a cost category as labor-related and include it in the 
labor-related share if the cost category is defined as being labor-
intensive and its cost varies with the local labor market. As stated in 
the FY 2020 IPPS/LTCH PPS final rule (84 FR 42642), the labor-related 
share for FY 2020 was defined as the sum of the FY 2020 relative 
importance of Wages and Salaries; Employee Benefits; Professional Fees: 
Labor-Related Services; Administrative and Facilities Support Services; 
Installation, Maintenance, and Repair Services; All Other: Labor-
related Services; and a portion of the Capital-Related Costs from the 
2013-based LTCH market basket.
    We propose to continue to classify a cost category as labor-related 
if the costs are labor-intensive and vary with the local labor market. 
Given this, based on our definition of the labor-related share and the 
cost categories in the proposed 2017-based LTCH market basket, we 
propose to include in the labor-related share for FY 2021 the sum of 
the FY 2021 relative importance 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 proposed 2017-based LTCH market 
basket.
    Similar to the 2013-based LTCH market basket, the proposed 2017-
based LTCH market basket includes two cost categories for nonmedical 
Professional fees (including but not limited to, expenses for legal, 
accounting, and engineering services). These are Professional Fees: 
Labor-related and Professional Fees: Nonlabor-related. For the proposed 
2017-based LTCH market basket, we propose to estimate the labor-related 
percentage of non-medical professional fees (and assign these expenses 
to the Professional Fees: Labor-related services cost category) based 
on the same method that was used to determine the labor-related 
percentage of professional fees in the 2013-based LTCH market basket.
    As was done for the 2013-based LTCH market basket, we propose to 
determine the proportion of legal, accounting and auditing, 
engineering, and management consulting services that meet our 
definition of labor-related services based on a survey of hospitals 
conducted by CMS in 2008. We notified the public of our intent to 
conduct this survey on December 9, 2005 (70 FR 73250) and did not 
receive any public comments in response to the notice (71 FR 8588). A 
discussion of the composition of the survey and post-stratification can 
be found in the FY 2010 IPPS/LTCH PPS final rule (74 FR 43850 through 
43856). Based on the weighted results of the survey, we determined that 
hospitals purchase, on average, the following portions of contracted 
professional services outside of their local labor market:
     34 percent of accounting and auditing services.
     30 percent of engineering services.
     33 percent of legal services.
     42 percent of management consulting services.
    For the proposed 2017-based LTCH market basket, we propose to apply 
each of these percentages to the respective 2012 Benchmark I-O cost 
category underlying the professional fees cost category to determine 
the Professional Fees: Nonlabor-related costs. The Professional Fees: 
Labor-related costs were determined to be the difference between the 
total costs for each Benchmark I-O category and the Professional Fees: 
Nonlabor-related costs. This is the same methodology that we used to 
separate the 2013-based LTCH market basket professional fees category 
into Professional Fees: Labor-related and Professional Fees: Nonlabor-
related cost categories.
    In the proposed 2017-based LTCH market basket, nonmedical 
professional fees that were subject to allocation based on these survey 
results represent approximately 5.6 percent of total costs (and are 
limited to those fees related to Accounting & Auditing, Legal, 
Engineering, and Management Consulting services). Based on our survey 
results, we propose to apportion approximately 3.6 percentage points of 
the 5.6 percentage point figure into the Professional Fees: Labor-
related share cost category and designate the remaining approximately 
2.0 percentage points into the Professional Fees: Nonlabor-related cost 
category.
    In addition to the professional services as previously listed, for 
the 2017-based LTCH market basket, we propose to allocate a proportion 
of the Home Office/Related Organization Contract Labor cost weight, 
calculated using the Medicare cost reports as previously stated, into 
the Professional Fees: Labor-related and Professional Fees: Nonlabor-
related cost categories. We propose to classify these expenses as 
labor-related and nonlabor-related as many facilities are not located 
in the same geographic area as their home office and, therefore, do not 
meet our definition for the labor-related share that requires the 
services to be purchased in the local labor market.
    Similar to the 2013-based LTCH market basket, we propose for the 
2017-based LTCH market basket to use the Medicare cost reports for 
LTCHs to determine the home office labor-related percentages. The 
Medicare cost report requires a hospital to report information 
regarding their home office provider. Using information on the Medicare 
cost report, we compare the location of the LTCH with the location of 
the LTCH's home office. We propose to classify a LTCH with a home 
office located in their respective labor market if the LTCH and its 
home office are located in the same Metropolitan Statistical Area 
(MSA). Then we determine the proportion of the Home Office/Related 
Organization Contract Labor cost weight that should be allocated to the 
labor-related share based on the percent of total Home Office/Related 
Organization Contract Labor costs for those LTCHs that had home offices 
located in their respective local labor markets of total Home Office/
Related Organization Contract Labor costs for LTCHs with a home office. 
We determined a LTCH's and its home office's MSA using their zip code 
information from the Medicare cost report. Using this methodology, we 
determined that 4 percent of LTCHs' Home Office/Related Organization 
Contract Labor costs were for home offices located in their respective 
local labor markets. Therefore, we are allocating 4 percent of the Home 
Office/Related Organization Contract Labor cost weight (0.1 percentage 
point = 1.9 percent x 4 percent) to the Professional Fees: Labor-
related cost weight and 96 percent of the Home Office/Related 
Organization Contract Labor cost weight to the Professional Fees: 
Nonlabor-related cost weight (1.8 percentage points = 1.9 percent x 96 
percent). For the 2013-based LTCH market basket, we used a similar 
methodology but we relied on provider counts rather than Home Office/
Related Organization Contract Labor costs to determine the labor-
related percentage.
    In summary, based on the two allocations mentioned earlier, we 
apportioned 3.7 percentage points of the professional fees and Home 
Office/Related Organization Contract Labor cost weights into the 
Professional Fees: Labor-Related cost category. This amount was added 
to the portion of

[[Page 32829]]

professional fees that we already identified as labor-related using the 
I-O data such as contracted advertising and marketing costs 
(approximately 0.8 percentage point of total costs) resulting in a 
Professional Fees: Labor-Related cost weight of 4.5 percent.
    As previously stated, we propose to include in the labor-related 
share the sum of the relative importance 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 proposed 2017-based LTCH market 
basket. The relative importance reflects the different rates of price 
change for these cost categories between the base year (2017) and FY 
2021. Based on IGI's fourth quarter 2019 forecast of the proposed 2017-
based LTCH market basket, the sum of the FY 2021 relative importance 
for Wages and Salaries, Employee Benefits, Professional Fees: Labor-
related, Administrative and Facilities Support Services, Installation 
Maintenance & Repair Services, and All Other: Labor-related Services is 
63.6 percent. The portion of Capital costs that is influenced by the 
local labor market is estimated to be 46 percent, which is the same 
percentage applied to the 2013-based LTCH market basket. Since the 
relative importance for Capital is 9.5 percent of the proposed 2017-
based LTCH market basket in FY 2021, we took 46 percent of 9.5 percent 
to determine the proposed labor-related share of Capital for FY 2021 of 
4.4 percent. Therefore, we are proposing a total labor-related share 
for FY 2021 of 68.0 percent (the sum of 63.6 percent for the operating 
cost and 4.4 percent for the labor-related share of Capital). Table E9 
shows the FY 2021 labor-related share using the proposed 2017-based 
LTCH market basket relative importance and the FY 2020 labor-related 
share using the 2013-based LTCH market basket.
[GRAPHIC] [TIFF OMITTED] TP29MY20.201

    The total difference between the FY 2021 labor-related share using 
the 2017-based LTCH market basket and the FY 2020 labor-related share 
using the 2013-based LTCH market basket is 1.7 percentage points (68.0 
percent and 66.3 percent, respectively). This difference is 
attributable to: (1) Revision to the base year cost weights (0.8 
percentage point); (2) revision to starting point of calculation of 
relative importance (base year) from 2013 to 2017 (0.6 percentage 
point); and (3) using an updated IGI forecast and reflecting an 
additional year of inflation (0.3 percentage point). The 0.8-percentage 
point difference in the base year cost weights is primarily due to the 
incorporation of the 2012 I-O data which shows an increase in the 
Professional Fees: Labor-Related services.
    We note that the use of the Medicare cost report to derive the Home 
Office/Related Organization Contract Labor cost weight has -0.1 
percentage point impact, meaning if we were to use the I-O data to 
derive the Home Office/Related Organization Contract Labor cost weight, 
the labor-related share would be 0.1 percentage point higher. The 
impact of using the Medicare cost report data to calculate the Home 
Office/Related Organization Contract Labor cost weight is minimal 
because if we were to instead use the I-O data to derive this weight, 
it would also increase the residual ``All Other'' cost weight from 28.3 
percent (using the Medicare cost report data to calculate the Home 
Office/Related Organization Contract Labor cost weight) to 30.2 percent 
(using the I-O data to calculate the Home Office/Related Organization 
Contract labor cost weight). The higher residual ``All Other'' cost 
weight then leads to relatively higher cost weight for Administrative 
and Facilities Support Services which is also reflected in the labor-
related share.

[[Page 32830]]

VIII. Quality Data Reporting Requirements for Specific Providers and 
Suppliers

    In section VIII. of the preamble of this proposed rule, we discuss 
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 this proposed 
rule, we are proposing changes to the Medicare and Medicaid Promoting 
Interoperability Programs (previously known as the Medicare and 
Medicaid EHR Incentive Programs) for eligible hospitals and critical 
access hospitals (CAHs).

A. Hospital Inpatient Quality Reporting (IQR) Program

1. Background and 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 healthcare 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 healthcare quality and value, while 
giving patients the tools and information needed to make the best 
decisions for themselves.
    We seek to promote higher quality and more efficient healthcare for 
Medicare beneficiaries. This effort is supported by the adoption of 
widely-agreed upon quality and cost measures. We have worked with 
relevant stakeholders to define measures in almost every care setting 
and currently measure some aspect of care for almost all Medicare 
beneficiaries. These measures assess clinical processes, patient safety 
and adverse events, patient experiences with care, care coordination, 
and clinical outcomes, as well as cost of care. 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), the FY 2018 IPPS/LTCH PPS final rule 
(82 FR 38326 through 38328 and 82 FR 38348), the FY 2019 IPPS/LTCH PPS 
final rule (83 FR 41538 through 41609), and the FY 2020 IPPS/LTCH PPS 
final rule (84 FR 42448 through 42509) for the measures we have 
previously adopted for the Hospital IQR Program measure set for the FY 
2022 payment determination and subsequent years. We also refer readers 
to 42 CFR 412.140 for Hospital IQR Program regulations.
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. We are 
not proposing any changes to this policy in this proposed rule.
3. Removal Factors for Hospital IQR Program Measures
    We refer readers to the FY 2019 IPPS/LTCH PPS final rule (83 FR 
41540 through 41544) for a summary of the Hospital IQR Program's 
removal factors.
    We are not proposing any changes to our policies regarding measure 
removal in this proposed rule.
4. 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. We also refer readers to the FY 2019 IPPS/LTCH PPS final rule 
(83 FR 41147 through 41148), in which we describe the Meaningful 
Measures Initiative, our objectives under this framework for quality 
measurement, and the quality topics that we have identified as high 
impact measurement areas that are relevant and meaningful to both 
patients and providers. We are not proposing any changes to these 
policies in this proposed rule.
5. Proposed New Measures for the Hospital IQR Program Measure Set
    We are not proposing to adopt any new measures in this proposed 
rule.
6. Summary of Previously Finalized Hospital IQR Program Measures for 
the FY 2022 Payment Determination
    This table summarizes the previously finalized Hospital IQR Program 
Measures for the FY 2022 Payment Determination:
BILLING CODE 4120-01-P

[[Page 32831]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.202


[[Page 32832]]


BILLING CODE 4120-01-C
7. Summary of Previously Finalized Hospital IQR Program Measures for 
the FY 2023 Payment Determination
    This table summarizes the previously finalized Hospital IQR Program 
measure set for the FY 2023 Payment Determination:
BILLING CODE 4120-01-P

[[Page 32833]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.203


[[Page 32834]]


BILLING CODE 4120-01-C
8. Summary of Previously Finalized Hospital IQR Program Measures for 
the FY 2024 Payment Determination and Subsequent Years
    This table summarizes the previously finalized Hospital IQR Program 
measure set for the FY 2024 Payment Determination and Subsequent Years:
BILLING CODE 4120-01-P

[[Page 32835]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.204


[[Page 32836]]


BILLING CODE 4120-01-C
9. 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. In order to successfully participate in the 
Hospital IQR Program, hospitals must meet specific procedural, data 
collection, submission, and validation requirements. 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 previously 
discussed description. In accordance with the statute, the FY 2021 
payment determination will begin the seventh year that the Hospital IQR 
Program will reduce the applicable percentage increase by one-quarter 
of such applicable percentage increase.
b. Maintenance of Technical Specifications for Quality Measures
    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. We refer 
readers to the FY 2019 IPPS/LTCH PPS final rule (83 FR 41538) in which 
we summarized how the Hospital IQR Program maintains the technical 
measure specifications for quality measures and the subregulatory 
process for incorporation of nonsubstantive updates to the measure 
specifications to ensure that measures remain up-to-date. We are not 
proposing any changes to these policies in this proposed rule.
    The data submission requirements, Specifications Manual, and 
submission deadlines are posted on the QualityNet website at: http://www.QualityNet.org/ (and any other successor CMS-designated websites). 
The technical specifications used for electronic clinical quality 
measures (eCQMs) are contained in the CMS Annual Update for the 
Hospital Quality Reporting Programs (Annual Update). 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 
electronic health record (EHR) vendors to use in order to collect and 
submit data on eCQMs from hospital EHRs. The Annual Update and 
implementation guidance documents are available on the Electronic 
Clinical Quality Improvement (eCQI) Resource Center website at: https://ecqi.healthit.gov/. For example, for the CY 2020 reporting period/FY 
2022 payment determination, hospitals submitted eCQM data using the May 
2019 Annual Update and any applicable addenda.
    Hospitals must register and submit quality data through the 
QualityNet Secure Portal (also referred to as the Hospital Quality 
Reporting (HQR) System). There are safeguards in place in accordance 
with the HIPAA Privacy and Security Rules to protect patient 
information submitted through this website. See 45 CFR parts 160 and 
164, subparts A, C, and E.
c. Procedural Requirements
    The Hospital IQR Program's procedural requirements are codified in 
regulation at 42 CFR 412.140. We refer readers to these codified 
regulations for participation requirements, as further explained by the 
FY 2014 IPPS/LTCH PPS final rule (78 FR 50810 through 50811) and the FY 
2017 IPPS/LTCH PPS final rule (81 FR 57168). We are not proposing any 
changes to these procedural requirements in this proposed rule.
d. Data Submission Requirements for Chart-Abstracted Measures
    We refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 
51640 through 51641), the FY 2013 IPPS/LTCH PPS final rule (77 FR 53536 
through 53537), and the FY 2014 IPPS/LTCH PPS final rule (78 FR 50811) 
for details on the Hospital IQR Program data submission requirements 
for chart-abstracted measures. We are not proposing any changes to the 
data submission requirements for chart-abstracted measures in this 
proposed rule.
e. Reporting and Submission Requirements for eCQMs
(1) Background
    For a discussion of our previously finalized reporting and 
submission requirements for eCQMs, 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), the FY 2018 IPPS/LTCH PPS final rule 
(82 FR 38355 through 38361; 38386 through 38394; 38474 through 38485; 
and 38487 through 38493), the FY 2019 IPPS/LTCH PPS final rule (83 FR 
41567 through 41575; 83 FR 41602 through 41607), and the FY 2020 IPPS/
LTCH PPS final rule (84 FR 42501 through 42506).
    Current reporting and submission requirements were established in 
the FY 2018 IPPS/LTCH PPS final rule. In that final rule (82 FR 38368 
through 38361), we finalized eCQM reporting and submission requirements 
such that hospitals were 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. Those reporting 
requirements were extended to the CY 2019 reporting period/FY 2021 
payment determination in the FY 2019 IPPS/LTCH PPS final rule (83 FR 
41603 through 41604), as well as to the CY 2020 reporting period/FY 
2022 payment determination and the CY 2021 reporting period/FY 2023 
payment determination in the FY 2020 IPPS/LTCH PPS final rule (84 FR 
42501 through 42503).
    In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42503 through 
42505), we also finalized that for the CY 2022 reporting period/FY 2024 
payment determination, hospitals would be required to report one, self-
selected calendar quarter of data for: (a) Three self-selected eCQMs, 
and (b) the Safe Use of Opioids--Concurrent Prescribing eCQM (Safe Use 
eCQM), for a total of four eCQMs.
    In this proposed rule, we are proposing to progressively increase, 
over a 3-year period, the number of quarters for which hospitals are 
required to report eCQM data, from the current requirement of one self-
selected quarter of data to four quarters of data. We believe that 
increasing the number of quarters for which hospitals are required to 
report eCQM data will produce more comprehensive and reliable quality 
measure data for patients and providers. Increasing the number of 
reported quarters to be reported has several benefits. Primarily, a 
single quarter of data is not enough to capture trends in performance 
over time. Evaluating multiple quarters of data would provide a more 
reliable and accurate picture of overall performance. Further, 
reporting multiple quarters of

[[Page 32837]]

data would provide hospitals with a more continuous information stream 
to monitor their levels of performance. Ongoing, timely data analysis 
can better identify a change in performance that may necessitate 
investigation and potentially corrective action.
    The current policy requiring more limited reporting was established 
due to stakeholder feedback about challenges in reporting data, and to 
give hospitals more time to gain experience with reporting (including 
upgrading systems and training to support e-CQM reporting) (82 FR 78355 
through 78361). That policy, as well as the changes we propose in this 
proposed rule, are consistent with CMS's stated goal to create a 
gradual shift to more robust e-CQM reporting (82 FR 38356). Taking an 
incremental approach over a 3-year period would give hospitals and 
their vendors time to plan in advance and build upon and utilize 
investments already made in their EHR infrastructure. We refer readers 
to section XI.B.7. of the preamble of this proposed rule for a 
discussion of the increased collection of information burden associated 
with this proposal. We also refer readers to section VIII.D. of the 
preamble of this proposed rule for similar proposals under the 
Promoting Interoperability Program.
(2) Proposed Reporting and Submission Requirements for eCQMs for the CY 
2021 Reporting Period/FY 2023 Payment Determination
    For the CY 2021 reporting period/FY 2023 payment determination, we 
propose to increase the amount of data required while keeping the 
number of eCQMs required the same. Specifically, in this proposed rule, 
we are proposing that hospitals report two self-selected calendar 
quarters of data for each of the four self-selected eCQMs for the CY 
2021 reporting period/FY 2023 payment determination.
(3) Proposed Reporting and Submission Requirements for eCQMs for the CY 
2022 Reporting Period/FY 2024 Payment Determination
    For the CY 2022 reporting period/FY 2024 payment determination, we 
propose to increase the amount of data required while keeping the 
number and type of eCQMs required the same. Specifically, in this 
proposed rule, we are proposing to require that hospitals report three 
self-selected calendar quarters of data for the CY 2022 reporting 
period/FY 2024 payment determination for each required eCQM: (a) Three 
self-selected eCQMs; and (b) the Safe Use of Opioids eCQM.
(4) Proposed Reporting and Submission Requirements for eCQMs for the CY 
2023 Reporting Period/FY 2025 Payment Determination and Subsequent 
Years
    For the CY 2023 reporting period/FY 2025 payment determination and 
beyond, we propose to further increase the amount of data required 
while keeping the number and type of eCQMs required the same. 
Specifically, in this proposed rule, we are proposing to require that 
hospitals report four calendar quarters of data beginning with the CY 
2023 reporting period/FY 2025 payment determination and for subsequent 
years for each required eCQM: (a) Three self-selected eCQMs; and (b) 
the Safe Use of Opioids eCQM.
(5) Continuation of Certification Requirements for eCQM Reporting
(a) Requiring Use of 2015 Edition Certification Criteria
    In the FY 2019 IPPS/LTCH PPS final rule (83 FR 41604 through 
41607), to align the Hospital IQR Program with the Promoting 
Interoperability Program, we finalized a policy to require hospitals to 
use the 2015 Edition certification criteria for certified EHR 
technology (CEHRT) for the CY 2019 reporting period/FY 2021 payment 
determination and subsequent years. We are not proposing any changes to 
this policy in this proposed rule.
(b) Requiring EHR Technology To Be Certified to All Available eCQMs
    In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42505 through 
42506), we finalized the requirement that EHRs be certified to all 
available eCQMs used in the Hospital IQR Program for the CY 2020 
reporting period/FY 2022 payment determination and subsequent years. We 
are not proposing any changes to this policy in this proposed rule.
(6) File Format for EHR Data, Zero Denominator Declarations, and Case 
Threshold Exemptions
    We refer readers to the FY 2016 IPPS/LTCH PPS final rule (80 FR 
49705 through 49708) and the FY 2017 IPPS/LTCH PPS final rule (81 FR 
57169 through 57170) for our previously adopted eCQM file format 
requirements. Under these requirements, hospitals: (1) Must submit eCQM 
data via the Quality Reporting Document Architecture Category I (QRDA 
I) file format as was previously required; (2) may use third parties to 
submit QRDA I files on their behalf; and (3) may either use abstraction 
or pull the data from non-certified sources in order to then input 
these data into CEHRT for capture and reporting QRDA I files. Hospitals 
can continue to meet the reporting requirements by submitting data via 
QRDA I files, zero denominator declaration, or case threshold exemption 
(82 FR 38387).
    More specifically regarding the use of QRDA I files, in the FY 2017 
IPPS/LTCH PPS final rule (81 FR 57169 through 57170), we stated that we 
expect QRDA I files to reflect data for one patient per file per 
quarter, and that they contain the following four key elements that are 
utilized to identify the file:
     CMS Certification Number (CCN).
     CMS Program Name.
     EHR Patient ID.
     Reporting period specified in the Reporting Parameters 
Section per the CMS Implementation Guide for the applicable reporting 
year, which is published on the eCQI Resource Center website at https://ecqi.healthit.gov/QRDA.
    In this proposed rule, we are proposing to add EHR Submitter ID to 
the four key elements listed, as previously discussed, as a fifth key 
element for file identification beginning with the CY 2021 reporting 
period/FY 2023 payment determination. An EHR Submitter ID is the ID 
that is assigned by QualityNet to submitter entities upon registering 
into the system and will be used to upload QRDA I files. For vendors, 
the EHR Submitter ID is the Vendor ID; for hospitals, the EHR, 
Submitter ID is the hospital's CCN. Particularly for situations when a 
hospital uses one or more vendors to submit QRDA I files via the 
QualityNet Secure Portal (also referred to as the Hospital Quality 
Reporting (HQR) System), this additional element would prevent the risk 
of a previously submitted file by a different vendor unintentionally 
being overwritten. Therefore, hospitals would be required to submit the 
following elements to identify the QRDA 1 file:
     CMS Certification Number (CCN).
     CMS Program Name.
     EHR Patient ID.
     Reporting period specified in the Reporting Parameters 
Section.
     EHR Submitter ID.
(7) Submission Deadlines for eCQM Data
    We refer readers to the FY 2015 IPPS/LTCH PPS final rule (79 FR 
50256 through 50259), the FY 2016 IPPS/LTCH PPS final rule (80 FR 49705 
through 49709), and the FY 2017 IPPS/LTCH PPS final rule (81 FR 57169 
through 57172) for our previously adopted policies to align eCQM data 
reporting periods and submission deadlines for both the Hospital IQR 
and Medicare

[[Page 32838]]

Promoting Interoperability Programs. In the FY 2017 IPPS/LTCH PPS final 
rule (81 FR 57172), we finalized the alignment of the Hospital IQR 
Program eCQM submission deadline with that of the Medicare Promoting 
Interoperability Program--the end of 2 months following the close of 
the calendar year--for the CY 2017 reporting period/FY 2019 payment 
determination and subsequent years. We note the submission deadline may 
be moved to the next business day if it falls on a weekend or federal 
holiday. We are not proposing any changes to the eCQM submission 
deadlines in this proposed rule.
f. Data Submission and Reporting Requirements for Hybrid Measures
(1) Background
    In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38350 through 
38355), we finalized voluntary reporting of the Hybrid Hospital-Wide 
Readmission (HWR) measure for the CY 2018 reporting period. For data 
submission and reporting requirements under the 2018 Voluntary 
Reporting Period, we finalized that the 13 core clinical data elements 
and six linking variables for the Hybrid HWR measure be submitted using 
the QRDA I file format, and that hospitals voluntarily reporting data 
for the Hybrid HWR measure could use EHR technology certified to the 
2014 Edition, the 2015 Edition, or a combination thereof (82 FR 38394 
through 38397). In the FY 2020 IPPS/LTCH PPS final rule, we finalized 
the adoption of the Hybrid HWR measure for the Hospital IQR Program (84 
FR 42465 through 42481) as well as a number of requirements related to 
data submission and reporting requirements for hybrid measures under 
the Hospital IQR Program (84 FR 42506 through 42508). We adopted the 
Hybrid HWR measure into the Hospital IQR Program in a stepwise fashion, 
first accepting data submissions for the Hybrid HWR measure during two 
voluntary reporting periods (84 FR 42479). Beginning with the FY 2026 
payment determination, hospitals are required to report on this measure 
(84 FR 42479).
(2) Certification and File Format Requirements
    In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42507), we finalized 
a requirement that hospitals use EHR technology certified to the 2015 
Edition to submit data on the Hybrid HWR measure. In addition, we 
finalized that the core clinical data elements and linking variables 
identified in hybrid measure specifications must be submitted using the 
QRDA I file format. In order to ensure that the data have been 
appropriately connected to the encounter, the core clinical data 
elements specified for risk adjustment need to be captured in relation 
to the start of an inpatient encounter. The QRDA I file standard 
enables the creation of an individual patient-level quality report that 
contains quality data for one patient for one or more quality measures.
    In this proposed rule, we are proposing to continue the policy that 
requires hospitals to use EHR technology certified to the 2015 Edition 
to submit data on the Hybrid HWR measure and expand this requirement to 
apply to any future hybrid measure adopted into the Hospital IQR 
Program's measure set. We are also clarifying that core clinical data 
elements and linking variables must be submitted using the QRDA I file 
format for future hybrid measures in the program. We are inviting 
public comment on our proposals.
(3) Additional Submission Requirements
    In the FY 2020 IPPS/LTCH PPS final rule, we finalized allowing 
hospitals to meet the hybrid measure reporting and submission 
requirements by submitting any combination of data via QRDA I files, 
zero denominator declarations, and/or case threshold exemptions (84 FR 
42507). We also finalized applying similar zero denominator declaration 
and case threshold exemption policies to hybrid measure reporting as we 
allow for eCQM reporting (84 FR 42507 through 42508). We are not 
proposing any changes to the hybrid measure reporting and submission 
requirement supporting any combination of data via QRDA I files, zero 
denominator declaration, and/or case threshold exemptions in this 
proposed rule.
    As with eCQM reporting, we encourage all hospitals and their health 
IT vendors to submit QRDA I files early, and to use one of the pre-
submission testing tools for electronic reporting, such as the CMS Pre-
Submission Validation Application (PSVA) tool (81 FR 57113), to allow 
additional time for testing and to make sure all required data files 
are successfully submitted by the deadline.
(4) Submission Deadlines for Hybrid Measures
    We refer readers to the FY 2020 IPPS/LTCH PPS final rule (84 FR 
42508), where we finalized submission deadlines for hybrid measures. We 
are not proposing any changes to these policies in this proposed rule.
g. Sampling and Case Thresholds for Chart-Abstracted Measures
    We refer readers to the FY 2011 IPPS/LTCH PPS final rule (75 FR 
50221), the FY 2012 IPPS/LTCH PPS final rule (76 FR 51641), the FY 2013 
IPPS/LTCH PPS final rule (77 FR 53537), the FY 2014 IPPS/LTCH PPS final 
rule (78 FR 50819), and the FY 2016 IPPS/LTCH PPS final rule (80 FR 
49709) for details on our sampling and case thresholds for the FY 2016 
payment determination and subsequent years. We are not proposing any 
changes to this policy in this proposed rule.
h. 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 submission 
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. We are not proposing 
any changes to these policies in this proposed rule.
i. Data Submission Requirements for Structural Measures
    There are no remaining structural measures in the Hospital IQR 
Program.
j. Data Submission and Reporting Requirements for CDC NHSN HAI Measures
    For details on the data submission and reporting requirements for 
Healthcare-Associated Infection (HAI) measures reported via the CDC's 
National Healthcare Safety Network (NHSN), 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.
    We refer readers to the FY 2019 IPPS/LTCH PPS final rule (83 FR 
41547 through 41553), in which we finalized the removal of five of 
these measures (CLABSI, CAUTI, Colon and Abdominal Hysterectomy SSI, 
MRSA Bacteremia, and CDI) from the Hospital IQR Program. As a result, 
hospitals will not

[[Page 32839]]

be required to submit any data for those measures under the Hospital 
IQR Program following their removal beginning with the CY 2020 
reporting period/FY 2022 payment determination. However, the five CDC 
NHSN HAI measures are included in the HAC Reduction and Hospital VBP 
Programs and reported via the CDC NHSN portal (83 FR 41474 through 
41477; 83 FR 41449 through 41452). We further note that the HCP measure 
remains in the Hospital IQR Program and will continue to be reported 
via NHSN. We are not proposing any changes to these policies in this 
proposed rule.
10. Validation of Hospital IQR Program Data
a. Background
    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), the FY 2018 IPPS/LTCH PPS final rule (82 FR 38398 
through 38403), and the FY 2019 IPPS/LTCH PPS final rule (83 FR 41607 
through 41608) for detailed information on validation processes for 
chart-abstracted measures and eCQMs, and previous updates to these 
processes for the Hospital IQR Program.
    Validation for chart-abstracted measures has been updated over 
recent years as the number of chart-abstracted measures has been 
reduced. In the FY 2019 IPPS/LTCH PPS final rule (83 FR 41562 through 
41567), we removed four clinical process of care measures,\472\ and 
noted that for the CY 2021 reporting period/FY 2023 payment 
determination and subsequent years, only one clinical process of care 
measure (SEP-1) remains in the program for chart-abstracted validation 
(83 FR 41608).
---------------------------------------------------------------------------

    \472\ In the FY 2019 IPPS/LTCH PPS final rule (83 FR 41562 
through 41567), we removed three clinical process-of-care measures 
(IMM-2, ED-1, and VTE-6) for the CY 2019 reporting period/FY 2021 
payment determination and subsequent years, and one clinical process 
of care measure (ED-2) for the CY 2020 reporting period/FY 2022 
payment determination and subsequent years.
---------------------------------------------------------------------------

    We adopted the process for validating eCQM data in the FY 2017 
IPPS/LTCH PPS final rule (81 FR 57173 through 57181). Validation of 
eCQM data was finalized 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 refer readers to 
the FY 2018 IPPS/LTCH PPS final rule (82 FR 38398 through 38403), in 
which we finalized several updates to the 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 this proposed rule, we are proposing to incrementally combine 
the validation processes for chart-abstracted measure data and eCQM 
data and related policies in a stepwise process. To accomplish this, we 
are proposing to: (1) Update the quarters of data required for 
validation for both chart-abstracted measures and eCQMs; (2) expand 
targeting criteria to include hospital selection for eCQMs; (3) change 
the validation pool from 800 hospitals to 400 hospitals; (4) remove the 
current exclusions for eCQM validation selection, (5) require 
electronic file submissions for chart-abstracted measure data; (6) 
align the eCQM and chart-abstracted measure scoring processes; and (7) 
update the educational review process to address eCQM validation 
results. We believe these proposals will ultimately streamline the 
validation process and reduce the total number of hospitals selected 
for validation. These are discussed in detail in the following 
sections.
b. Submission Quarters
(1) Current Policy
    Currently, we require hospitals selected for chart-abstracted 
measures to submit data from the Q3 and Q4 of the calendar year, 3 
years before the payment determination and the Q1 and Q2 of the 
calendar year, 2 years before the payment determination (FY 2014 IPPS/
LTCH final rule (78 FR 50822 through 50823). This is because there is a 
lag associated with validation. In general, validation is a year 
behind. Validation results affecting a certain FY payment determination 
are based on measures submitted for the prior payment determination. 
For example, validation results affecting the FY 2024 payment 
determination are based on measures submitted for the FY 2023 payment 
determination (CY 2021 discharge period with data submission completing 
in CY 2022).
    For validation affecting the FY 2023 payment determination, 
hospitals must submit data to validate chart abstracted measures from 
the Q3 and Q4 of CY 2020 and the Q1 and Q2 of CY 2021. These are data 
originally submitted for the FY 2022 program payment determination. 
Depending on whether a hospital is selected as a random or targeted 
hospital, CMS requests data between 1 and 5 months following the data 
reporting submission deadline for a given reporting quarter. Following 
this request, hospitals have 30 days to submit randomly selected 
medical records to the Clinical Data Abstraction Center (CDAC), and 
after submission, CMS validates the data in preparation to make the 
associated payment determination. Under the current policy, hospitals 
selected for eCQM validation for a given payment determination year are 
required to provide medical records for a sample of cases occurring 
during one of the self-selected calendar quarters of the year 3 years 
before that payment determination (82 FR 38399 through 38400). For 
example, for validation affecting the FY 2023 payment determination 
period, hospitals selected during CY 2021 for eCQM validation are 
required to submit data from one self-selected quarter out of the 4 
calendar quarters of 2020, that is Q1 through Q4 of CY 2020 (82 FR 
38398 through 38403). These requirements are illustrated in the 
following table.
[GRAPHIC] [TIFF OMITTED] TP29MY20.205


[[Page 32840]]


    To support the transition to a combined validation process for both 
chart-abstracted measures and eCQMs, we are proposing to shift the 
quarters of data used for both chart-abstracted measure validation and 
eCQM validation in an incremental manner in order to align the two over 
time.
(2) Proposed Quarters Required for Validation Affecting the FY 2023 
Payment Determination
    In order to align the quarters used for chart-abstracted measure 
validation and eCQM validation, we are proposing to first change the 
period for validation affecting the FY 2023 payment determination. 
Instead of validating chart-abstracted measure data from Q3 2020-Q2 
2021, we are proposing to validate measure data only from the Q3 and Q4 
of CY 2020 for validation affecting the FY 2023 payment determination 
for chart-abstracted measures (illustrated in Table: 2 that follows) as 
a transition year. Specifically, this means that we would not require 
facilities to submit data for chart-abstracted measure validation for 
the Q1 and Q2 of CY 2021 for validation affecting the FY 2023 payment 
determination. We would use measure data from only two quarters (Q3 and 
Q4 of CY 2020) for hospitals selected under both the random and 
targeted chart-abstracted measure validations. We note that this 
proposal only affects chart-abstracted measure validation; we would 
continue to validate the self-selected quarter of eCQM data submitted 
during 2020 for validation affecting the FY 2023 payment determination 
as previously finalized.
[GRAPHIC] [TIFF OMITTED] TP29MY20.206

(3) Proposed Quarters Required for Validation Affecting the FY 2024 
Payment Determination and Subsequent Years
    For validation affecting the FY 2024 payment determination and 
subsequent years, we propose to use Q1-Q4 data of the applicable 
calendar year for validation of both chart-abstracted measures and 
eCQMs. For example, the quarters required for validation affecting the 
FY 2024 payment determination would occur as displayed in the following 
table.
[GRAPHIC] [TIFF OMITTED] TP29MY20.207

    We believe aligning the quarters of submission data used for both 
chart-abstracted measures and eCQM validation will allow hospitals 
selected for validation to more easily track and meet validation 
requirements, such as medical records requests from the CDAC.
    We invite the public to comment on our proposal to incrementally 
align the quarters used for chart-abstracted measure and eCQM 
validation as previously discussed.
c. Proposed Combination of Chart-Abstracted Measure and eCQM Validation 
Beginning With Validation Affecting the FY 2024 Payment Determination
    As noted previously, in the FY 2017 IPPS/LTCH PPS final rule (81 FR 
57173), we finalized a separate validation process for eCQMs in the 
Hospital IQR Program. In addition to validating the chart-abstracted 
measures, we began validating an additional pool of up to 200 randomly 
selected hospitals for eCQMs (81 FR 57173).
    Upon alignment of validation quarters as proposed in section 
VIII.A.10.b.(2). the preamble of this proposed rule, we wish to combine 
the validation process for both chart-abstracted measures and eCQMs. 
Therefore, in this proposed rule, we are proposing to remove the 
separate process for eCQM validation, beginning with the validation 
affecting the FY 2024 payment determination (for validation commencing 
in CY 2022 using data from the CY 2021 reporting period). Instead, 
beginning with validation affecting the FY 2024 payment determination 
and subsequent years, we are proposing to incorporate eCQMs into the 
existing validation process for chart-abstracted measures such that 
there would be one pool of hospitals selected through random selection 
and one pool of hospitals selected using targeting criteria, for both 
chart-abstracted measures and eCQMs. Under the aligned validation 
process, a single hospital would be selected for validation of both 
eCQMs and chart-abstracted measures and would be expected to submit 
data for both chart-abstracted measures and eCQMs. For specific data 
submission requirements, we refer readers to section VIII.A.10.e of the 
preamble of this proposed rule ``Number of Cases Required for 
Validation.''

[[Page 32841]]

(1) Targeted Selection of Hospitals for Validation
    We refer readers to the FY 2013 IPPS/LTCH PPS Final Rule (77 FR 
53552 through 53553) and the FY 2014 IPPS/LTCH PPS Final Rule (78 FR 
50834) where we finalized targeted chart abstracted measure validation 
for a supplemental sample of hospitals in addition to random 
validation. The supplemental sample of hospitals includes all hospitals 
that failed validation in the previous year and a random sample of 
hospitals meeting certain targeting criteria. These criteria are as 
follows:
     Any hospital with abnormal or conflicting data patterns. 
One example of an abnormal data pattern would be if a hospital has 
extremely high or extremely low values for a particular measure. As 
described in the FY 2013 IPPS/LTCH PPS final rule, we define an 
extremely high or low value as one that falls more than 3 standard 
deviations from the mean which is consistent with the Hospital OQR 
Program (76 FR 74485). An example of a conflicting data pattern would 
be if two records were identified for the same patient episode of care 
but the data elements were mismatched for primary diagnosis. Primary 
diagnosis is just one of many fields that should remain constant across 
measure sets for an episode of care. Other examples of fields that 
should remain constant across measure sets are patient age and sex. Any 
hospital not included in the base validation annual sample and with 
statistically significantly more abnormal or conflicting data patterns 
per record than would be expected based on chance alone (p <.05), would 
be included in the population of hospitals targeted in the supplemental 
sample.
     Any hospital with rapidly changing data patterns. For this 
targeting criterion, we define a rapidly changing data pattern as a 
hospital which improves its quality for one or more measure sets by 
more than 2 standard deviations from 1 year to the next, and also has a 
statistically significant difference in improvement (one-tailed p <.05) 
(77 FR 53553).
     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.
     Any hospital that passed validation in the previous year, 
but had a two-tailed confidence interval that included 75 percent.
     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.
    In this proposed rule, we are proposing that beginning with 
validation affecting the FY 2024 payment determination, the existing 
targeting criteria would apply to all applicable hospitals, capturing 
both measure types (that is, chart-abstracted measures and eCQMs). In 
other words, we are proposing to expand targeted validation to include 
eCQMs, not just chart-abstracted measures. Doing so will facilitate the 
proposed combination of chart-abstracted and eCQM validation such that 
hospitals selected under this combined targeting approach would be 
validated for both chart-abstracted and eCQMs.
    Additionally, we are clarifying that a hospital that has been 
granted an Extraordinary Circumstances Exception could still be 
selected for validation (chart-abstracted measures and eCQMs) under the 
targeting criteria. We invite public comment on our proposal.
(2) Number of Hospitals
    In the FYs 2013 and 2014 IPPS/LTCH PPS final rules (77 FR 53551 
through 53554, 78 FR 50833), we finalized that for chart-abstracted 
measure validation, we take an annual sample from 400 randomly selected 
hospitals and from up to 200 hospitals selected using targeting 
criteria. In the FY 2017 IPPS/LTCH PPS final rule (81 FR 57173 through 
57178), we finalized that for eCQMs, we take an annual sample of up to 
200 randomly selected hospitals that have not been selected for chart-
abstracted measure validation. Under these existing policies, we may 
validate data from up to a total of 800 hospitals for a given year for 
both chart-abstracted measures and eCQMs.
    In this proposed rule, we are proposing to change the hospital 
selection policies to reduce the total number of hospitals selected for 
validation from up to 800 hospitals to up to 400 hospitals, beginning 
with validation affecting the FY 2024 payment determination. We are 
proposing that up to 200 hospitals would be selected randomly and up to 
200 would be selected using targeted criteria. Detailed descriptions on 
proposals to effectuate that reduction follow.
(a) Proposed Number of Hospitals Under Random Selection
    Instead of taking an annual sample from 400 randomly selected 
hospitals as previously finalized, we are proposing to reduce the 
number of hospitals selected at random for validation to up to 200 
hospitals, beginning with validation affecting the FY 2024 payment 
determination (measure data collected during CY 2021 and submitted 
during CY 2022 for the FY 2023 payment determination). We are proposing 
these changes in conjunction with the HAC Reduction Program and refer 
readers to section IV.M. of this proposed rule for those proposals. We 
believe that reducing the total number of hospitals selected for chart-
abstracted measure validation each year to ``up to 200'' would maintain 
a sufficient sample size for a statistically meaningful estimate of 
hospitals' reporting accuracy and help streamline the process for both 
programs.
    One of our goals for the annual random sample is to estimate the 
total percentage of hospitals in the Hospital IQR Program that have 
been reporting unreliable data. The basic premise behind random 
sampling is that one can learn something about all hospitals by 
gathering data on just a subset of hospitals (77 FR 53552). The minimum 
sample size required to assess the percentage of hospitals in the 
Hospital IQR Program that have been reporting unreliable data depends 
on the expected percentage of hospitals that fail validation. Because a 
very high percentage of Hospital IQR Program hospitals pass validation 
(96.4 percent for the FY 2018 payment determination, 95.8 percent for 
the FY 2019 payment determination, and 96.2 percent for the FY 2020 
payment determination), we believe that we can reduce burden on 
hospitals by selecting fewer hospitals for the base annual random 
sample without adversely affecting our estimate of this percentage. 
Using an estimated passing rate of 96 percent, our power calculations 
indicate that with a pool of up to 200 hospitals, we can be highly 
confident that at least 94.8 percent of all hospitals in the Hospital 
IQR Program population are achieving the requisite reliability score.
    In addition, in the FY 2019 IPPS/LTCH PPS final rule, we finalized 
removal of five healthcare associated infection measures \473\ from the 
Hospital IQR Program and incorporated the same measures into the HAC 
Reduction Program (83 FR 41547 through 41553). Because of this, in the 
FY 2019 IPPS/LTCH PPS final rule, we also created validation policies 
under the HAC Reduction Program (83 FR 41479 through 41483). Following 
the transfer

[[Page 32842]]

of NHSN HAI measure validation to the HAC Reduction Program, in this 
proposed rule, we are proposing that both the Hospital IQR Program and 
the HAC Reduction Program use a single random hospital sample of up to 
200 hospitals beginning with validation affecting the FY 2024 payment 
determination. In other words, hospitals would be randomly selected and 
this pool of up to 200 hospitals would be validated under both 
programs.
---------------------------------------------------------------------------

    \473\ CAUTI, CDI, CLABSI, Colon and Abdominal Hysterectomy SSI, 
and MRSA Bacteremia.
---------------------------------------------------------------------------

    We are proposing to change the Hospital IQR Program policy from an 
exact number of hospitals selected for random validation (that is, 400) 
to a range (that is, up to 200). This is because there are some 
hospitals that are eligible for the HAC Reduction Program, but which do 
not also participate in the Hospital IQR Program. Over 95 percent of 
hospitals that are eligible for the HAC Reduction Program also 
participate in the Hospital IQR Program. The small proportion of 
hospitals that do not participate in the Hospital IQR Program would be 
included in the single pool from which hospitals could be randomly 
selected; however, if such a hospital were selected for validation, it 
would not be required to submit data for validation under the Hospital 
IQR Program. Therefore, selecting a single sample for both programs 
could potentially result in a number totaling less than 200 hospitals 
for validation of Hospital IQR Program chart-abstracted data because 
hospitals that are eligible for the HAC Reduction Program, but do not 
participate in the Hospital IQR Program would not be validated in the 
Hospital IQR Program. This is consistent with the previously finalized 
Hospital IQR Program chart-abstracted validation process, for which 
hospitals were subject to both chart-abstracted measure validation as 
well as HAI measure validation (83 FR 41608). The only difference is 
that HAI measure validation has since moved to the HAC Reduction 
Program and, hence, the HAI validation performance will be accounted 
for under the HAC Reduction Program.
    We believe that this proposed approach would simplify validation 
for hospitals under both programs. This proposal enables us to continue 
validating Hospital IQR Program chart-abstracted data without 
increasing the total number of hospitals selected for validation across 
both programs. We also refer readers to section IV.M. of the preamble 
of this proposed rule for more detail on the validation proposals for 
the HAC Reduction Program. Again, we note that this proposal is being 
made in conjunction with that in the HAC Reduction Program, and 
finalization of this proposal in the Hospital IQR Program would be 
contingent on the HAC Reduction Program proposal also being finalized.
    We invite public comment on this proposal.
(B) Exclusion Criteria
    In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38399), we finalized 
exclusion criteria, applied before the random selection of up to 200 
hospitals for eCQM validation. The exclusion criteria include any 
hospital--
     Selected for chart-abstracted measure validation;
     That has been granted an Extraordinary Circumstances 
Exception (ECE); and
     That does not have at least five discharges for at least 
one reported eCQM included among their QRDA I file submissions. (81 FR 
57174, 82 FR 38399). Hospitals meeting one or more of these exclusion 
criteria are not eligible for selection for eCQM validation each year 
(82 FR 38399).
    In this proposed rule, in conjunction with our proposal to combine 
chart-abstracted measure and eCQM validation, we are proposing to 
remove all of the previously finalized exclusion criteria (as 
previously referenced) beginning with validation affecting the FY 2024 
payment determination and for subsequent years. Since a separate sample 
of hospitals for eCQM validation will no longer need to be identified, 
the previously finalized exclusion criteria for eCQM validation 
hospital selection will no longer be needed. We invite public comment 
on our proposal to remove the previously finalized exclusion criteria. 
Finalization of this proposal would be contingent on finalization of 
our proposal to combine chart-abstracted measure and eCQM validation.
(c) Number of Hospitals Selected Under Targeted Selection
    We refer readers to FY 2013 IPPS/LTCH PPS final rule (77 FR 53552 
through 53553) where we previously established that we would select up 
to 200 hospitals for chart abstracted measures data validation using 
the targeting criteria described in section VIII.A.11.c. of the 
preamble of this proposed rule. The Hospital IQR Program does not 
currently have a policy for targeted selection of hospitals for eCQM 
validation.
    In this proposed rule, while we are not proposing any changes to 
the number of hospitals selected using targeting criteria, in sections 
VIII.A.3.c.(1) and VIII.A.10.a of this proposed rule, we are proposing 
to combine chart-abstracted measure and eCQM validation and to decrease 
the number of randomly selected hospitals. If these proposals are both 
finalized, the total number of hospitals selected for validation (for 
both chart abstracted measures and eCQMs) would be at maximum 400 (up 
to 200 hospitals randomly selected + up to 200 hospitals using 
targeting criteria). The current and proposed validation hospital 
numbers and measure types are illustrated in the tables that follow:

[[Page 32843]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.208

    Under the proposed aligned validation process, the Hospital IQR 
Program would validate a pool of up to 400 hospitals (up to 200 
randomly selected and up to 200 selected using the targeting criteria), 
across both measure types.
d. Proposed Use of Electronic File Submissions for Chart-Abstracted 
Measure Medical Records Requests Beginning With Validation Affecting 
the FY 2024 Payment Determination
    Currently, hospitals may choose to submit paper copies of medical 
records for chart-abstracted measure validation (75 FR 50226), or they 
may submit copies of medical records for validation by securely 
transmitting electronic versions of medical information (78 FR 50834, 
79 FR 50269). Submission of electronic versions can either entail 
downloading or copying the digital image of the medical record onto CD, 
DVD, or flash drive (78 FR 50835), or submission of PDFs using a secure 
file transmission process after logging into the QualityNet Secure 
Portal (also referred to as the Hospital Quality Reporting (HQR) 
System) (79 FR 50269). We reimburse hospitals at $3.00 per chart (78 FR 
50956). Neither paper copies nor submission of CD, DVD, or flash drive 
is applicable for eCQMs since that data is required to be submitted 
electronically via Secure File Transfer (81 FR 57174 through 57178).
    In this proposed rule, we are proposing to discontinue the option 
for hospitals to send paper copies of, or CDs, DVDs, or flash drives 
containing medical records for validation affecting the FY 2024 payment 
determination (i.e., beginning with data submission for Q1 of CY 2021). 
We are proposing to require hospitals to instead submit only electronic 
files when submitting copies of medical records for validation of 
chart-abstracted measures, beginning with validation affecting the FY 
2024 payment determination (i.e., Q1 of CY 2021) and for subsequent 
years. Under this proposal, hospitals would be required to submit PDF 
copies of medical records using direct electronic file submission via a 
CMS-approved secure file transmission process. We would continue to 
reimburse hospitals at $3.00 per chart, consistent with the current 
reimbursement amount for electronic submissions of charts.
    We strive to provide the public with accurate quality data while 
maintaining alignment with hospital recordkeeping practices. We 
appreciate that hospitals have rapidly adopted EHR systems as their 
primary source of information about patient care, which can facilitate 
the process of producing electronic copies of medical records (78 FR 
50834). Additionally, we monitor the medical records submissions to the 
CMS Clinical Data Abstraction Center (CDAC) contractor, and have found 
that almost two-thirds of hospitals already use the option to submit 
PDF copies of medical records as electronic files. In our assessment 
based on this monitoring, we believe requiring electronic file 
submissions can be a more effective and efficient process for hospitals 
selected for validation. Requiring electronic file submissions reduces 
the burden of not only coordinating numerous paper-based pages of 
medical records, but also of having to then ship the papers or physical 
digital media storage to the CDAC. Therefore, we believe it is 
appropriate to require that hospitals use electronic file submissions 
via a CMS-approved secure file transmission process. We invite public 
comment on our proposal.
e. Number of Cases Required for Validation
(1) Chart-Abstracted Measures
    We refer readers to the FY 2017 IPPS/LTCH PPS final rule (81 FR 
57179 through 57180) where we established a process in which the CDAC 
contractor requests selected hospitals to submit eight randomly 
selected medical records on a quarterly basis from which data are 
abstracted (for a total of 32 records per year). Once the CDAC 
contractor receives the data, it re-abstracts the measures which were 
submitted by the hospitals for the Hospital IQR Program and calculates 
the percentage of matching measure numerators and denominators for each 
measure within each chart submitted by the hospital. Each selected case 
may have multiple measures included in the validation. We are not 
proposing any changes to the number of cases required from each 
selected hospital for chart-abstracted measure validation.
(2) eCQMs
    In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38398 through 
38399), we finalized that selected hospitals must submit eight cases 
per reported quarter to complete eCQM data validation. We consider a 
sample of eight cases per quarter to be the minimum sample size needed 
to accurately ascertain the quality of the reported data (82 FR 38399). 
Each selected case may have multiple measures included in the 
validation.
    In this proposed rule, we are not proposing any changes to this 
policy. However, we refer readers to section VIII.A.10.e of the 
preamble (Reporting and Submission Requirements for eCQMs) of this 
proposed rule for more details on our proposal to increase the

[[Page 32844]]

number of quarters for which hospitals are required to report eCQM 
data: From one self-selected quarter of data to four quarters of data 
progressively over several years. If those proposals are finalized, 
hospitals selected for validation would be required to submit: (1) A 
total of 16 requested cases from 2 calendar quarters of data (8 cases x 
2 quarters) for validation affecting the FY 2024 payment determination; 
(2) a total of 24 requested cases from 3 quarters of data (8 cases x 3 
quarters) for validation affecting the FY 2025 payment determination; 
and (3) a total of 32 requested cases over 4 quarters of data (8 cases 
x 4 quarters) for validation affecting the FY 2026 payment 
determination and for subsequent years. This means that for eCQM 
validation, hospitals will have to submit validation data for each 
quarter of their self-selected eCQM submission quarters.
f. Scoring Processes
(1) Current Scoring Process
    Currently, there are two separate processes for payment 
determinations related to validation requirements--one for chart-
abstracted measure validation and another for eCQM validation.
    For chart-abstracted measure validation scoring, under the current 
process, the CDAC contractor requests that hospitals submit eight 
randomly selected medical records on a quarterly basis from which data 
are abstracted and submitted by the hospital to the Clinical Data 
Warehouse (for a total of 32 records per year per hospital). Once the 
CDAC contractor receives the data, it re-abstracts the same data 
submitted by the hospitals and calculates the percentage of matching 
measure numerators and denominators for each measure within each chart 
submitted by the hospital (81 FR 57179 through 57180). Each selected 
case may have multiple measures included in the validation score. 
Specifically, one patient may meet the numerator and denominator 
criteria for multiple measures, and therefore, would generate multiple 
measures in the validation score. Consistent with previous years, each 
quarter and clinical topic is treated as a stratum for variance 
estimation purposes. Approximately 4 months after each quarter's 
validation submission deadline, validation results for chart-abstracted 
measures for the quarter are posted on the QualityNet Secure Portal 
(also referred to as the Hospital Quality Reporting (HQR) System). At 
the end of the year, the validation score is calculated by combining 
the data from all four quarters into one agreement rate for each 
hospital. At this point, CMS calculates a confidence interval around 
the agreement rate for each hospital using a normal distribution 
assumption. The upper bound of the confidence interval is calculated as 
the final validation score. A hospital must attain at least a 75 
percent validation score based upon all four quarters of chart-
abstracted data validation to pass the validation requirement. The 
overall validation score from the chart-abstracted measure is used to 
determine whether a hospital has met the validation requirement under 
the Hospital IQR Program for purposes of the annual payment update. 
Specifically, if a hospital fails chart-abstracted validation (because 
the validation score was below 75 percent), it would receive an 
applicable annual reduction to the hospital's IPPS market basket update 
(APU) for failing to meeting all Hospital IQR Program requirements.
    eCQM validation is different, because the accuracy of eCQM data 
submitted for validation (as measured by the agreement rate) does not 
currently affect a hospital's payment determination as described in the 
FY 2017 IPPS/LTCH PPS final rule (81 FR 57181). As finalized in the FY 
2018 IPPS/LTCH PPS final rule (82 FR 38398 through 38399), selected 
hospitals must submit eight cases, per self-selected quarter to 
complete eCQM data validation. Because the reporting quarter is self-
selected, validation occurs on an annual basis using all 8 cases that 
are submitted. For hospitals to receive their full APU, they must 
provide 75 percent of requested eCQM medical records in a timely and 
complete manner (82 FR 38398 through 82 FR 38401). Hospitals receive 
eCQM validation results through email communications on an annual 
basis.\474\
---------------------------------------------------------------------------

    \474\ https://qualitynet.org/inpatient/data-management/ecqm-data-validation.
---------------------------------------------------------------------------

(2) Proposed Weighted Scoring
    To support the transition to a combined validation process for both 
chart-abstracted measures and eCQMs, we are proposing to provide one 
combined validation score starting with validation affecting the FY 
2024 payment determination and for subsequent years. Specifically, this 
single score would reflect a weighted combination of a hospital's 
validation performance for chart-abstracted measures and eCQMs. Since 
eCQMs are not currently validated for accuracy, we propose that the 
eCQM portion of the combined agreement rate would be multiplied by a 
weight of zero percent and chart abstracted measure agreement rate 
would be weighted at 100 percent for validation affecting the FY 2024 
payment determination and subsequent years (i.e., starting with the CY 
2021 discharge data submitted for FY 2023 payment determination and 
validation affecting the FY 2024 payment determination). The agreement 
rate and associated confidence interval would be calculated based on 
the validation data collected from each hospital for each fiscal year. 
The validation score associated with the combined agreement rate would 
be the upper bound of the calculated confidence interval. For more 
detailed information on the confidence interval, please refer to the 
Chart-Abstracted Data validation page of QualityNet: https://www.qualitynet.org/inpatient/data-management/chart-abstracted-data-validation. Under this proposal however, in the absence of an eCQM 
score that reflects reporting accuracy, hospitals would continue to be 
required to successfully submit at least 75 percent of the requested 
medical records for eCQM validation. Submission of requested medical 
records at or in excess of this threshold would meet the eCQM 
validation requirements. Under this proposal, hospitals would continue 
to receive their total validation score annually.
    As we move forward, we will determine when eCQM measure data are 
ready for accuracy scoring for validation. In this proposed rule, we 
are proposing to progressively increase the number of eCQM validation 
cases (from 8 cases for validation affecting FY 2023 payment 
determination, to 16 cases for validation affecting FY 2024 payment 
determination, to 24 cases for validation affecting FY 2025 payment 
determination, and to 32 cases for validation affecting FY 2026 payment 
determination and beyond). The additional cases collected and validated 
under the proposal will support the calculation of a statistically 
robust validation score. We anticipate increasing the eCQM validation 
score weighting in the future to include eCQM measures accuracy as part 
of the overall validation score. Any adjustments in the weighting and 
scoring would be proposed through future rulemaking. We invite public 
comments on our proposal.
g. Summary
    Our validation proposals are summarized in the following table:

[[Page 32845]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.209

h. Educational Review Process
(1) Chart-Abstracted Measures
    In the FY 2015 IPPS/LTCH PPS final rule (79 FR 50260), we 
established an educational review process for validation of chart-
abstracted measures. The process was subsequently updated in the FY 
2018 IPPS/LTCH PPS final rule (82 FR 38402 through 38403). In this 
process, hospitals may request an educational review if they believe 
they have been scored incorrectly or if they have questions about their 
validation results. As noted above, approximately 4 months after each 
quarter's validation submission deadline, validation results for chart-
abstracted measures for the quarter are posted on the QualityNet Secure 
Portal (also referred to as the Hospital Quality Reporting (HQR) 
System). Hospitals have 30 calendar days following the date validation 
results are posted to identify any potential CDAC or CMS errors for the 
first three quarters of validation results and contact the Validation 
Support Contractor (VSC) to request an educational review. Upon receipt 
of an educational review request, we review the data elements 
identified in the request, as well as the written justifications 
provided by the hospital. We provide the results of an educational 
review, outlining the findings of whether the scores were correct or 
incorrect, to the requesting hospital through a CMS-approved secure 
file transmission process (82 FR 38402). We note that at the end of the 
year, the validation score is calculated by combining the data from all 
four quarters into one agreement rate for each hospital.
    If an educational review yields incorrect CMS validation results 
for chart-abstracted measures, we use the corrected quarterly score, as 
recalculated during the educational review process to compute the final 
confidence interval (82 FR 38402). We use the revised score identified 
through an educational review when determining whether or not a 
hospital failed validation (82 FR 38402). Corrected scores, however, 
are only used if they indicate that the hospital performed more 
favorably than previously determined (82 FR 38402).\475\ We note that 
corrections only occur to calculations, not to the underlying measure 
data (82 FR 38402). A detailed description of the educational review 
process for validation of chart-abstracted measures is also available 
on the QualityNet website. We are not proposing any changes to our 
educational review process for chart-abstracted measures.
---------------------------------------------------------------------------

    \475\ Hospitals may still request reconsideration even if an 
educational review determined that a hospital was scored correctly. 
Hospitals that fail Hospital IQR Program requirements, including 
validation, may request reconsideration after receiving notification 
of their payment determination for the applicable fiscal year.
---------------------------------------------------------------------------

(2) Proposed Educational Review Process for eCQMs for Validation 
Affecting the FY 2023 Payment Determination and Subsequent Years
    In this proposed rule, we are proposing to extend a similar process 
established for chart-abstracted measure validation educational reviews 
to eCQM validation beginning with validation affecting the FY 2023 
payment determination and subsequent years (that is, starting with data 
from CY 2020). While we are proposing to combine the hospital pool and 
generate a single score for both eCQM and chart-abstracted measure data 
validation, these underlying processes would still remain distinct 
because the underlying data being validated is distinct. We believe 
that expanding the educational review process to incorporate eCQMs 
would allow hospitals to better understand the processes and data for 
eCQM validation. Under our proposal, hospitals may request an 
educational review if they believe they have been scored incorrectly or 
if they have questions about their validation of eCQMs. Specifically, a 
hospital would have 30 calendar days to contact the VSC to solicit a 
written explanation of the validation performance following the date 
that the validation results were provided to the hospital. Because 
hospitals receive eCQM validation results on an annual basis, however, 
they would have the opportunity to request an educational review once 
annually following receipt of their results. Upon receipt of an 
educational review request, we would review the requested data elements 
and written justifications provided by the hospital. We are also 
proposing to provide the results of the eCQM validation educational 
review to the requesting hospital, outlining the findings of whether 
the scores were correct or incorrect, through a CMS-approved secure 
file transmission process.
    We invite public comment on our proposal.
11. Data Accuracy and Completeness Acknowledgement (DACA) Requirements
    We refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 
53554) for previously adopted details on DACA requirements. We are not 
proposing any changes to this policy in this proposed rule.
12. Public Display Requirements
a. Background
    Section 1886(b)(3)(B)(viii)(VII) of the Act requires the Secretary 
to report quality measures of process, structure, outcome, patients' 
perspectives on care, efficiency, and costs of care that relate

[[Page 32846]]

to services furnished in inpatient settings in hospitals on the 
internet website of CMS. Section 1886(b)(3)(B)(viii)(VII) of the Act 
also 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 and/or its successor website after a 30-day preview period (78 
FR 50776 through 50778). 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), the 
FY 2018 IPPS/LTCH PPS final rule (82 FR 38403 through 38409), and the 
FY 2019 IPPS/LTCH PPS final rule (83 FR 41538 through 41539) 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, or its successor website, 
and on occasion are reported on other CMS websites such as: https://
data.medicare.gov, or its successor website.
b. Proposed Public Reporting of eCQM Data
(1) Background
    The Hospital IQR Program initiated voluntary reporting of eCQM data 
in the FY 2014 IPPS/LTCH PPS final rule, for the CY 2014 reporting 
period/FY 2016 payment determination (78 FR 50807 through 50810). At 
that time, we noted our belief that electronic collection and reporting 
of quality data using health IT would ultimately simplify and 
streamline quality reporting (78 FR 50807). Based on our ongoing 
experience with eCQMs, we continue to believe this. We also believe 
that electronic reporting furthers CMS and HHS policy goals to promote 
quality through performance measurement and, in the long-term, will 
both improve the accuracy of the data and reduce reporting burden for 
providers. We expect that over time, hospitals will continue to 
leverage EHRs to capture, calculate, and electronically submit quality 
data, build and refine their EHR systems, and gain more familiarity 
with reporting eCQM data (78 FR 50807).
    Since the FY 2014 IPPS/LTCH PPS final rule, the Hospital IQR 
Program's eCQM reporting requirements have evolved. In the FY 2016 
IPPS/LTCH PPS final rule, the reporting of eCQM data became required 
(rather than voluntary) under the Hospital IQR Program, beginning with 
the CY 2016 reporting period/FY 2018 payment determination (80 FR 49693 
through 49698). At the time of publication of this proposed rule, 
hospitals will have completed the reporting of eCQM data for the CY 
2019 reporting period/FY 2021 payment determination by the March 2, 
2020 submission deadline, the fourth year of required eCQM reporting.
    Most recently, in the FY 2020 IPPS/PPS LTCH final rule, we 
finalized the Hospital IQR Program's reporting requirements for the CY 
2022 reporting period/FY 2024 payment determination, to require that 
hospitals report one self-selected calendar quarter of data for: (a) 
Three self-selected eCQMs; and (b) the Safe Use of Opioids--Concurrent 
Prescribing eCQM (Safe Use eCQM), for a total of four eCQMs (84 FR 
42503). We refer readers to section VIII.A.10.e of the preamble of this 
proposed rule where we discuss our proposal to progressively increase 
the quarters of eCQM data, beginning with the CY 2022 reporting period/
FY 2024 payment determination.
    As eCQM reporting for the Hospital IQR Program continues to advance 
and hospitals have gained several years of experience with successfully 
collecting and reporting eCQM data, we believe it is important to 
further our policy goals of leveraging EHR-based quality measure 
reporting in order to incentivize data accuracy, promote 
interoperability, increase transparency, and reduce long-term provider 
burden by providing public access to the reported eCQM data. 
Originally, as we incorporated eCQMs into the Hospital IQR Program on a 
voluntary basis, we stated that we would need time to assess the data 
submitted by hospitals to determine the optimal timing and transition 
strategy for publicly reporting eCQM data (78 FR 50813). We finalized 
that eCQM data reported for the Hospital IQR Program would only be 
publicly reported if we determine the data are accurate enough to be 
reported (78 FR 50818). In the FY 2016 IPPS/LTCH PPS final rule when we 
made the reporting of eCQMs required rather than voluntary, we stated 
that any data submitted electronically would not be posted on the 
Hospital Compare website at that time, and that we would address public 
reporting in future rulemaking, after the conclusion and assessment of 
the validation pilot (80 FR 49698).
    The eCQM validation pilot was completed in 2015 and was addressed 
in the FY 2017 IPPS/LTCH PPS final rule (81 FR 57173 through 57174). 
Building upon the validation pilot, we adopted procedures to begin the 
required validation of eCQM data under the Hospital IQR Program in the 
FY 2017 IPPS/LTCH PPS final rule, and stated that the first validation 
of eCQM data would occur in spring 2018 to validate data from the CY 
2017 reporting period. As finalized in the FY 2017 IPPS/LTCH PPS final 
rule (81 FR 57180 through 57181), the validation process for eCQMs was 
established as an incremental process to ensure hospitals are able to 
successfully report the medical records that correspond to the data 
used for eCQM measure reporting. eCQM validation scoring is different, 
because the accuracy of eCQM data submitted for validation currently 
does not currently affect a hospital's payment determination. The eCQM 
validation process was established as an incremental process to ensure 
hospitals are able to successfully report the medical records that 
correspond to the data used for eCQM measure reporting.
    Our validation of eCQM data submitted from CY 2017 and CY 2018 has 
demonstrated that hospitals are capable of reporting eCQM measure data. 
Since the eCQM validation pilot, we have completed eCQM data validation 
from the CY 2017 reporting period and the CY 2018 reporting period, and 
worked with stakeholders to develop a more fulsome understanding of the 
eCQM data submitted. Our review of the CY 2017 and CY 2018 eCQM data 
submitted for validation included an analysis of over 1,200 patient 
episodes of care submitted by over 190 hospitals per reporting period. 
The majority of hospitals successfully submitted validation records 
within the timeline requested. The results demonstrate that hospitals 
report the majority of eCQM data with agreement rates of 80 percent or 
better. Agreement rates are the ratios which reflect the frequency at 
which a hospital's electronically reported medical record data matches 
results adjudicated by the Clinical Data Abstraction Center (CDAC). CMS 
calculates an agreement rate for each hospital. Our analysis 
demonstrates that hospitals continue to improve the accuracy of 
identifying patients appropriate for measure denominator inclusion, and 
tend to accurately report a wide variety of data types, including 
diagnoses, medications, and laboratory values. [Based on our review of 
the CY 2017 and CY 2018 eCQM data submitted

[[Page 32847]]

for validation, and on the finding that the majority of eCQM data was 
reported with agreement rates of 80 percent or better, we believe eCQM 
data are accurate enough to be publically reported in aggregate. 
Because eCQM validation examines eCQMs on a chart-by-chart basis (as 
opposed to in aggregate) and affects payment, in section VIII.A.10.f. 
above, we propose that eCQM validation continue to be based on 
successful submission of at least 75 percent of the requested medical 
records for eCQM validation instead of reporting accuracy. In the 
interests of providing data to the public as quickly as possible, and 
as expressed in more detail below, we are proposing to begin public 
reporting of eCQM data.
(2) Proposal To Begin Publicly Reporting eCQM Data Beginning With the 
eCQM Data Reported by Hospitals for the CY 2021 Reporting Period/FY 
2023 Payment Determination
    Based on our validation of eCQM data submitted from CY 2017 and CY 
2018, and in alignment with our goal to encourage data accuracy and 
transparency, in this proposed rule, we are proposing to begin publicly 
reporting eCQM data beginning with the eCQM data reported by hospitals 
for the CY 2021 reporting period/FY 2023 payment determination and for 
subsequent years. These data could be made available to the public as 
early as the fall of 2022. We refer readers to section VIII.A.10.f.(2) 
of the preamble to this proposed rule for a discussion of proposed 
chart-abstracted measure and eCQM validation weighted scoring.
    As with other Hospital IQR Program measures, hospitals would have 
the opportunity to review their data before they are made public, as 
required by section 1886(b)(3)(B)(viii)(VII) of the Act, during a 30-
day preview period in accordance with previously finalized policies (76 
FR 51608). Measure data, including eCQM data, are published on the 
Hospital Compare and/or https://data.medicare.gov websites or successor 
websites.
    We plan to continue assessing the eCQM data submitted in future 
years and will continue working to ensure that hospitals receive 
feedback on their validation results aimed at improving transparency 
and reporting accuracy. We are committed to providing data to patients, 
consumers, and providers as quickly as possible so they are empowered 
to make informed decisions about their own, and their patients' 
healthcare.
    Understanding that it will be important for hospitals and 
stakeholders alike to know how to find the eCQM data once they are 
publicly posted, we would convey any updates to the posting locations 
through routine communication channels to hospitals, vendors, and QIOs, 
including, but not limited to, issuing memos, emails, and notices on 
the QualityNet and eCQI Resource Center websites.
    We also refer readers to section VIII.D. of the preamble of this 
proposed rule for a similar proposal in the Medicare Promoting 
Interoperability Program. We are soliciting public comment on this 
proposal.
13. Reconsideration and Appeal Procedures
    We refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 
51650 through 51651), the FY 2014 IPPS/LTCH PPS final rule (78 FR 
50836), and 42 CFR 412.140(e) for details on reconsideration and appeal 
procedures for the FY 2017 payment determination and subsequent years. 
We are not proposing any changes to this policy in this proposed rule.
14. Hospital IQR Program Extraordinary Circumstances Exceptions (ECE) 
Policy
    We refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 
51651 through 51652), the FY 2014 IPPS/LTCH PPS final rule (78 FR 50836 
through 50837), the FY 2015 IPPS/LTCH PPS final rule (79 FR 50277), the 
FY 2016 IPPS/LTCH PPS final rule (80 FR 49713), the FY 2017 IPPS/LTCH 
PPS final rule (81 FR 57181 through 57182), the FY 2018 IPPS/LTCH PPS 
final rule (82 FR 38409 through 38411), and 42 CFR 412.140(c)(2) for 
details on the current Hospital IQR Program ECE policy. We also refer 
readers to the QualityNet website at: http://www.QualityNet.org/ for 
our current requirements for submission of a request for an exception. 
We are not proposing any changes to this policy in this proposed rule.

B. Proposed Changes to the PPS-Exempt Cancer Hospital Quality Reporting 
(PCHQR) Program

1. Background
    The PPS-Exempt-Cancer Hospital Quality Reporting (PCHQR) Program is 
authorized by section 1866(k) of the Act, and it applies to hospitals 
described in section 1866(d)(1)(B)(v) (referred to as ``PPS-Exempt 
Cancer Hospitals'' or ``PCHs''). Under the PCHQR Program, PCHs must 
submit to the Secretary data on quality measures with respect to a 
program year in a form and manner, and at a time, specified by the 
Secretary.
    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); the FY 2018 IPPS/LTCH PPS final rule (82 FR 38411 
through 38425); the FY 2019 IPPS/LTCH PPS final rule (83 FR 41609 
through 41624); CY 2019 OPPS/ASC final rule with comment period (83 FR 
59149 through 59154); and the FY 2020 IPPS/LTCH PPS final rule (84 FR 
42509 through 42524).
    In this proposed rule, we are proposing to incorporate refinements 
to two existing measures in the PCHQR Program measure set--the 
Catheter-Associated Urinary Tract Infection (CAUTI) Outcome Measure 
(NQF #0138) and the Central Line-Associated Bloodstream Infection 
(CLABSI) Outcome Measure (NQF #0139). While we are not proposing to add 
any new measures or remove any existing measures, we continue to assess 
the PCHQR Program measure set's alignment with the Meaningful Measures 
Initiative, which is discussed in more detail in I.A.2. of the preamble 
of the FY 2019 IPPS/LTCH PPS final rule (83 FR 41147 through 41148).
2. Summary of PCHQR Program Measures for the FY 2023 Program Year
    The table in this section of this rule summarizes the PCHQR Program 
measure set for the FY 2023 program year.

[[Page 32848]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.210

3. Proposed Refinements to the Catheter-Associated Urinary Tract 
Infection (CAUTI) Outcome Measure (NQF #0138) and the Central Line-
Associated Bloodstream Infection (CLABSI) Outcome Measure (NQF #0139) 
Beginning With the FY 2023 Program Year
a. Background
    In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53556 through 
53559), we adopted the Catheter-associated Urinary Tract Infection 
(CAUTI) (NQF #0138) and Central line-associated Bloodstream Infection 
(CLABSI) (NQF #0139) measures for use in the PCHQR Program beginning 
with the FY 2014 program year, and we refer readers to this rule for a 
detailed discussion of these measures. In the FY 2019 IPPS/LTCH PPS 
proposed rule (83 FR 20503), we proposed to remove both measures from 
the program because we believed that removing the measures would reduce 
program costs and complexities associated with the use of these data by 
patients in decision-making. We stated that we believed the costs, 
coupled with the high technical and administrative burden on PCHs 
associated with collecting and reporting the measure data, outweighed 
the benefits of their continued use. We further stated that it had 
become difficult for CMS to publicly report data on these measures due 
to the low volume of data produced and reported by the small number of 
PCHs that participate in the PCHQR

[[Page 32849]]

Program, and that we lacked an appropriate methodology to publicly 
report these data. For these reasons, we believed that the measures 
should be removed beginning with the FY 2021 program year under measure 
removal Factor 8: The costs associated with the measures outweighed the 
benefit of their continued use in the program.
    However, after considering the comments we had received on this 
proposal and other updated information, in the CY 2019 OPPS/ASC final 
rule (83 FR 59150), we decided to retain both the CAUTI and CLABSI 
measures in the PCHQR Program. We stated that since the time we made 
our proposal, we had conducted our own analyses regarding the continued 
use of the CAUTI and CLABSI measures using updated CDC data. We also 
stated that although the CDC had previously believed that oncology unit 
locations, including those in PCHs, had a higher incidence of 
infections than other types of units in acute care hospitals, the CDC 
now believes, after controlling for location type, that oncology unit 
locations in PCHs do not have a higher incidence of infection than 
oncology units within other acute care hospitals. We stated that the 
CDC's updated analysis also produced a consistent finding that cancer 
hospital status was not a significant risk factor in any of the device-
associated HAI risk models, including those used for CAUTI and CLABSI. 
Lastly, we stated that we believe these results indicate that reporting 
PCH CAUTI and CLABSI performance measure data is just as important as 
reporting acute care hospital CAUTI and CLABSI performance measure data 
(83 FR 59151). Based on this updated information, as well as the public 
comments, we concluded that the importance of emphasizing patient 
safety in quality care delivery justified retaining the CAUTI and 
CLABSI measures in the PCHQR Program (83 FR 59151).
    We also noted in the CY 2019 OPPS/ASC PPS final rule that the CAUTI 
and CLABSI measure specifications had been recently updated to use new 
standard infection ratio (SIR) calculations that can be applied to 
cancer hospitals, including PCHs. We noted that this updated SIR 
calculation methodology is different than the methodology we are 
currently using to calculate the CAUTI and CLABSI measures. 
Additionally, the use of raw location-stratified rates in the current 
methodology had created a concern that the CAUTI and CLABSI data 
calculated under the current methodology might appear to inaccurately 
show lower performance among PCHs than the performance reported by 
acute care hospitals that are reporting CAUTI and CLABSI data using the 
updated methodology (83 FR 59151). We stated that we believed the 
updated methodology addresses this concern because the updates include 
rates that are stratified by patient care locations within PCHs, 
without the use of predictive models or comparisons in the rate 
calculations. We also stated that we intended to propose to adopt these 
updated versions of the CAUTI and CLABSI measures, and that we would 
work closely with the CDC to assess the updated risk adjusted versions 
of these measures (83 FR 59151).
b. Proposed Updates to the CAUTI and CLABSI Measures
    In this proposed rule, we are proposing to refine the CAUTI and 
CLABSI measures by adopting the updated SIR calculation methodology 
developed by the CDC that calculates rates that are stratified by 
patient care locations within PCHs, without the use of predictive 
models or comparisons in the rate calculations.
(1) Description of the CDC Re-Baselining Efforts
    The CDC's National Healthcare Safety Network (NHSN) uses 
healthcare-associated infection (HAI) incidence data from a prior time 
period and a standard population of facilities that report data to the 
NHSN (such as all healthcare facilities of a specified type) to 
establish a HAI baseline for those facilities, including a HAI baseline 
for CAUTI and CLABSI.\476\ The NHSN then uses that baseline to 
calculate the SIR. For both of these measures, the SIR is calculated as 
a comparison of the actual number of HAIs reported by a facility with 
the number that would be predicted by the HAI baseline.\477\
---------------------------------------------------------------------------

    \476\ Centers for Disease Control and Prevention. ``Paving Path 
Forward: 2015 Rebase line.'' Available at: https://www.cdc.gov/nhsn/2015rebaseline/index.html.
    \477\ Ibid.
---------------------------------------------------------------------------

    In 2016, the CDC used 2015 HAI incidence data to update both the 
source of aggregate data and the risk adjustment methodology used to 
create the HAI baselines. As a result, the CDC established new HAI 
baselines for purposes of calculating the SIRs used to calculate HAI 
measures, including the CAUTI and CLABSI measures.\478\ The CDC's 
decision to use 2015 data was multifactorial and relied partially on 
its implementation of updated surveillance protocols and definitions as 
well as increased reporting of certain HAI types by additional 
healthcare facility types.\479\
---------------------------------------------------------------------------

    \478\ Ibid.
    \479\ Summary of CDC's Rebaseline Analysis of NHSN HAI Data. 
Updated September 7, 2018.
---------------------------------------------------------------------------

    During its re-baselining effort, the CDC determined that it could 
generate HAI baselines that produce more accurate SIR calculations for 
the 17 hospitals that enroll in NHSN as facility type ``HOSP-ONC'' (11 
PCHs and 6 other hospitals that classify themselves as cancer hospitals 
but are not PCHs for purposes of Medicare) by standardizing the new HAI 
baselines across infection type and facility type.\480\ Therefore, the 
CDC created a risk adjustment model for acute care hospitals and 
determined that it could include the 17 cancer hospitals that in that 
risk adjustment model because it found that cancer hospital status was 
not a significant risk factor that would preclude their inclusion.\481\
---------------------------------------------------------------------------

    \480\ Ibid.
    \481\ Ibid.
---------------------------------------------------------------------------

    The CDC also evaluated what additional oncology-specific patient 
locations (for example, hematology/oncology ward, medical oncology ICU) 
should be adjusted for when deriving SIR calculations for hospitals in 
the acute care risk adjustment model. The CDC considered this because 
examining patient care location allows for the assessment of which 
patient populations are at higher risk for CAUTI and CLABSI incidences. 
Further, stakeholders had previously raised concerns that the omission 
of a risk adjustment for oncology-specific patient care locations in 
the SIR calculations could inaccurately appear to show lower 
performance on the HAI measures, including CLABSI and CAUTI, by PCHs 
and other cancer hospitals than other acute care hospitals; adjusting 
for oncology-specific patient locations as a part of the new risk model 
mitigates this concern. When the CDC stratified by location within the 
acute care hospital risk adjustment model, it found that in comparison 
to non-oncology-specific patient locations, the oncology-specific 
locations, particularly those designated as oncology units,\482\ 
produced statistically significant differences in HAI measure 
performance. As a result, the CDC further updated the acute care risk 
adjustment model to stratify the HAI baselines by oncology-specific 
location types.\483\
---------------------------------------------------------------------------

    \482\ A ward is a floor or section of a hospital or outpatient 
clinic where cancer patients are treated.
    \483\ Summary of CDC's Rebaseline Analysis of NHSN HAI Data. 
Updated September 7, 2018.

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

[[Page 32850]]

(2) CAUTI and CLABSI Results Using the Updated HAI Baselines That 
Incorporate New Risk-Adjustment
    The CDC tested the CAUTI and CLABSI measures based on the updated 
HAI baselines that incorporate the new risk adjustment described above. 
According to the CDC's calculation methodology, when assessing the 
performance results for the CAUTI or CLABSI measure, a p-value of 0.05 
or less was noted to be statistically significant.\484\ They noted that 
when assessed based on the adjustment for oncology unit, both the CAUTI 
and CLABSI measures yielded p-values of <0.0001.\485\ This means that 
within the acute care hospital risk adjustment model, the 
categorization of a patient care location as an oncology unit is a 
statistically significant predictor of CAUTI and CLABSI incidence. 
Given that the majority of reporting locations within PCHs would be 
classified as oncology units, the application of this additional risk 
adjustment by location within the acute care hospital risk adjustment 
model will result in a more accurate assessment of the incidence of 
CAUTIs and CLABSIs within PCHs.
---------------------------------------------------------------------------

    \484\ NHSN's Guide to the SIR-Updated March 2019. Available at: 
https://www.cdc.gov/nhsn/2015rebaseline/index.html.
    \485\ Ibid.
---------------------------------------------------------------------------

(3) Measure Applications Partnership Analysis of the Refinements to the 
CAUTI and CLABSI Measures
    In compliance with section 1890A(a)(2) of the Act, we included the 
updated versions of the CAUTI and CLABSI outcome measures in a publicly 
available document entitled ``2019 Measures Under Consideration 
Spreadsheet.'' \486\ This is a list of quality and efficiency measures 
under consideration for use in various Medicare programs, which the 
Measure Applications Partnership (MAP) reviews. The MAP supported the 
use of both refined measures in the PCHQR Program for rulemaking.\487\
---------------------------------------------------------------------------

    \486\ 2019 Measures Under Consideration. Information available 
at: http://www.qualityforum.org/Project_Pages/MAP_Hospital_Workgroup.aspx.
    \487\ 2020 Considerations for Implementing Measures Draft 
Report--Hospitals. Available at: http://www.qualityforum.org/map/.
---------------------------------------------------------------------------

    Regarding the CAUTI measure, the MAP indicated that because CAUTIs 
are the most common HAI, hospitals should continue working to reducing 
their incidence and prevalence across all inpatient settings. The MAP 
also determined that even though CAUTI is a chart-abstracted measure 
that is burdensome to collect, the benefit of collecting data on this 
measure outweighs that cost.\488\ In addition, the MAP acknowledged it 
is imperative to evaluate CAUTI incidence in all inpatient settings, 
including cancer hospitals. The revised version of this measure was 
endorsed by the National Quality Forum on October 23, 2019.\489\ We 
refer readers to NQF's Final Report--Spring 2019 Cycle \490\ for a more 
detailed discussion of this measure.
---------------------------------------------------------------------------

    \488\ Ibid.
    \489\ Memo CSAC Meeting--Spring 2019 Cycle, available at: http://www.qualityforum.org/ProjectMaterials.aspx?projectID=86057.
    \490\ Final Report--Spring 2019 Cycle, available at: http://www.qualityforum.org/ProjectMaterials.aspx?projectID=86057.
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    For the CLABSI measure, the MAP also determined that even though 
the measure is chart-abstracted and burdensome to collect, the benefit 
of collecting data on this measure outweighs the cost.\491\ The MAP 
further noted that this measure is pertinent in the healthcare domain 
of patient safety and suggested that the CDC consider the differences 
in types of cancer and/or differences in types of cancer treatments 
when assessing the measure's performance in the future.\492\ Like the 
CAUTI measure, we note that the revised version of this measure was 
endorsed by the NQF on October 23, 2019.\493\ We refer readers to NQF's 
Final Report--Spring 2019 Cycle \494\ for a more detailed discussion of 
this measure.
---------------------------------------------------------------------------

    \491\ 2020 Considerations for Implementing Measures Draft 
Report--Hospitals. Available at: http://www.qualityforum.org/map/.
    \492\ Ibid.
    \493\ Memo CSAC Meeting--Spring 2019 Cycle, available at: http://www.qualityforum.org/ProjectMaterials.aspx?projectID=86057.
    \494\ Final Report--Spring 2019 Cycle, available at: http://www.qualityforum.org/ProjectMaterials.aspx?projectID=86057.
---------------------------------------------------------------------------

c. Summary
    We are proposing to refine the CAUTI and CLABSI measures by 
adopting the updated measures specifications that use the new SIR 
calculation methodology, which calculates measure rates that are 
stratified by patient care locations within PCHs. We believe that it is 
important to continue to measure CAUTI and CLABSI incidence because of 
the implications these two measures have in the patient safety domain 
of healthcare. We also believe it is important to provide stratified 
performance results where appropriate for the cohort of patients with 
cancer which is why we believe that applying the CDC's update of the 
risk-adjustment model (which will ultimately yield more precise SIR 
results) is appropriate for the CAUTI and CLABSI measures. 
Implementation of the refined, stratified measures will make the 
measures more representative of the quality of care provided at PCHs, 
particularly when performance rates are compared to other acute care 
hospitals. Further, stratified performance results will more accurately 
demonstrate the incidence of CAUTI and CLABSI for comparison among 
PCHs. In addition, implementation of the refined versions would also 
address previous stakeholder requests that a statistically significant 
method for public reporting of these measures be utilized. Lastly, 
implementing the refined versions of these measures means that the 
PCHQR Program would be utilizing the most recently NQF-endorsed 
versions of these measures.
    We are inviting public comment on our proposal to refine the 
Catheter-associated Urinary Tract Infection (CAUTI) (NQF #0138) and 
Central line-associated Bloodstream Infection (CLABSI) (NQF #0139) 
measures to utilize the updated HAI baselines that incorporate an 
updated risk adjustment approach, as developed by the CDC, for the FY 
2023 program year and subsequent years.
4. Maintenance of Technical Specifications for Quality Measures
    We maintain and periodically update technical specifications for 
the PCHQR Program measures. The specifications may be found on the 
QualityNet website at https://www.qualitynet.org/pch. 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. We are 
not proposing any changes to our processes for maintaining technical 
specifications for PCHQR Program measures in this proposed rule.
5. 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 going to be made public with 
respect to that 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' perspectives 
on care, efficiency, and costs of care that relate to services 
furnished in such hospitals on the CMS website.

[[Page 32851]]

    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 2020 IPPS/LTCH PPS final rule (84 FR 42520 through 
42523), we finalized that we would begin to publicly display data on a 
number of PCH measures as soon as is practicable due to planned website 
improvements that we stated could delay our ability to begin the public 
display. In October 2019, we began to publicly report data on the 
following four HAI measures: (1) Specific Surgical Site Infection (SSI) 
Outcome Measure (NQF #0753); (2) NHSN Facility-wide Inpatient Hospital-
onset Methicillin resistant Staphylococcus aureus Bacteremia Outcome 
Measure (NQF #1716); (3) NHSN Facility-wide Inpatient Hospital-onset 
Clostridium difficile Infection (CDI) Outcome Measure (NQF #1717); and 
(4) NHSN Influenza Vaccination Coverage Among Healthcare Personnel (NQF 
#0431).
    In the table that follows, we summarize our current public display 
requirements for the PCHQR Program measures.
[GRAPHIC] [TIFF OMITTED] TP29MY20.211

b. Proposal To Publicly Display the Refined Versions of the CAUTI and 
CLABSI Measures
    As described in section VIII.B.3.b. of the preamble of this 
proposed rule, we are proposing to adopt refined versions of the CAUTI 
and CLABSI measures in the PCQHR Program beginning with the FY 2023 
program year. Should this proposal be finalized as proposed, we propose 
to begin publicly reporting the refined versions of the CAUTI and 
CLABSI measures in the fall of 2022 using CY 2021 data. We will not 
publicly report the current versions of those measures because as 
described above, the refined versions of the measures more accurately 
capture the quality of care furnished at PCHs. We welcome comment on 
this proposal.
6. Form, Manner, and Timing of Data Submission
    Data submission requirements and deadlines for the PCHQR Program 
are posted on the QualityNet website. We are not proposing any updates 
to our previously finalized data submission requirements and deadlines 
in this proposed rule.
7. Extraordinary Circumstances Exceptions (ECE) Policy Under the PCHQR 
Program
    We refer readers to the FY 2019 IPPS/LTCH PPS final rule (83 FR 
41623 through 41624), for a discussion of the Extraordinary 
Circumstances Exceptions (ECE) policy under the PCHQR Program. We are 
not proposing any changes to this policy in this proposed rule.

C. Long-Term Care Hospital Quality Reporting Program (LTCH QRP)

1. Background
    The Long-Term Care Hospital Quality Reporting Program (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 must reduce 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 
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

[[Page 32852]]

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), the FY 2018 IPPS/LTCH PPS final rule 
(82 FR 38425 through 38426), the FY 2019 IPPS/LTCH PPS final rule (83 
FR 41624 through 41634), and the FY 2020 IPPS/LTCH PPS final rule (84 
FR 42524 through 42591).
2. Quality Measures Currently Adopted for the FY 2022 LTCH QRP
    The LTCH QRP currently has 17 measures for the FY 2022 LTCH QRP, 
which are set out in the following table:
[GRAPHIC] [TIFF OMITTED] TP29MY20.212

    Furthermore, LTCHs are required to report additional standardized 
patient assessment data beginning with the FY 2022 LTCH QRP. For more 
information on the reporting of this additional standardized patient 
assessment data, we refer readers to the FY 2020 IPPS/LTCH PPS final 
rule (84 FR 42536 through 42590).
    There are no proposals or updates in this proposed rule for the 
LTCH Quality Reporting Program.
3. Form, Manner, and Timing of Data Submission Under the LTCH QRP
    We refer readers to the regulations at Sec.  412.560(b) for 
information regarding the current policies for reporting LTCH QRP data.
    For more details about the required reporting periods of measures 
or standardized patient assessment data during the first and subsequent 
years upon adoption, please refer to the FY 2020 IPPS/LTCH PPS final 
rule (84 FR 24588 through 24590).
5. Policies Regarding Public Display of Measure Data for the LTCH QRP
    We are not proposing any new policies regarding the public display 
of measure data at this time.

D. Proposed Changes to the Medicare and Medicaid Promoting 
Interoperability Programs

1. Background
a. Statutory Authority for the Medicare and Medicaid Promoting 
Interoperability Programs
    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 were available to eligible hospitals and CAHs 
for certain payment years (as authorized under sections 1886(n) and 
1814(l) of the Act, respectively) if they successfully demonstrated 
meaningful use of CEHRT, which included reporting on eCQMs using CEHRT. 
Incentive payments were available to Medicare Advantage (MA) 
organizations under section 1853(m)(3) of the Act for certain 
affiliated hospitals that successfully demonstrate meaningful use of 
CEHRT. In accordance with the timeframe set forth in the statute, these 
incentive payments under Medicare generally are no longer available, 
except for Puerto Rico eligible hospitals. For more information on the 
Medicare incentive payments available to Puerto Rico eligible 
hospitals, we refer readers to the FY 2019 IPPS/LTCH PPS final rule (83 
FR 41672 through 41675).
    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 EHR 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

[[Page 32853]]

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. We previously established, however, that in accordance with 
section 1903(t)(5)(D) of the Act, in no case may any Medicaid eligible 
hospital receive an incentive after 2021 (Sec.  495.310(f), 75 FR 
44319). Therefore, December 31, 2021 is the last date that States could 
make Medicaid Promoting Interoperability Program payments to Medicaid 
eligible hospitals (other than pursuant to a successful appeal related 
to 2021 or a prior year) (84 FR 42591 through 42592). For additional 
discussion or context around the discontinuation of the Medicaid 
Promoting Interoperability Program, we refer readers to the FY 2019 
IPPS/LTCH PPS final rule (83 FR 41676 through 41677) or the CY 2019 
PFS/QPP final rule (83 FR 59704 through 59706).
2. EHR Reporting Period
a. Proposed EHR Reporting Period in CY 2022 for Eligible Hospitals and 
CAHs
    Under the definitions of ``EHR reporting period'' and ``EHR 
reporting period for a payment adjustment year'' at 42 CFR 495.4, the 
EHR reporting period in CY 2021 is a minimum of a continuous 90-day 
period in CY 2021 for new and returning participants in the Promoting 
Interoperability Programs. Eligible hospitals and CAHs may select an 
EHR reporting period of a minimum of any continuous 90-day period in CY 
2021 (from January 1, 2021 through December 31, 2021).
    For CY 2022, we are proposing an EHR reporting period of a minimum 
of any continuous 90-day period in CY 2022 for new and returning 
participants (eligible hospitals and CAHs) in the Medicare Promoting 
Interoperability Program. We believe that adopting a 90-day EHR 
reporting period in CY 2022 as in CY 2021 would be appropriate because 
it would provide programmatic consistency for hospital reporting. We 
are proposing corresponding changes to the definition of ``EHR 
reporting period for a payment adjustment year'' at 42 CFR 495.4. We 
are not proposing to define an EHR reporting period in CY 2022 for the 
Medicaid Promoting Interoperability Program because the program will 
end with CY 2021 in accordance with section 1903(t)(5)(D) of the Act 
(42 CFR 495.310(f)). For additional discussion or context around the 
discontinuation of the Medicaid Promoting Interoperability Program, we 
refer readers to the FY 2019 IPPS/LTCH PPS final rule (83 FR 41676 
through 41677) or the CY 2019 PFS/QPP final rule (83 FR 59704 through 
59706).
3. Proposed Changes to the Query of Prescription Drug Monitoring 
Program Measure Under the Electronic Prescribing Objective
a. Background
    In the FY 2019 IPPS/LTCH PPS final rule (83 FR 41648 through 
41656), we adopted two new opioid measures for the Electronic 
Prescribing objective, however, we changed certain policies related to 
those measures in the subsequent FY 2020 IPPS/LTCH PPS final rule (84 
FR 42593 through 42596): (1) Query of Prescription Drug Monitoring 
Program (PDMP), which is optional in CY 2019 and CY 2020 and worth 5 
bonus points each year; and (2) Verify Opioid Treatment Agreement, 
which was optional in CY 2019 but removed entirely from the program 
starting in CY 2020.
b. Query of PDMP Measure
    In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42595), we finalized 
that the Query of PDMP measure is optional and eligible for 5 bonus 
points in CY 2020. We have continued to receive substantial feedback 
from health IT vendors and hospitals that the flexibility currently 
included in the measure presents unintended challenges such as 
significant burden associated with IT system design and additional 
development needed to accommodate the measure and any future changes to 
it. Since publication of the FY 2020 IPPS/LTCH PPS final rule, 
stakeholders have continued to express concern that it is still too 
premature to require the Query of PDMP measure and score it based on 
performance in CY 2021.
    We agree with stakeholders that PDMPs are still maturing in their 
development and use. As stated by the Substance Abuse and Mental Health 
Services Administration (SAMHSA) in 2018, ``PDMPs operate independently 
within states and are not currently linked into a larger system; 
therefore, no comprehensive national PDMP prescription data are 
available. Moreover, there is no uniform way of accessing PDMP data 
across states, as data platforms differ by state.'' \495\
---------------------------------------------------------------------------

    \495\ https://www.edc.org/sites/default/files/uploads/pdmp-overview.pdf.
---------------------------------------------------------------------------

    Stakeholders also mentioned the challenge posed by the current lack 
of integration of PDMPs into the EHR workflow. Historically, health 
care providers have had to go outside of the EHR workflow in order to 
separately log in to and access the State PDMP. In addition, 
stakeholders noted the wide variation in whether PDMP data can be 
stored in the EHR. By integrating PDMP data into the health record, 
health care providers can improve clinical decision making by utilizing 
this information to identify potential opioid use disorders, inform the 
development of care plans, and develop effective interventions.
    ONC recently engaged in an assessment to better understand the 
current state of policy and technical factors impacting PDMP 
integration across States. This assessment explored factors like PDMP 
data integration, standards and hubs used to facilitate interstate PMDP 
data exchange, access permissions, and laws and regulations governing 
PDMP data storage. The assessment revealed ambiguous or non-existent 
policies regarding PDMP placement in health IT systems, interpretation 
of PDMP data, and PDMP access roles. Less than half of hospitals have 
reported integration of PDMP queries within their EHR workflows.\496\ 
In addition, variability in standards and hubs used to facilitate 
interstate PMDP data exchange, as well as to store and report PDMP 
data, contribute to the complexity of PDMPs.
---------------------------------------------------------------------------

    \496\ See also ONC analysis of 2017 AHA survey data at: https://www.healthit.gov/buzz-blog/health-it/new-data-show-nearly-one-third-of-hospitals-can-access-pdmp-data-within-their-ehr.
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    The SUPPORT for Patients and Communities Act, enacted in 2018, is 
an important investment in combating the opioid epidemic. Several of 
the provisions of the SUPPORT for Patients and Communities Act address 
opioid use disorder prevention, recovery, and treatment, including 
increased access to evidence-based treatment and follow-up care, 
through legislative changes specific to the Medicare and Medicaid 
programs. Specifically, with respect to PDMPs, the SUPPORT for Patients 
and Communities Act included new requirements and federal funding for 
PDMP enhancement, integration, and interoperability, and established 
mandatory use of PDMPs by certain Medicaid providers to help reduce 
opioid misuse and overprescribing and to help promote the overall 
effective prevention and treatment of opioid use disorder.
    Section 5042(a) of the SUPPORT for Patients and Communities Act 
added section 1944 to the Act, titled ``Requirements relating to 
qualified prescription drug monitoring programs and prescribing certain 
controlled

[[Page 32854]]

substances.'' Subsection (f) of section 1944 of the Act increased 
Medicaid FFP during FY 2019 and FY 2020 for certain state expenditures 
to design, develop, or implement a qualified PDMP (and to make 
subsequent connections to such program). As a condition of this 
enhanced FFP, states must meet the conditions described in section 
1944(f)(2) regarding agreements with contiguous states. There are 
currently a number of states that have used or are seeking to use, this 
enhanced FFP.
    Under section 1944(b)(1) of the Act, to be a qualified PDMP, a PDMP 
must facilitate access by a covered provider to the following 
information (at a minimum) about a covered individual, in as close to 
real-time as possible: Information regarding the prescription drug 
history of a covered individual with respect to controlled substances; 
the number and type of controlled substances prescribed to and filled 
for the covered individual during at least the most recent 12-month 
period; and the name, location, and contact information of each covered 
provider who prescribed a controlled substance to the covered 
individual during at the least the most recent 12-month period. Under 
section 1944(b)(2) of the Act, a qualified PDMP must also facilitate 
the integration of the information described in section 1944(b)(1) of 
the Act into the workflow of a covered provider, which may include the 
electronic system used by the covered provider for prescribing 
controlled substances. CMS issued additional guidance to states about 
the enhanced FFP authorized by the SUPPORT for Patients and Communities 
Act, which can be found at https://www.medicaid.gov/sites/default/files/Federal-Policy-Guidance/Downloads/faq051519.pdf.
    We additionally note that section 7162 of the SUPPORT for Patients 
and Communities Act supports PDMP integration as part of the CDC's 
grant programs aimed at efficiency and enhancement by states, including 
improvement in the intrastate and interstate interoperability of PDMPs.
    In support of efforts to expand the use of PDMPs, there are 
currently a number of federally supported activities underway aimed at 
developing a more robust and standardized approach to EHR-PDMP 
integration. Partners including CMS, CDC, ONC, and private sector 
stakeholders are focused on developing and refining standard-based 
approaches to enable effective integration into clinical workflows, 
exploring emerging technical solutions to enhance access and use of 
PDMP data, and providing technical resources to a variety of 
stakeholders to advance and scale the interoperability of health IT 
systems and PDMPs. For instance, stakeholders are working to map the 
NCPDP SCRIPT standard version 2017071 and the 2015 ASAP Prescription 
Monitoring Program Web Service standard version 2.1A to the HL7[supreg] 
FHIR[supreg] standard version R4.\497\ These mapping efforts are 
currently targeting completion by June 2020 after which the standard 
would be balloted. Moreover, a number of enhancements to PDMPs are 
occurring across the country, including enhancements to RxCheck which 
is a federally supported interstate exchange hub for PDMP data.\498\ In 
addition, the ONC Interoperability Standards Advisory includes 
monitoring of current and emerging standards related to PDMP and OUD 
data capture and exchange that would allow a provider to request a 
patient's medication history from a State PMDP.\499\ We believe these 
standards and technical approaches are likely to rapidly reach maturity 
and to support adoption across health care system stakeholders.
---------------------------------------------------------------------------

    \497\ http://hl7.org/fhir/us/meds/pdmp.html.
    \498\ https://www.pdmpassist.org/RxCheck.
    \499\ https://www.healthit.gov/isa/allows-a-provider-request-a-patients-medication-history-a-state-prescription-drug-monitoring.
---------------------------------------------------------------------------

    In addition to monitoring activities which can provide a stronger 
technical foundation for a measure focused on PDMP use, we also 
requested comments in the FY 2020 IPPS/LTCH PPS proposed rule on 
alternative measures designed to advance clinical goals related to the 
opioid crisis (84 FR 19568 and additional comment responses in the FY 
2020 IPPS/LTCH PPS final rule in 84 FR 42593 through 42595). 
Specifically, we sought public comment on the development of potential 
measures for consideration for the Promoting Interoperability Program 
that are based on existing efforts to measure clinical and process 
improvements specifically related to the opioid epidemic, including 
opioid quality measures endorsed by the National Quality Forum (NQF) 
and CDC Quality Improvement (QI) opioid measures based on CDC 
guidelines around prescribing practices. The latter of these includes 
the use of electronically specific CDS to support OUD prevention and 
treatment best practices and the integration of a PDMP query as a part 
of specific clinical workflows. We stated that these measures relate to 
a range of activities that hold promise in combatting the opioid 
epidemic as part of OUD prevention and treatment best practices, that 
they can be supported using CEHRT, and that they may include the use of 
PDMP queries as a tool within the broader clinical workflows. We 
continue to evaluate the comments received in response to this request, 
and will explore how measures such as those discussed may help 
participants to better understand the relationship between the measure 
description and the use of health IT to support the actions of the 
measures related to opioid use.
    We understand that there is wide variation across the country in 
how health care providers are implementing and integrating PDMP queries 
into health IT and clinical workflows, and that it could be burdensome 
for health care providers if we were to narrow the measure to specify a 
single approach to PDMP-EHR integration at this time. At the same time, 
we have heard extensive feedback from EHR developers that effectively 
incorporating the ability to count the number of PDMP queries in the 
EHR would require more robust certification specifications and 
standards. These stakeholders stated that health IT developers may face 
significant cost burdens under the current flexibility allowed for 
health care providers if they either fully develop numerator and 
denominator calculations for all the potential use cases and are 
required to change the specification at a later date. Stakeholders have 
noted that the costs of additional development will likely be passed on 
to health care providers without additional benefit as this development 
would be solely for the purpose of calculating the measure rather than 
furthering the clinical goal of the measure (for public comments 
discussed in last year's final rule, we refer readers to (84 FR 42593 
through 42595), continued from last year's proposed rule in (84 FR 
19556 through 19558)).
    Given current efforts to improve the technical foundation for EHR-
PDMP integration, the continued implementation of the SUPPORT for 
Patients and Communities Act (in particular, its provisions specific to 
Medicaid providers and qualified PDMPs), our ongoing review of 
alternative measure approaches, and stakeholder concerns as previously 
discussed about the current readiness across states for implementation 
of the existing measure, we believe that additional time is needed 
prior to requiring a Query of PDMP measure for performance-based 
scoring. While we appreciate the concerns that stakeholders have 
shared, CMS believes that this measure can play an important role in 
helping to address the opioid crisis. Maintaining it as an optional

[[Page 32855]]

measure with bonus points signals to the hospital and vendor community 
that this is an important measure which addresses a current gap that 
can help to spur development and innovation to reduce the barriers and 
challenges expressed to CMS.
    Therefore, we are proposing for CY 2021 to maintain the Electronic 
Prescribing Objective's Query of PDMP measure as optional and worth 5 
bonus points, as well as proposing corresponding changes to the 
regulation at Sec.  495.24(e)(5)(iii)(B). Continuing to include the 
measure as optional in CY 2021 would allow time for further progress 
around EHR-PDMP efforts minimizing the burden on eligible hospitals and 
CAHs reporting while still providing an opportunity for capable 
implementers to report on and earn 5 bonus points for the optional 
measure. We seek comments on our proposal to maintain the Query of PDMP 
measure in CY 2021 as optional and worth 5 bonus points.
4. Health Information Exchange Objective: Support Electronic Referral 
Loops by Receiving and Incorporating Health Information Measure
    In the FY 2019 IPPS/LTCH PPS final rule (83 FR 41659 through 
41661), we established a new Support Electronic Referral Loops by 
Receiving and Incorporating Health Information measure by combining the 
Request/Accept Summary of Care measure and the Clinical Information 
Reconciliation measure. In establishing the new measure, we did not 
change the specifications or actions associated with the two combined 
measures, which address receiving an electronic summary of care record 
and conducting reconciliation of the summary of care record. However, 
the name of the measure includes the word ``incorporating,'' which is 
not always required to increment the numerator of the measure. Instead, 
clinical information reconciliation must be completed using CEHRT for 
the following three clinical information sets: (1) Medication; (2) 
Medication Allergy; and (3) Current Problem List. In addition, we 
established that 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, the 
eligible hospital or CAH may count the reconciliation in the numerator 
without completing a redundant or duplicate update to the record (83 FR 
41661). Thus, we are proposing to modify the name of the Support 
Electronic Referral Loops by Receiving and Incorporating Health 
Information measure to better reflect the actions required by the 
numerator and denominator. We are proposing to replace the word 
``incorporating'' with the word ``reconciling''. The new proposed name 
would read: Support Electronic Referral Loops by Receiving and 
Reconciling Health Information measure. We are proposing corresponding 
changes to Sec.  495.24(e)(6)(ii)(B).
5. Scoring Methodology for Eligible Hospitals and CAHs Attesting to CMS 
under the Medicare Promoting Interoperability Program for an EHR 
Reporting Period in CY 2021
    The following table reflects the objectives and measures for CY 
2021 if the proposed changes discussed previously are adopted as final, 
including the proposed name change to the Support Electronic Referral 
Loops by Receiving and Incorporating Health Information measure and the 
continuation of the optional Query of PDMP measure worth 5 bonus points 
for CY 2021.
[GRAPHIC] [TIFF OMITTED] TP29MY20.213


[[Page 32856]]


5. Clinical Quality Measurement for Eligible Hospitals and CAHs 
Participating in the Medicare and Medicaid Promoting Interoperability 
Programs
a. Background and Current Clinical Quality Measures
    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 (CQMs; also referred to as electronic CQMs, 
or eCQMs) selected by CMS using CEHRT, as part of being a meaningful 
EHR user under the Medicare and Medicaid Promoting Interoperability 
Programs. We previously established, however, that in accordance with 
section 1903(t)(5)(D) of the Act, in no case may any Medicaid eligible 
hospital receive an incentive after 2021 (Sec.  495.310(f), 75 FR 
44319). Therefore, December 31, 2021 is the last date that States could 
make Medicaid Promoting Interoperability Program payments to Medicaid 
eligible hospitals (other than pursuant to a successful appeal related 
to 2021 or a prior year) (84 FR 42591 through 42592).
    The following table lists the previously finalized eCQMs available 
for eligible hospitals and CAHs to report under the Medicare and 
Medicaid Promoting Interoperability Programs (84 FR 42597 through 
42599) for the reporting period in CY 2021 and in subsequent years, 
including the Safe Use of Opioids--Concurrent Prescribing measure (NQF 
#3316e), which we finalized as mandatory for reporting beginning with 
CY 2022.
[GRAPHIC] [TIFF OMITTED] TP29MY20.214

b. Proposed eCQM Reporting Periods and Criteria for the Medicare and 
Medicaid Promoting Interoperability Programs in CYs 2021, 2022, and 
2023
    Consistent with our proposal for the Hospital IQR Program elsewhere 
in this proposed rule, we are proposing to progressively increase the 
number of quarters for which hospitals are required to report eCQM 
data, from the current requirement of one self-selected calendar 
quarter of data, to four calendar quarters of data, over a three-year 
period. Specifically, we propose to require 2 self-selected calendar 
quarters of data from 2021, 3 self-selected calendar quarters of data 
from 2022, and 4 calendar quarters of data beginning with2023. We 
believe that increasing the number of quarters for which hospitals are 
required to report eCQM data would produce more comprehensive and 
reliable quality measure data for patients and providers. Taking an 
incremental approach over a three-year period would give hospitals and 
their vendors time to plan in advance and build upon and utilize 
investments already made in their EHR infrastructure. We refer readers 
to section VIII.A.10.e. of the preamble of this proposed rule for 
similar proposals under the Hospital IQR Program.
(1) Proposed Changes to the eCQM Reporting Period in CY 2021
    In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42599 through 
42600), we established the eCQM reporting periods, reporting criteria, 
and submission periods for CY 2021. We refer readers to that final rule 
for a more detailed discussion of our previously established final 
policies. Consistent with our proposal for the Hospital IQR Program 
elsewhere in this rule, we are proposing to modify the CQM reporting 
period in CY 2021 under the Medicare and Medicaid Promoting 
Interoperability Programs for eligible hospitals and CAHs that report 
CQMs electronically. Specifically, we are proposing to require eligible 
hospitals and CAHs to report two self-selected calendar quarters of 
eCQM data from CY 2021, for four self-selected eCQMs from the set of 
available eCQMs for CY 2021 as previously established (84 FR 42599 
through 42600). We are inviting public comment on this proposal.
(2) Proposed Changes to the eCQM Reporting Period in CY 2022
    In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42600), we 
established the eCQM reporting periods, reporting criteria, and 
submission periods for CY 2022. We refer readers to that final rule for 
a more detailed discussion of our previously established final 
policies. Consistent with our proposal for the Hospital IQR Program 
elsewhere in this rule, we are proposing to modify the eCQM reporting 
period in CY 2022 under the Medicare Promoting Interoperability Program 
for eligible hospitals and CAHs that report eCQMs electronically. 
Specifically, we are proposing to require eligible hospitals and CAHs 
to report three self-selected calendar quarters of eCQM data from CY 
2022, for each required eCQM as previously established (84 FR 42600): 
(a) Three self-selected eCQMs from the set of available CQMs for CY 
2022, and (b) the Safe Use of Opioids--Concurrent Prescribing eCQM. We 
are inviting public comment on this proposal.
(3) Proposed Reporting and Submission Requirements for eCQMs for CY 
2023 and Subsequent Years
    For CY 2023 and each subsequent year, we are proposing to require

[[Page 32857]]

eligible hospitals and CAHs reporting CQMs for the Medicare Promoting 
Interoperability Program to report four calendar quarters of data from 
CY 2023 and each subsequent year for: (a) Three self-selected eCQMs 
from the set of available eCQMs for CY 2023 and each subsequent year; 
and (b) the Safe Use of Opioids--Concurrent Prescribing eCQM (NQF 
#3316e), for a total of four eCQMs. As finalized in the FY 2020 IPPS/
LTCH PPS final rule (84 FR 42601 through 42602), attestation is no 
longer a method for reporting CQMs for the Medicare Promoting 
Interoperability Program beginning with the reporting period in CY 
2023, and instead, all eligible hospitals and CAHs are required to 
submit their eCQM data electronically through the reporting methods 
available for the Hospital IQR Program. Additionally, we are proposing 
that the submission period for the Medicare Promoting Interoperability 
Program would be the 2 months following the close of the respective 
calendar year. For example, the submission period would be the 2 months 
following the close of CY 2023, ending February 28, 2024. We are 
inviting public comment on these proposals.
b. Proposed Public Reporting of eCQM Data
    Electronic reporting serves to further the CMS and HHS policy goals 
to promote quality through performance measurement and, in the long-
term, improve the accuracy of the data and reduce reporting burden for 
providers. It also promotes the continued effort to align the Promoting 
Interoperability Program with the Hospital IQR Program. We expect that 
over time, hospitals will continue to leverage EHRs to capture, 
calculate, and electronically submit quality data, build and refine 
their EHR systems, and gain more familiarity with reporting eCQM data.
    As eCQM reporting continues to advance, and hospitals have gained 
several years of experience with successfully collecting and reporting 
eCQM data, it is important to further our policy goals of leveraging 
EHR-based quality measure reporting in order to incentivize data 
accuracy, promote interoperability, increase transparency, and reduce 
long-term provider burden by providing public access to the reported 
eCQM data. Originally, eCQMs were integrated on a voluntary basis under 
the Hospital IQR Program in the FY 2014 IPPS/LTCH PPS final rule, where 
it was stated that additional time was required to assess the data 
submitted by hospitals to determine the optimal timing and transition 
strategy for publicly reporting eCQM data (78 FR 50813). Additionally, 
it was previously finalized that eCQM data would only be publicly 
reported if it was determined that the data was accurate enough to be 
reported (78 FR 50818). In the FY 2016 IPPS/LTCH PPS final rule, when 
the reporting of eCQMs was changed from voluntary to required, it was 
finalized that any data submitted electronically at that time would not 
be posted on the Hospital Compare website, and that public reporting 
would be addressed in future rulemaking, after the conclusion and 
assessment of the Hospital IQR Program's validation pilot (80 FR 
49698).
    Section 1886(b)(3)(B)(viii)(VII) of the Act requires the Secretary 
to report quality measures of process, structure, outcome, patients' 
perspectives on care, efficiency, and costs of care that relate to 
services furnished in inpatient settings in hospitals on the internet 
website of CMS. Section 1886(b)(3)(B)(viii)(VII) of the Act also 
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. The current Hospital IQR Program policy is to report data as 
soon as it is feasible on CMS websites such as the Hospital Compare 
and/or its successor website after a 30-day preview period (78 FR 50776 
through 50778). For additional information, please reference VIII.12.a. 
of this proposed rule, the Hospital IQR Program's Public Display 
Requirements.
    Section 1886(n)(4)(B) of the Act requires the Secretary to post on 
the CMS website, in an easily understandable format, a list of the 
names of the eligible hospitals and CAHs that are meaningful EHR users, 
and other relevant data as determined appropriate by the Secretary. We 
believe other relevant data could include clinical quality measure 
performance rates, and data intended to improve transparency and 
reporting accuracy, because such data would enable patients, consumers, 
and health care providers to make informed decisions about their own, 
and their patients', healthcare. Section 1886(n)(4)(B) of the Act also 
requires the Secretary to ensure that an eligible hospital or CAH has 
the opportunity to review the other relevant data that are to be made 
public with respect to the eligible hospital or CAH prior to such data 
being made public. By publicly reporting clinical quality measure data, 
this demonstrates our commitment to providing data to patients, 
consumers, and providers as quickly as possible to assist them in their 
decision-making, and the effort of continual alignment with the 
Hospital IQR Program.
    Therefore, in alignment with our goal to encourage data accuracy 
and transparency, we are proposing to align with the Hospital IQR 
Program in publicly reporting eCQM data submitted by eligible hospitals 
and CAHs for the Promoting Interoperability Program from the CY 2021 
reporting period and subsequent years. This data could be made 
available to the public as early as the fall of 2022.
    We are requesting public comments on these proposals, specifically, 
we are interested in comments that provide information on how these 
proposals might affect existing incentives and burdens under the 
Promoting Interoperability Program, as well as the benefit and utility 
of such data being publically available.
6. Proposed Technical Corrections to Regulation Text
a. Proposed Corrections to Regulations for Puerto Rico Eligible 
Hospitals Participating in the Medicare Promoting Interoperability 
Program
    In the FY 2019 IPPS/LTCH PPS final rule (83 FR 41673 and 41674), we 
amended Sec.  495.104(c)(5) to specify transition factors under section 
1886(n)(2)(E)(i) of the Act for the incentive payments for Puerto Rico 
eligible hospitals. Although our preamble discussion of the transition 
factors was accurate (83 FR 41673 and 41674), our amendments to the 
regulation text included inadvertent technical errors. Specifically, 
under Sec.  495.104(c)(5)(viii), we inadvertently included FY 2018 
twice and omitted FY 2021 (83 FR 41710 and 41711). We are proposing to 
correct these errors by revising in future rulemaking, after the 
conclusion and assessment of the Hospital IQR Program's validation 
pilot (80 FR 49698).
    Sec.  495.104(c)(5)(viii) to specify the correct transition factors 
for FYs 2018 through 2021 as follows:
     1 for FY 2018.
     \3/4\ for FY 2019.
     \1/2\ for FY 2020.
     \1/4\ for FY 2021.
b. Proposed Corrections to Regulatory Citations
    In prior rulemaking, we adopted regulatory text at Sec.  495.20 
which cross-references ONC's certification criteria under 45 CFR 
170.314. We recently identified two typographical errors in Sec.  
495.20: Specifically, paragraphs (e)(5)(iii) and (l)(11)(ii)(C)(1) 
should have cross-referenced provisions of 45 CFR 170.314, but instead 
certain

[[Page 32858]]

numbers were inadvertently transposed in the cross-references. 
Therefore, we are proposing to revise Sec.  495.20(e)(5)(iii) and 
(l)(11)(ii)(C)(1) to correct these errors.
7. Future Direction of the Medicare Promoting Interoperability Program
    In future years, we will continue to consider changes which support 
a variety of HHS goals as previously stated (83 FR 20537), including: 
Reducing administrative burden, supporting alignment with the Quality 
Payment Program, supporting alignment with the 21st Century Cures Act, 
advancing interoperability and the exchange of health information, and 
promoting innovative uses of health IT. More specifically, with regard 
to the 21st Century Cures Act final rule (available at https://www.federalregister.gov/documents/2020/05/01/2020-07419/21st-century-cures-act-interoperability-information-blocking-and-the-onc-health-it-certification), we will take under consideration potential areas of 
overlap which could include: Information blocking, transitioning from 
the Common Clinical Data Set (CCDS) to the United States Core Data for 
Interoperability (USCDI), finalization of a new certification criterion 
for a standards-based API using FHIR, and other updates to 2015 Edition 
health IT certification criteria and the ONC Health IT Certification 
Program. We believe maintaining our focus on promoting 
interoperability, alignment, and simplification will reduce health care 
provider burden while allowing flexibility to pursue innovative 
applications that improve care delivery.
    We solicit comment on how Medicare can best support these areas of 
overlap. For more detailed information on the updates discussed above, 
including updates made to 2015 Edition certification criteria, we refer 
readers to the 21st Century Cures Act final rule (available at https://www.federalregister.gov/documents/2020/05/01/2020-07419/21st-century-cures-act-interoperability-information-blocking-and-the-onc-health-it-certification).

IX. Proposed Changes for Hospitals and Other Providers

A. Proposed Changes in the Submission of Electronic Patient Records to 
Beneficiary and Family Centered Care Quality Improvement Organizations 
(BFCC-QIOs)

1. Background
    CMS' Quality Improvement Organization (QIO) Program is part of the 
HHS' national quality strategy for providing quality and patient 
centered care to Medicare beneficiaries. The mission of the QIO Program 
is to improve the effectiveness, efficiency, economy, and quality of 
services delivered to Medicare beneficiaries. We identify the core 
functions of the QIO Program as: (1) Improving quality of care for 
beneficiaries; (2) protecting the integrity of the Medicare Trust Fund 
by ensuring that Medicare pays only for services and goods that are 
reasonable and necessary and that are provided in the most appropriate 
setting; and (3) protecting beneficiaries by expeditiously addressing 
individual concerns (such as beneficiary complaints, provider-based 
notice appeals, violations of the Emergency Medical Treatment and Labor 
Act (EMTALA), and other related responsibilities). The QIO Program is 
an important resource in our effort to improve quality and efficiency 
of care for Medicare beneficiaries.
    A QIO is an organization comprised of health quality experts, 
clinicians, and consumers organized to improve the quality of care 
delivered to people with Medicare. QIOs work under the direction of 
CMS, to improve the quality of healthcare for all Medicare 
beneficiaries, and to support the Medicare program.
    Current law authorizes the QIOs to have access to the records of 
providers, suppliers, and practitioners under Medicare in order to 
perform their functions. For example, section 1154(a)(7)(C) of the Act 
requires QIOs, to the extent necessary and appropriate, to examine the 
pertinent records of any practitioner or provider of health care 
services that is providing services for which payment may be made under 
the Medicare program. Section 1156(a)(3) of the Act requires that any 
person who provides health care services payable under Medicare assure 
that services or items ordered or provided are supported by evidence of 
the medical necessity and quality as may reasonably be required by a 
reviewing QIO in the exercise of its responsibilities. Our regulations 
at 42 CFR 476.78(b) provide that health care providers that submit 
Medicare claims must cooperate in the assumption and conduct of QIO 
reviews. Under 42 CFR 476.78(b)(2), providers (defined broadly to 
include any health care facility, institution, or organization involved 
in the delivery of Medicare-covered services) and practitioners 
(defined broadly to include an individual credentialed within a 
recognized health care discipline and involved in providing the 
services of that discipline to patients) must provide patient care data 
and other pertinent data to the QIO when the QIO is collecting review 
information. In practice, this typically includes providing the QIO 
with copies of medical records for Medicare beneficiaries. In addition, 
under 42 CFR 480.111, QIOs are authorized to have access to and obtain 
records and information pertinent to the health care services furnished 
to Medicare patients, held by any institution or practitioner in the 
QIO area; QIOs may require the institution or practitioner to provide 
copies of such records or information to the QIO. In some cases, this 
access to information may include information from the records of non-
Medicare patients.
    While Sec.  480.111 does not explicitly require submission of 
electronic patient records, the current regulation at Sec.  
476.78(b)(2)(ii) requires providers and practitioners to send patient 
records in electronic format, if available, and subject to the QIO's 
ability to support receipt and transmission of the electronic version 
of patient records. The proposed regulation change would make 
electronic submission the default method of submission, mandating all 
providers and practitioners who provide patient records to the QIO to 
submit them in electronic format unless they have an approved waiver. 
Under the proposed regulation, providers and practitioners would be 
required to deliver patient records within 14 calendar days of a 
request. We believe the QIOs have developed the capability to securely 
receive and transmit medical patient records in electronic format, such 
that requiring submission of requested patient records in electronic 
format by providers and practitioners who has the capability is now 
reasonable. This is demonstrated by the fact that QIOs currently submit 
case files and patient records to the Departmental Appeals Board (DAB) 
and the Office of Medicare Hearings and Appeals (OMHA) electronically. 
Based on these facts, it is now evident that all QIOs are able and 
capable of receiving and sending patient records in electronic format.
    In 2011, we established the Medicare and Medicaid EHR Incentive 
Programs (now known as the Promoting Interoperability programs) to 
encourage eligible professionals, eligible hospitals, and critical 
access hospitals (CAHs) to adopt, implement, upgrade, and demonstrate 
meaningful use of certified electronic health record technology 
(CEHRT). Beginning in 2019, all eligible professionals, eligible 
hospitals, and CAHs are required to use CEHRT to meet the requirements 
of the Medicare and Medicaid Promoting Interoperability Programs. 
Requirements

[[Page 32859]]

for eligible hospitals, and CAHs that submit an attestation to CMS 
under the Medicare Promoting Interoperability Program were updated in 
the FY 2019 IPPS/LTCH PPS final rule (83 FR 41634 through 41677). Based 
on the National Center for Health Statistics' 2017 National Electronic 
Health Records Survey, 97 percent of hospitals and 80 percent of office 
based physicians have adopted certified EHRs, which would enable 
electronic submission of records to QIOs. See: https://www.cdc.gov/nchs/fastats/electronic-medical-records.htm.
    In Sec.  476.1, ``provider'' is defined as a health care facility, 
institution, or organization, including but not limited to a hospital, 
involved in the delivery of health care services for which payment may 
be made in whole or in part under Title XVIII of the Act. The term 
``practitioner'' means an individual credentialed within a recognized 
health care discipline and involved in providing the services of that 
discipline to patients. The regulations define ``QIO review'' as a 
review performed in fulfillment of a contract with CMS, either by the 
QIO or its subcontractors. The definitions specific to 42 CFR part 480 
do not explicitly define the terms institution or practitioner but the 
context makes it clear that these terms are references to health care 
providers that are facilities and individual practitioners. Our 
proposal would address submissions of patient records by all these 
types of health care providers to QIOs and reimbursement for those 
submissions.
2. Proposed Changes
    We are proposing to amend Sec. Sec.  412.115, 413.355, 476.78, 
480.111, and 484.265 to mandate providers and practitioners submit 
patient records to Beneficiary and Family Centered Care Quality 
Improvement Organizations (BFCC-QIOs) in an electronic format. This 
proposal would also update the procedures and reimbursement rates for 
patient records providers and practitioners furnish to QIOs. In our 
proposal, we use and would define the term ``patient record''. We 
propose to define ``patient record'' at Sec.  476.78(e)(1) as all 
patient care data and other pertinent data or information relating to 
care or services provided to an individual patient, in the possession 
of the provider or practitioner, as requested by a BFCC-QIO for the 
purpose of performing one or more QIO functions. Providers in this 
context would include an institution. As discussed in more detail later 
in this section, we understand that QIOs request and receive primarily 
(if not only) records and information that is about or related to the 
health care provided to specific individuals. This broad definition 
would include any information relevant or pertinent to a particular 
individual (or services or Medicare-covered benefits provided to an 
individual) that is requested by a QIO is part of the patient record 
for that individual, even if the information is not necessarily part of 
what is traditionally understood as a medical record. We solicit 
comment on this definition and how we use patient record (defined this 
way) as the basis for reimbursement for submission of electronic 
patient records.
    Under section 1866(a)(1)(F) of the Act, CMS is required to 
reimburse hospitals for the cost of providing patient records to the 
QIOs for QIO functions as discussed in this proposed rule. Based on 
similar requirements applicable to other providers and the history of 
litigation related to this provision, we subsequently applied this 
requirement to additional providers and suppliers under Medicare. The 
provisions governing reimbursement for sending patient records to the 
QIOs is codified at 42 CFR 476.78 and 42 CFR 480.111. Specifically, we 
are proposing the following changes to the reimbursement requirements:
     Patient records that are required to be provided to a QIO 
under Sec.  476.78(b)(2) would need to be delivered in electronic 
format, unless a QIO approves a waiver. Providers and practitioners who 
lack the capability to submit patient records in an electronic format 
could submit patient records by facsimile or photocopying and mailing, 
after the QIO approves a waiver. Initial waiver requests by those 
providers that are required to execute a written agreement with a QIO 
would be expected to be made at the time the provider executes a 
written agreement with the QIO. Other providers and practitioners who 
are not required to execute a written agreement with a QIO would 
request a waiver by giving the QIO notice of their lack of capability 
to submit patient records in electronic format.
     Establish reimbursement rates of $3.00 per patient record 
that is submitted to the QIO in electronic format and $0.15 per page 
for requested patient records submitted by facsimile or by photocopying 
and mailing (plus the cost of first class postage for mailed 
photocopies), after a waiver is approved by the QIO.
     Apply those reimbursement rates to patient records 
submitted to a QIO in accordance with Sec. Sec.  412.115, 413.355, 
476.78, 480.111, and 484.265.
    We believe these proposals would bring the procedures and 
associated reimbursement rates for submission of patient records to a 
QIO up to date with CMS policies for promoting use of electronic health 
records and burden reduction.
    These proposed changes would be applicable to all providers and 
practitioners providing patient records to QIOs for purpose of QIO 
reviews under Sec.  476.78. In addition, we are proposing to revise the 
requirements applicable to institutions and practitioners submitting 
records and information to the QIOs in accordance with Sec.  480.111. 
Specifically, we are proposing to require such institutions and 
practitioners to conform with the requirement applicable to providers 
and practitioners under Sec.  476.78(c) and (d). By the cross-
references in the proposed regulation text, we are proposing to permit 
reimbursement by the QIOs to institutions and practitioners for 
providing records and information to the QIOs under Sec.  480.111 in 
the same manner and rates as would apply to providers and practitioners 
under proposed Sec.  476.78(e). To align with these and other changes, 
we are proposing also to amend other regulations that address 
submitting patient records for QIO reviews, specifically: Sec. Sec.  
412.115, 413.355, and 484.265. We address each of these proposed 
changes individually.
    We are proposing in Sec. Sec.  412.115(c), 413.355, and 484.265 to 
revise the current text which provides for an additional payment to be 
made, respectively, to hospitals, skilled nursing facilities and home 
health agencies in accordance with Sec.  476.78 for the costs of 
photocopying and mailing medical records requested by a QIO. 
Specifically, we are proposing to revise these provisions to permit an 
additional payment to a hospital, skilled nursing facility, or home 
health agency in accordance with Sec.  476.78 for the costs of sending 
requested patient records to the QIO in electronic format, by 
facsimile, or by photocopying and mailing. These changes would ensure 
that reimbursement is permitted for all healthcare providers and 
practitioners, on the same basis and at the same rates as authorized 
for the submission of requested patient records to the QIO under our 
proposed revisions to Sec.  476.78.
    The current regulation at Sec.  476.78(c) describes the existing 
photocopying reimbursement methodology for prospective payment system 
providers and includes a step-by-step analysis of how to calculate cost 
of photocopying. This step-by-step analysis of how to

[[Page 32860]]

calculate provider's cost for photocopying records was a tool or 
methodology for determining or increasing reimbursement rates; we 
believe that specific methodology is no longer necessary in light of 
changes in technology and procedure. We are proposing to remove the 
step-by-step analysis for calculating the photocopying reimbursement 
rate from Sec.  476.78(c), because we expect that 20 percent of 
providers would submit patient records by facsimile or photocopying and 
mailing if CMS authorizes reimbursement for the submission of patient 
records in an electronic format, and that that number would decrease 
further over time. The assumed 20 percent estimate of waiver requests 
is based on the 2017 Office of National Coordinator (ONC) and Center 
for Disease Control (CDC) provider and practitioner survey of EHR 
adoption and use of Certified EHR technology. This assumption is 
further supported by the number of providers that currently have access 
to CMS's MD portal. Therefore, we expect that future updates to the 
calculation of photocopying reimbursement rate would be of decreasing 
concern to the majority of stakeholders.
    At Sec.  476.78(c), we are proposing that information that is 
required to be delivered to a QIO by a provider or a practitioner under 
Sec.  476.78 must be delivered in an electronic format using a 
mechanism specified by the requesting QIO. We propose that in the 
absence of a mechanism specified by the requesting QIO, the requested 
records may be submitted using any CMS approved secure mechanism. This 
includes mechanisms such as: Secure file transfer (SFT), managed file 
transfer (MTF), Electronic Submission of Medical Documentation System 
(esMD), or CMS-approved internet portal, or CMS-approved physical 
medium for submitting electronic records. Under our proposal, CMS would 
provide a list of approved mechanisms for submission of records and 
information to the QIO in an electronic format when the QIO contacts 
the provider to conduct a review, or when a written agreement between 
the QIO and provider is executed. We are proposing to address the 
amount of reimbursement in new paragraph (e) of Sec.  476.78, as 
discussed later in this section. CMS would not permit the QIOs to 
reimburse for any patient record submitted by facsimile or by 
photocopying and mailing, if the provider or practitioner in question 
does not have an approved waiver.
    We are proposing to redesignate existing Sec.  476.78(d) as Sec.  
476.78(f), with revisions to be consistent with our proposed 
reimbursement rates. We propose to create a new provision at Sec.  
476.78(d) to establish a process for practitioners and providers to 
request waivers of the requirements for the electronic submission of 
requested patient records to the QIOs under proposed Sec.  476.78(c). A 
QIO-approved waiver would afford a provider or practitioner who is not 
capable of submitting patient records to its QIO in an electronic 
format the opportunity to continue submitting patient records using 
facsimile or by photocopying and mailing. We are proposing that 
providers who are required to execute a written agreement with a QIO, 
but which lack the capability to submit requested patient records in 
electronic format to the requesting QIO, must request a waiver of the 
requirement to submit records in an electronic format to the QIO. A 
request for a waiver by providers who are required to execute a written 
agreement with the QIO, must generally be made to the QIO when 
executing a written agreement with the QIO. However, where such a 
provider's lack of capability arises after the written agreement is 
executed, we are proposing that the provider could request a waiver by 
notifying the QIO, that they lack the capability to submit patient 
records in electronic format. We are also proposing, at Sec.  
476.78(d)(2)(ii), that the waiver would become part of the written 
agreement between the QIO and the provider. Upon approval of a waiver, 
a provider or practitioner may submit requested patient records by 
facsimile or photocopying and mailing. We note that the current 
regulations do not specifically provide for reimbursement for patient 
records submitted to the QIO by facsimile, but CMS in order to 
encourage efficiency in patient record transmission, has historically 
interpreted the provisions governing reimbursement for patient records 
submitted to the QIOs through photocopying and mailing to also 
authorize reimbursement for the submission of patient records by 
facsimile. We are now proposing to specifically incorporate our 
historic interpretation into the regulatory framework. We are 
soliciting comment on these proposals, including the requirement that 
the request for a waiver must generally be made during execution of the 
written agreement.
    Similarly, we are proposing that providers, practitioners and 
institutions subject to Sec.  476.78 or Sec.  480.111 that are not 
required to execute a written agreement with the QIO, may also request 
a waiver of the requirement to submit records in electronic format to 
the QIO, by notifying the QIO that they lack the capability to submit 
patient records in an electronic format. Upon approval of the waiver, a 
provider or practitioner may submit requested patient records and 
information by photocopying and mailing. We solicit comment on this 
proposal, including whether the regulation should require a written 
record of the waiver.
    We are proposing to establish these waiver processes because we 
recognize that some practitioners and providers may lack the capacity 
to submit records to the QIOs in an electronic format. However, these 
providers and practitioners are still required to comply with QIO 
requests for records. We believe the waiver request process would not 
add extra burden on the providers and practitioners because they can 
request a waiver simply by notifying the QIO that they lack the 
capability to submit patient records in an electronic format, either 
when executing a written agreement with the QIO in accordance with 
Sec.  476.78(a) or when they are contacted by the QIO to request 
patient records. Under our proposal, such waiver requests could be made 
by whatever means the provider or practitioner uses to communicate with 
the QIO. We invite comment on these proposals.
    We are also proposing to add a new paragraph (e) to Sec.  476.78 to 
authorize QIOs to reimburse providers and practitioners for the cost of 
submitting patient records, requested by a QIO for the purpose of 
carrying out QIO functions, with rates of reimbursement based on the 
mode of submission. The QIOs could not reimburse for any patient record 
submitted by facsimile or by photocopying and mailing without an 
approved waiver. Each of these reimbursement rates were calculated to 
reflect the costs associated with submitting a patient record, 
including labor and supplies. Proposed Sec.  476.78(e)(2) would provide 
that a QIO could reimburse a provider or practitioner for requested 
patient records submitted in an electronic format, at the rate of $3.00 
per record. We are proposing that Sec.  476.78(e)(3) would provide that 
a QIO may reimburse a provider or practitioner, with an approved waiver 
in place, for requested patient records submitted by facsimile or 
photocopying and mailing at the rate of $0.15 per page, plus the cost 
of first class postage for patient records submitted via photocopying 
and mailing. We discuss the methodology, we are proposing to use to 
calculate these payment rates in section IX.A.2.b. of the preamble of 
this proposed rule.

[[Page 32861]]

    For purposes of QIO reimbursement under Sec.  476.78(e), we are 
proposing to define a ``patient record'' at Sec.  476.78(e)(1) as all 
patient care data and any other pertinent data or information relating 
to care or services provided to an individual patient in the possession 
of the provider or practitioner, as requested by a QIO, for the purpose 
of performing one or more QIO functions. We are proposing to interpret 
and use this definition of patient record broadly. For example, this 
definition of ``patient record'' would include the policies and 
established operating procedures of a health care provider, to the 
extent that that information is pertinent to an individual patient or 
the services or Medicare-covered benefits provided to an individual 
patient, and the QIO requests that information. We are also proposing 
at Sec.  476.78(e)(4) that the QIOs would only be permitted to 
reimburse a practitioner or providers once for each patient record 
submitted, for each request made by a QIO. Each request from a QIO 
would be reimbursed separately at the rates specified in Sec.  
476.78(e), including for records that had already been provided in 
response to a previous request. However, only one reimbursement would 
be provided by the QIO for each patient record submitted, per request, 
even if a particular patient record is submitted to the QIO using 
multiple different formats, in fragments, or more than once in response 
to a particular request.
    We are proposing to revise the requirements applicable to 
institutions and practitioners submitting records and information to 
the QIOs in accordance with Sec.  480.111. Specifically, we are 
proposing to require such institutions and practitioners to conform 
with the requirement applicable to providers and practitioners under 
Sec.  476.78(c) and (d). By the cross-references in the proposed 
regulation text, we are proposing to permit reimbursement by the QIOs 
to institutions and practitioners for providing records and information 
to the QIOs under Sec.  480.111 in the same manner and rates as would 
apply to providers and practitioners under proposed Sec.  476.78(e). In 
our proposal, the reimbursement rates proposed under Sec.  476.78(e) 
would also apply to institutions and practitioners subject to Sec.  
480.111. We are proposing to replace the current language in Sec.  
480.111(d) governing the reimbursement by the QIO for requested patient 
records with a provision that provides referring to the reimbursement 
rates in Sec.  476.78(e). Therefore, if these changes are finalized, 
reimbursement for patient records submitted under Sec.  480.111 would 
be consistent with reimbursement under Sec.  476.78. This proposal 
would provide a consistent level of reimbursement from submission of 
patient records to the QIOs, across all health care providers and 
practitioners, that submit patient records to the QIO under Sec. Sec.  
476.78 and 480.111. The goal of our proposal is to put all QIO 
reimbursement for patient records in the same section of the 
regulations, so that QIOs, providers, and practitioners know where to 
find the relevant provisions. This proposal would also help to reduce 
the risk of inconsistencies in policy application due to duplication of 
related QIO regulations in multiple sections.
a. Required Submission of Patient Records in Electronic Format to the 
QIO
    Currently Sec.  476.78 requires providers and practitioners who are 
subject to QIO review activities under 42 CFR part 476 to submit 
requested patient care data and other pertinent data and information to 
the QIO. We are proposing to require those submissions be made in 
electronic format. We are proposing to require electronic submission 
because it is more efficient, cost effective, and timely. Our 
comparison of patient records submission in electronic format and 
submission by facsimile and mail indicate a savings of about $71.8 
million to CMS over 5 years. These savings is an estimated combination 
of $37.6 million cost savings from reimbursement to providers for 
sending patient records via facsimile, photocopying and mailing, and 
$34.2 million cost saving from payment to QIOs to cover the costs for 
scanning and uploading paper based patient records.
    Currently, Sec.  476.78(b)(2)(ii) requires providers and 
practitioners send secure transmission of an electronic version of 
medical information to the QIO, if available, and subject to the QIO's 
ability to support receipt and transmission of the electronic version 
of patient records. Because most providers and all QIOs have 
demonstrated ability to send and receive patient records in electronic 
format, we are proposing to mandate providers and practitioners to 
submit requested patient records and information to the QIO in 
electronic format.
    Our interoperability programs, quality reporting programs, and 
other programs are now requiring electronic submission of patient care 
data and information to CMS and its contractors. The Promoting 
Interoperability program is successful in encouraging widespread 
adoption of EHRs by providers and practitioners. In addition, about 79 
percent of hospitals use the eSMD to send medical records 
electronically. By participation in these CMS data transfer programs, 
providers, practitioners, and QIOs have demonstrated the capability to 
collect, store, and safely transmit EHR data electronically. Based on 
our years of experience administering the Medicare and Medicaid EHR 
Incentive and Promoting Interoperability programs, we believe that most 
providers and practitioners are now able to safely communicate 
patient's medical records electronically to QIOs. This is evidenced by 
the increased number of providers, practitioners, and QIOs that 
currently participate in the use of esMD, MFT, and other related 
electronic data communication methods.
    On September 15, 2011, we implemented the esMD system for programs 
requiring the review of medical documentation and patient records such 
as: Medicare Fee for service payment appeals, prior authorization 
requests, and durable medical equipment requests. The esMD system is 
used by providers on a voluntary basis to transmit medical 
documentation to review contractors electronically. This medical 
documentation (including patient records) is used by CMS contractors to 
review claims and to verify providers' compliance with Medicare rules 
for documentation and payment. Medicare providers and review 
contractors believe that using the esMD system results in cost savings 
and increased efficiencies, as well as improve payment turnaround time, 
and reduce the administrative burden associated with medical 
documentation requests and responses. By 2017, there are about 60,579 
providers has access and used esMD to send medical records, and up to 
2.5 million medical records were transmitted from providers to Medicare 
contractors. See 2017 esMD Annual Report: https://www.cms.gov/Research-Statistics-Data-and-Systems/Computer-Data-and-Systems/ESMD/Downloads/2017-esMD-Annual-Program-Report-10-01-2016-09-30-2017.pdf.
    The MFT refers to a software or a service that manages the secure 
transfer of data from one computer to another through a network (for 
example, the internet). MFT software is marketed to corporate 
enterprises as an alternative to using ad-hoc file transfer solutions. 
MFT is currently available to providers and practitioners, and QIOs 
currently use MFT to transmit data to its clinical peer reviewers. The 
MFT provides another good option for providers and practitioners to 
submit records and information securely to QIOs.

[[Page 32862]]

    Given numerous improvements in electronic data communication 
capabilities among both providers and QIOs, and the expansion in access 
to electronic data communication technology, we believe it is in the 
best interest of the Medicare program for CMS to support electronic 
data communication between the QIOs and providers and practitioners. We 
propose to require providers and practitioners to provide patient 
records to the QIO electronically beginning in FY 2021 and for 
subsequent years. Our proposal provides for a waiver for providers and 
practitioners that lack the capability to submit patient records in 
electronic format. Lacking the capability to submit patient records in 
electronic format may have a number of causes, such as the records not 
being in an electronic format or readily convertible to an electronic 
format or the provider or practitioner suffering a loss of the 
necessary resources to submit records through the QIO-approved or CMS-
approved mechanism (such as because of a power outage). The intent of 
this policy change is to incentivize health care providers and 
practitioners subject to Sec.  476.78 to use the most efficient 
mechanisms available to submit required data to the QIOs for review 
activities, in order to minimize the time and expense required to 
satisfy their responsibilities under Sec.  476.78(b), and thereby 
minimize the expense CMS incurs in the administering the QIO program. A 
complete discussion of the anticipated impact of these proposals can be 
found section I.H.13. of Appendix A to this proposed rule.
b. Reimbursement for Submission of Patient Records to the QIOs in 
Electronic Format
    We are proposing at Sec.  476.78(e)(2) to authorize the QIOs to 
reimburse providers and practitioners, for submitting requested patient 
records to the QIO in an electronic format, starting in FY 2021. The 
current regulation does not authorize or set a rate for reimbursement 
when providers submit patient records to the QIOs in an electronic 
format. We believe the lack of reimbursement for the submission of 
requested patient records in an electronic format discourages providers 
and practitioners from sending patient records in an electronic format, 
which is a more efficient and cost effective method for transmitting 
patient records than facsimile or photocopying and mailing. This lack 
of reimbursement for electronic submission of patient records does not 
align with other CMS programs and policies that seek to incentivize the 
use of electronic records and the electronic transmission of 
information such as the Promoting Interoperability Program. We believe 
this proposal would encourage more practitioners and providers to 
submit patient records in electronic format to the QIOs.
    In calculating the rate of reimbursement for submission of patient 
records in an electronic format, we took into consideration the labor 
rate and materials cost associated with submitting patient records in 
an electronic format. We are proposing to follow steps similar to those 
used in CMS' methodology for calculating reimbursement for photocopying 
patient records for the QIOs. We calculated the proposed reimbursement 
rate for patient records submitted in electronic format as follows:
     Step 1--Calculate total salary of a medical records clerk, 
including fringe benefits, using the salary level for an experienced 
midlevel (GS-5 step 5) secretary in the Federal government as 
representative of that of a medical records clerk.
     Step 2--Calculate labor costs associated with searching 
for, downloading, and submitting electronic records.
     Step 3--Determine the number of patient records that can 
be searched, retrieved, processed, and submitted per hour.
     Step 4--Calculate the cost of active productive 
time of a medical record clerk by dividing annual salary with total 
productive hours, taking into account time spent at rest, and away from 
work.
     Step 5--Calculate total reimbursement for 
submitting patient records to the QIOs in electronic format by dividing 
the total productive hour cost by the total number of patient records 
we estimate a medical records clerk can process in 1 hour.
    Using this methodology, we calculated the reimbursement for 
submitting records electronically to QIO as follows:
(1) The Labor Costs Associated With Searching for, Downloading, and 
Submitting Patient Records
    Labor costs were calculated by adding the annual salary of a 
medical records clerk with the costs of fringe benefits, and dividing 
that sum with the number of patient records that can reasonably be 
expected to be processed in a year.
    In this proposed rule, we would continue to use the salary of a 
Federal GS-5 midlevel secretary as representative of a medical records 
clerk's salary. We would take into account increases in the payment 
rate for a midlevel secretary in the federal government for the CY 
2020. Using the salary level for an experienced midlevel (GS-5 step 5) 
secretary in the Federal government as representative of that of a 
medical records clerk, the annual salary of the medical records clerk 
is estimated to be $39,573 according to the Office of Personnel 
Management's 2020 General Schedule pay scale, with locality adjustment 
for the rest of the United States. In calculating the fringe benefits 
applicable to a medical records clerk, we used OMB Circular A-76 to 
calculate the annual fringe benefit cost, based on 36.25 percent of the 
GS-5 salary. The estimated annual fringe benefit cost is therefore 
$14,345 ($39,573 * 36.25 percent). Adding the fringe benefit cost, the 
estimated total annual salary of a medical records clerk is $53,918. 
Assuming a full time equivalent of 2080 hours per year and divide the 
annual salary by the number of hours worked ($53,918/2080 hours) in a 
year, the total salary per hour of a medical records clerk would be $26 
per hour.
(2) Labor Costs Associated With Searching for, Downloading, and 
Submitting Patient Records
    We assume that an average patient record request by QIO will be 
contained in a single electronic file that can be classified as one 
electronic record. This assumption is based on CMS' experience with 
current QIO transfer of electronic patient records to OMHA and the DAB. 
We estimate that it will take a medical record clerk an average of 5 
minutes to search, retrieve, process, and submit a requested patient 
record in electronic format. Using this estimate we calculate that a 
medical records clerk could search for, retrieve, process, and 
submitted a total of 12 medical records per hour.
(3) Active Productive Time of a Medical Record Clerk
    We estimate a medical records clerk is active and productive for a 
total of 1,430 hours per year (about 5.5 productive hours per day). We 
took into account the time spent by the medical records clerk at rest 
and lunch, and time away from work on annual vacation, sick, and 
holiday leave. To calculate the cost of one active productive hour we 
divide the estimated cost for annual salary and fringe benefits by the 
total number of active productive hours per year. We estimate the cost 
of one active productive hour at $38 per hour ($53,918/1430 hours).
(4) Cost of Supplies
    We estimate that there would be no cost for supplies directly 
attributable to

[[Page 32863]]

searching, downloading, and submitting patient records to the QIO.
(5) Total Reimbursement Rate for Submitting Patient Records to the QIOs 
in an Electronic Format
    We estimated total cost for submitting a patient record to the QIO 
at $3 per record. This calculation was derived by dividing the total 
productive hour cost of $38 by the number of patient records that can 
processed in an hour, which is 12 records ($38/12 records = 3.17). 
Consistent with our policy and generally accepted mathematics 
principles, we chose to round our calculations to nearest decimal. We 
believe this decision is both reasonable and supportable.
    We invite public comment on this proposed methodology for 
calculating the rate of reimbursement for processing patient records in 
an electronic format. In addition, we invite public comment on 
alternative methodologies for determining more appropriate 
reimbursement rate for the submission of patient records to the QIOs in 
an electronic format, and we intend to seek to finalize our policy in 
the final rule based upon the public comments we received.
c. Waiver Process for Exemption From Requirement To Submit Patient 
Records in Electronic Format to the QIO
    We propose to permit providers and practitioners who cannot submit 
requested patient records and information in electronic format to 
request a waiver. Any provider or practitioner that lacks the 
capability to submit patient records and information to the QIO in 
electronic format must obtain a waiver to be exempted from the 
requirement of submitting patient records and information in electronic 
format. Upon approval of the waiver, the provider or practitioner can 
submit requested patient records and information to QIO by facsimile or 
first class mail. We propose that requests for waivers by providers 
that are required to execute a written agreement with the QIO must 
generally be made to the QIO when executing the written agreement. 
After the waiver is approved, a provider or practitioner may send 
requested patient records and information by facsimile or first class 
mail. Providers and practitioners that are not required to execute a 
written agreement with the QIO may request a waiver to be exempted from 
submitting patient records in electronic format by notifying the QIO 
that they lack the capability to submit patient records in electronic 
format. The QIOs may reimburse providers and practitioners with 
approved waivers for requested patient records submitted by facsimile 
or by photocopying and mailing, as proposed in Sec.  476.78(e)(3). 
Under our proposal, reimbursement would not be permitted for any 
patient record submitted to the QIO by facsimile or by photocopying and 
mailing, when the provider or practitioner does not have an approved 
waiver. We propose that a waiver would be approved by the QIO after the 
provider or practitioner has demonstrated that it lacks the capability 
to submit patient records in an electronic format. Under our proposal, 
only providers and practitioners that have an approved wavier may 
receive reimbursement for submitting patient records by facsimile or by 
photocopying and mailing.
d. Reimbursement Rate for Providers Submitting Patient Records by 
Photocopying and Mailing
    We are proposing that the QIOs would reimburse providers with 
approved waivers for submitting patient record by photocopying and 
mailing. We are proposing at Sec.  476.78(e)(3) to increase the 
reimbursement rate for submitting patient records by photocopying and 
mailing from $0.12 per page to $0.15 per page. We are updating this 
payment rate in accordance with CMS's commitment to periodically revise 
the photocopying reimbursement rate. This rate adjustment is fair, 
reasonable, and meets the current labor and material cost articulated 
in the established formula for calculating photocopying reimbursement 
rate. We propose to use the following formula for updating the rate of 
reimbursement for photocopying and mailing records to QIO as follows:
     Step 1. CMS adds the annual salary of a photocopy machine 
operator and the costs of fringe benefits as determined in accordance 
with the principles set forth in OMB circular A-76, to establish a 
total annual salary for the photocopy machine operator.
     Step 2. CMS divides the total annual salary of the 
photocopy machine operator by the number of pages that can be 
reasonably expected to be made annually by the photocopy machine 
operator to establish the labor cost per page.
     Step 3. CMS adds to the per-page labor cost as previously 
determined in step two to the per-page costs of photocopying supplies.
    We used this methodology to determine what specific rate to propose 
for the reimbursement for sending patient records by photocopying and 
mailing patient records. We are proposing to increase the per-page 
reimbursement rate to $0.15 for photocopying patient records. We 
calculated the proposed photocopying reimbursement rate by updating the 
salary, fringe benefits, and supply figures associated with 
photocopying and submitting patient records to the QIO. In accordance 
with this methodology we considered the following factors in 
calculating the proposed new rate:
(1) Labor Costs Associated With Photocopying and Submitting Patient 
Records
    Labor costs for photocopying patient records were calculated by 
adding the annual salary of a photocopy machine operator with the costs 
of fringe benefits, and dividing that sum by the number of pages that 
can reasonably be expected to be photocopied in 1 year. In this 
proposed rule, we would continue to rely upon the salary of a Federal 
GS-5 midlevel secretary as representative of a photocopy machine 
operator's salary. Using the salary level for an experienced (GS-5) 
midlevel secretary in the Federal government as representative of that 
of a photocopy machine operator, the annual salary of the photocopy 
machine operator is estimated to be $39,573, according to the Office of 
Personnel Management's 2020 General Schedule pay scale. This estimate 
include the locality pay adjustment for the rest of the United States. 
In calculating the fringe benefit of we used OMB Circular A-76 to 
calculate the annual fringe benefit cost, based on 36.25 percent of the 
GS-5 salary. The annual fringe benefit cost is $14,345 ($39,573 * 36.25 
percent). Adding the fringe benefit, the estimated total annual salary 
of the photocopying operator is estimated at: $53,918. To determine the 
per-page labor cost, the total of salary ($39,573) and fringe benefits 
($14,345) costs, which amount to $53,918, was divided by 624,000 pages, 
the number of photocopies a photocopy machine operator can make in 1 
year. The estimated labor cost for photocopying 1 page of patient 
records is $0.08 ($53,918/624,000 pages).
(2) Number of Pages a Photocopy Machine Operator Can Photocopy Annually
    We estimate the total number of pages that a photocopy machine 
operator can photocopy per year based on hand feeding of documents into 
a photocopying machine. We recognize that modern technologies exist 
which support faster photocopying, such as through automatic paper 
feeds. We are aware that using an automatic paper feeds can greatly 
increase the number of pages that can be photocopied per

[[Page 32864]]

minutes, and as a result, greatly decrease the cost of photocopying per 
page. We assume that not all providers and practitioners has access to 
modern technology or uses modern photocopier capable of automatic paper 
feed. Therefore, we would calculate the number of page a photocopy 
machine operator can photocopy, using the manual paper feed estimate. 
In calculating the number of pages that can be photocopied per hour 
using a manual feed, we take into consideration that recent 
improvements in photocopying machine technology has improved the speed 
of photocopier up to 8 pages per minute. In order to account for time 
spent by the photocopy machine operator in search and retrieval tasks, 
and time away from work on annual vacation, sick, and holiday leave, 
the total number of work hours per year is estimated at 1,300 (average 
of 5 productive hours per day), resulting in a total of 624,000 (1,300 
hour x 60 minutes x 8 pages) pages per year.
(3) Costs of Photocopying Materials and Supplies
    We are proposing a total estimated supply cost of 7 cents per page, 
based on a per-page paper cost of 6 cents and a per-page toner and 
developer cost of 1 cent per page. The supply cost include the cost of 
photocopying paper and toner cartridge. Using the market survey cost 
for these materials we estimated the average cost, using the average 
price and quality at the GSA material supplies rate, we estimated that 
copier paper cost 6 cents per page for paper and 1 cent per page for 
photocopy machine toner. The paper cost was based on a cost of $32.49 
per case for recycled white photocopier paper of 5,000 sheets in a 
case. The costs of photocopier toner that yield 37,000 copies was 
estimated at $54.99 per toner cartridge. We calculated these costs 
using estimates of the costs for recycled photocopier paper and toner 
cartridges contained in the GSA supply catalogue.
(4) Total Reimbursement Rate for Photocopying Patient Records
    We estimate total cost of photocopying at 15 cents per page. This 
calculation was derived by adding the total estimated labor cost of 8 
cents per page and total cost of photocopying supplies of (7 cents per 
page. Consistent with our policy and generally accepted mathematics 
principles, we chose to round our calculations to nearest decimal. We 
believe this decision is both reasonable and supportable. We invite 
public comment on this proposed methodology for calculation of the rate 
for reimbursement for sending patient records and information by 
photocopying. In addition, we invite public comment on alternative 
methodologies for determining a more appropriate photocopying 
reimbursement rate and intend to finalize a policy based upon the 
public comments we receive.
e. Reimbursement Rate for Providers Submitting Patient Records by 
Facsimile
    We are proposing at Sec.  476.78(e)(3) to reimburse providers and 
practitioners with approved waivers that submit patient records to the 
QIO by facsimile at the rate of $0.15 per page. The current regulations 
do not specifically provide for reimbursement for patient records 
submitted to the QIO by facsimile, but CMS's has historically 
interpreted the provisions governing reimbursement for patient records 
submitted to the QIOs through photocopying and mailing to also 
authorize reimbursement for the submission of patient records by 
facsimile. We are now proposing to specifically incorporate our 
historic interpretation into the regulatory framework. Pursuant to this 
proposal the QIOs would continue to provide for reimbursement for 
patient records submitted to the QIO via facsimile, using a rate 
estimated based on the associated with submitting patient records to 
the QIO by facsimile. We believe the rate we are proposing is fair, 
reasonable, and reflects current labor and material costs associated 
with sending patient records to the QIOs by facsimile. We calculated 
the reimbursement for submitting patient records by facsimile to the 
QIO as follows:
     Step 1. CMS adds the annual salary of a facsimile machine 
operator and the costs of fringe benefits as determined in accordance 
with the principles set forth in OMB circular A-76, to establish a 
total annual salary for the facsimile machine operator.
     Step 2. CMS divides the total annual salary of the 
facsimile machine operator by the number of pages of patient records 
that can be reasonably expected to be sent annually by facsimile. This 
calculation establishes the labor cost per page of patient records 
submitted by facsimile.
     Step 3. CMS adds to the per-page labor cost as determined 
in step two to the average cost of maintaining a dedicated phone line 
for facsimile service.
    We used this methodology to determine the specific rate of 
reimbursement we are proposing for submitting patient records to the 
QIO by facsimile. Similar to our methodology for calculating a fair and 
appropriate reimbursement rate for submitting records to the QIO via 
photocopying and mailing, we calculated the proposed reimbursement rate 
for sending patient records to the QIO by facsimile as follows:
(1) Labor Costs Associated With Submitting Patient Records by Facsimile
    Labor costs were calculated by adding the annual salary of a 
facsimile machine operator with the costs of fringe benefits, and 
dividing that sum by the number of pages that a single facsimile 
operator can reasonably be expected to submit in a year. We are 
proposing to rely upon the salary of a Federal GS-5 midlevel secretary 
as representative of a facsimile machine operator's salary. Using the 
salary level for an experienced (GS-5) midlevel secretary in the 
Federal government as representative of that of a facsimile machine 
operator, the annual salary of the facsimile operator is estimated to 
be $39,573 according to the Office of Personnel Management's 2020 
General Schedule pay scale, including the locality adjustment for the 
rest of the United States. In calculating the cost of fringe benefits 
we used OMB Circular A-76 to calculate the annual fringe benefit cost, 
based on 36.25 percent of the GS-5 salary. The annual estimated fringe 
benefit cost is $14,345 ($39,573 * 36.25 percent). With fringe 
benefits, we estimated total annual salary of the facsimile operator at 
$53,918.
(2) Number of Pages a Facsimile Operator Can Submit Annually
    We estimate the total number of pages that a facsimile machine 
operator could submit per year based on hand feeding of documents into 
facsimile machine. We recognize that several modern technologies exist 
which support faster faxing, such as through automatic paper feeds or 
faxing over the internet. These technologies greatly increase the 
number of pages that can be submitted by facsimile on an hourly basis, 
and as a result, greatly decrease per page cost of submitting patient 
records by facsimile. However, we took into consideration the fact that 
not all providers and practitioners have access to the internet or 
modernized facsimile machines. Therefore, we are proposing to calculate 
the per page reimbursement rate using the manual paper feed as our 
guide. We estimated that a facsimile machine operator using a manual 
feed can submit 5 pages of patient records to the QIO in 1 minute. This 
estimate does not account for any delay in transmission due to poor 
connectivity or machine fault. In order to account for time spent by 
the facsimile machine

[[Page 32865]]

operator in search and retrieval tasks, and time away from work on 
annual vacation, sick, and holiday leave, we estimated the total number 
of work hours per year at 1,300 (an average of 5 productive hours per 
day), resulting in a total of 390,000 (1,300 hours x 60 minutes x 5 
pages) pages of patient records, which a facsimile operator can submit 
to the QIO in 1 year.
    To determine the per-page labor cost for submitting patient records 
to the QIO via facsimile, we divided the total salary ($39,573) and 
fringe benefits ($14,345) costs, $53,918, by 390,000, the number of 
copies a facsimile operator can submit in a year, resulting in an 
estimated labor cost of 14 cents per page ($53,918/390,000 pages).
(3) Other Costs Associated With Sending Patient Records by Facsimile
    We are proposing to reimburse the cost of a dedicated telephone 
line used for a facsimile machine at the rate of $29.99 per month, for 
an estimated total cost of $359.88 per year. Our estimate does not take 
into consideration that multiple facsimile machines can use on 
telephone line, and that a telephone line can be used for other 
purposes than transmitting records via facsimile. We estimated that 1 
cent per page ($359.88/390,000 pages) would reflect the cost of a 
dedicated telephone line used for facsimile service, based on estimated 
the estimated 390,000 pages of patient records we expect a facsimile 
machine operator could submit in a year. We estimated the cost of 
telephone line using the average per month cost for a single business 
telephone line per month based on an average drawn from comparison of 
major telecommunications service provider rates. We estimate that there 
is no reimbursable paper or material cost associated with sending 
patient records to the QIO by facsimile, as CMS does not reimburse 
providers and suppliers for the cost of machinery and overhead costs 
for submitting patient records to the QIOs.
(4) Reimbursement Rate for Sending Patient Records by Facsimile
    We estimate total cost of or submitting patient records by 
facsimile to the QIO at 15 cents per page. This estimate was calculated 
by adding the total estimated labor cost of 14 cents per page, and 
total cost of a dedicated telephone line at 1 cent per page. Consistent 
with our policy and generally accepted mathematics principles, we chose 
to round our calculations to nearest decimal. We believe this decision 
is both reasonable and supportable. We invite public comment on this 
proposed methodology for calculating the rate for reimbursement for 
submitting patient records by facsimile. In addition, we invite public 
comment on alternative methodologies for determining an appropriate 
facsimile reimbursement rate and intend to finalize our policy based 
upon the public comments we receive.

B. Revised Regulations To Account for, and Mandate, PRRB Electronic 
Filing (42 CFR Part 405, Subpart R)

1. Background
    Congress created the Provider Reimbursement Review Board (PRRB or 
Board) in 1972 to furnish providers with an independent forum for 
resolving payment disputes typically arising from certain Medicare Part 
A final determinations (usually cost report audit appeals). (See 42 
U.S.C. 1395oo and 42 CFR 405.1801 and 405.1840 through 405.1873.) The 
Board has the full power and authority to make rules and establish 
procedures, not inconsistent with the law, regulations, and CMS 
Rulings, that are necessary or appropriate to carry out its function. 
(See 42 U.S.C. 1395oo(e) and 42 CFR 405.1868(a).)
    On average, the PRRB receives approximately 3,000 new appeals 
annually. The PRRB's docket is unique and complex, so it is imperative 
that the Board manage its docket in the most efficient manner possible. 
For example, an individual provider appeal may involve one or more 
issues; in contrast, a group appeal involves multiple providers 
appealing a common issue. (See 42 U.S.C. 1395oo(b) and 42 CFR 
405.1837.) In addition, many providers or issues may be transferred 
between the cases to create a complex web of interrelated appeals. In 
light of these complexities, it is imperative that the Board continue 
to improve the efficiencies of its processes.
    Until mid-2018, appeal documents (including documents such as 
appeal requests, transfer requests, and position papers) could only be 
filed with the PRRB on paper. Over the past decade, CMS and the Board 
have received feedback from its stakeholders requesting an electronic 
filing system. On August 16, 2018, the CMS Office of Hearings (OH) and 
the Board released the OH Case and Document Management System (OH 
CDMS). OH CDMS is a web-based portal where providers can file appeals 
and all parties can manage their cases. Besides instantaneously 
accepting submissions electronically, OH CDMS releases outgoing 
electronic correspondence and Board decisions as well. OH CDMS enables 
providers and their representatives to manage their cases in real time, 
and it allows parties to view all documents officially filed through 
the system (including viewing opposing parties' submissions). When a 
party makes a submission, whether submitting a new appeal or taking an 
action on an existing case, there is an immediate system notification 
that confirms the submission was made. All parties on the case will 
then receive an email confirming the date and time of delivery. 
Internally, the system also serves as a daily workflow management 
system for the PRRB and its staff and aids the PRRB in strategically 
managing its docket in a more efficient manner.
    The feedback we have received from active users of OH CDMS has been 
largely positive. We have also incorporated user suggestions to refine 
the system. OH CDMS offers a Help Desk, available each business day, to 
assist users with technical questions that may arise.
2. Technical Changes To Support Electronic Filing
    To support the use of the electronic filing system, we are 
proposing to make technical changes throughout the regulations at 42 
CFR part 405, subpart R. First, we propose to update the definitions of 
``date of receipt'' and ``reviewing entity'' at 42 CFR 405.1801(a) to 
indicate that submissions to an electronic filing system are considered 
received on the date of electronic delivery. We are also proposing to 
add a new definition of ``in writing or written'' that indicates either 
of these terms means a hard copy or electronic submission. We believe 
these are common sense technical changes that reflect current practice 
and understanding. We note that we are not proposing to revise the 
requirement in Sec.  405.1801(a) that the date of receipt by a party or 
affected nonparty of documents involved in proceedings before a 
reviewing entity, including the Board, is presumed to be 5 days after 
the date of issuance. Therefore, regardless of whether the Board issues 
a decision electronically or by some other means, the 5-day presumption 
regarding receipt by a party would continue to apply. We also propose 
to make technical changes throughout the subpart to replace references 
related to hard copy documents such as ``mail'' and ``hand delivery'' 
with terms that apply to both hard copy and electronic submissions. We 
seek comments on these changes.
    We are also proposing to update 42 CFR 405.1857, related to 
subpoenas, so that it generally conforms to the technical changes we 
are proposing.

[[Page 32866]]

However, we are proposing to add the following statement to this 
section, ``If the subpoena request is being sent to a nonparty subject 
to the subpoena, then the subpoena must be sent by certified mail.'' 
This change is to ensure that the subpoena rule is in accordance with 
section 205(d) of the Act (Issuance of subpoenas in administrative 
proceedings).
3. Intention To Revise Board Instructions To Require Mandatory 
Electronic Submissions
    As stated earlier in this preamble, the Board has the full power 
and authority to make rules and establish procedures, not inconsistent 
with the law, regulations, and CMS Rulings, that are necessary or 
appropriate to carry out its function. (See 42 U.S.C. 1395oo(e) and 42 
CFR 405.1868(a).) It is critically important that the PRRB docket 
records be fully populated within OH CDMS so that the Board and its 
stakeholders can optimally realize the technological benefits and 
efficiencies of OH CDMS. Therefore, we are proposing to amend the 
regulations at 42 CFR 405.1843 (Parties to proceedings in a Board 
appeal) to make clear that parties to a Board appeal shall familiarize 
themselves with the instructions for handling a PRRB appeal, including 
any and all requirements related to the electronic or online filing of 
documents for future mandatory filing. This change to require 
electronic submissions would transform the PRRB's docket to a more 
efficient and less costly paperless environment, and will support a 
better continuity of operations posture. Accordingly, no earlier than 
FY 2021, the PRRB may require that all new submissions (in new and 
pending appeals) be filed electronically using OH CDMS. This 
requirement would be reflected in updated Board instructions, which are 
currently published at https://www.cms.gov/Regulations-and-Guidance/Review-Boards/PRRBReview/Downloads/PRRB-Rules-August-29-2018.pdf.
    Because the Board plans to wait until at least FY 2021 to 
potentially require electronic filings, we believe that stakeholders 
would have ample time necessary to register and start using the system 
to the extent they have not already done so on a voluntary basis. 
Stakeholders can access the Electronic Filing web page located at 
https://www.cms.gov/Regulations-and-Guidance/Review-Boards/PRRBReview/Electronic-Filing to find instructions on accessing and using OH CDMS. 
We recommend that parties to PRRB appeals, who have not already, sign 
up for and begin using OH CDMS as soon as possible to allow time to 
become familiar with the system and to avoid any issues that may arise 
if signing up for the system is delayed until after use of the system 
becomes mandatory.
    It has already been approximately 21 months since the system became 
operational and available to stakeholders. In this regard, we note the 
following:
     Many providers started using the system immediately after 
OH CDMS was launched.
     OH CDMS now has over 700 registered users, and continues 
to grow. We believe that this number of users is largely representative 
of the cohort of stakeholders that will use OH CDMS.
     Over 65 percent of all new appeals have been filed 
electronically by providers using the system.
     All government contractors that participate in PRRB 
appeals (including Medicare Administrative Contractors (MACs), the Cost 
Report Audit and Appeals contractor (CRAA), and the Appeals Support 
Contractor (ASC)) use the system.
    Nevertheless, to provide additional notice to stakeholders, the 
PRRB would provide at least 60 calendar days' notice (through its 
instructions) before the exact date that electronic filing would become 
mandatory. Thus, under the proposed rule, the earliest the PRRB could 
publish such instructions would be October 1, 2020 and, as a result, 
the earliest effective date for mandatory usage of the system for PRRB 
appeals submissions would be November 30, 2020.
    We note that making use of OH CDMS mandatory for PRRB appeals is 
consistent with recent revisions updating the Medicare Geographic 
Classification Review Board (MGCRB) regulations that similarly permit 
the MGCRB to require the use of OH CDMS through its instructions. The 
MGCRB regulatory change was published in the FY 2017 IPPS/LTCH PPS 
final rule (81 FR 56928 (August 22, 2016)) and the requirement to file 
electronically was effective for the 2020 reclassification cycle. The 
transition to mandatory electronic filing of MGCRB applications went 
smoothly, and we received positive feedback regarding OH CDMS from the 
user community.
    Finally, we note that the provisions governing contractor hearing 
officer appeals, Administrative and Judicial Review and reopenings are 
also found in part 405 subpart R. However, we are not proposing changes 
to the submission procedures for these processes at this time.

B. Proposed Revisions of Medicare Bad Debt Policy

1. Background
    Under the Medicare program, beneficiaries may be responsible for 
payments of premiums, copayments, deductibles (including blood 
deductibles), and coinsurance amounts that are related to covered 
services (42 CFR 409.80 through 409.89). The Medicare program 
recognizes that a beneficiary's failure to pay a deductible or 
coinsurance amount could lead to non-Medicare patients bearing the 
related costs of covered Medicare services, a result that is barred by 
the prohibition of cross-subsidization detailed in 1861(v)(1)(A)(i) of 
the Act (see also 42 CFR 413.89(d)).
    Reimbursement to providers is allowable under Medicare for 
beneficiaries' unpaid deductible and coinsurance amounts for covered 
services reimbursed by the program on the basis of reasonable cost or 
paid under a cost-based prospective payment system. Thus, the following 
amounts are not included as allowable bad debts under Medicare:
     Unpaid Medicare deductible and coinsurance amounts 
associated with furnishing non-covered services and services furnished 
to non-Medicare patients.
     Unpaid Medicare premiums and Medicare copayments \500\ 
associated with any covered service.
---------------------------------------------------------------------------

    \500\ While copayments and coinsurance amounts are both amounts 
of Medicare beneficiary cost sharing, a copayment is usually a fixed 
amount a beneficiary may be required to pay as their share of cost 
for a medical service or supply (for example, a doctor's visit, 
hospital outpatient visit, or prescription drug). Unpaid copayments 
are excluded from bad debt reimbursement. Conversely, a coinsurance 
amount is usually an amount a beneficiary may be required to pay as 
a percentage share of cost with the Medicare plan for services after 
the payment of any applicable deductible.
---------------------------------------------------------------------------

     Unpaid Medicare deductible and coinsurance amounts 
associated with any covered services paid by the Program under a fee 
schedule or under a reasonable charge-based methodology including 
Program fee schedule payments made to physicians (including payments to 
providers on behalf of provider-based physicians) for professional 
services and fee schedule payments made to other practitioners.
     Unpaid Medicare deductible and coinsurance amounts 
associated with covered services paid for under a contractual capitated 
rate-based plan, such as but not limited to, a Medicare Advantage plan.
     Unpaid Medicare deductible and coinsurance amounts written 
off to charity care.

[[Page 32867]]

     Unpaid Medicare deductible and coinsurance amounts written 
off to a contractual allowance account.
    In accordance with section 1861(v)(1) of the Act and regulations at 
Sec.  413.89, Medicare pays some of the uncollectible deductible and 
coinsurance amounts to certain providers, suppliers and other entities 
(hereinafter collectively referred to as ``providers'') eligible to 
receive reimbursement for bad debt of Medicare beneficiaries. To 
determine if bad debt amounts are allowable, providers must meet the 
requirements at Sec.  413.89, and Chapter 3, Bad Debts, Charity and 
Courtesy Allowances, of the Provider Reimbursement Manual (PRM) (CMS 
Pub. 15-1) (hereinafter referred to as PRM), which provides further 
explanation and instruction regarding the requirements for Medicare bad 
debt reimbursement.
    The reimbursement of Medicare bad debt was not originally 
statutorily mandated; rather, it was first promulgated by CMS \501\ in 
1966 \502\ shortly after the Medicare Program's inception and was 
thereafter set forth in the regulations.\503\ Congress later 
statutorily created reimbursement limits on allowable Medicare bad debt 
under section 1861(v)(1)(T), (V) and (W) of the Act. The regulations at 
Sec.  413.89(b)(1) define ``bad debts'' as amounts considered to be 
uncollectible from accounts and notes receivable that were created or 
acquired in providing services. Accounts receivable and notes 
receivable are designations for claims arising from the furnishing of 
services, and are collectible in money in the relatively near future. 
Similar language is set forth in the PRM, Chapter 3, Section 302.1. To 
be an allowable Medicare bad debt, the debt must meet all of the 
following criteria (see Sec.  413.89(e) and PRM, Chapter 3, Section 
308):
---------------------------------------------------------------------------

    \501\ To implement the Medicare statute, the Social Security 
Administration (SSA) was reorganized and the Bureau of Health 
Insurance (BHI) was established on July 30, 1965. The BHI then 
became responsible for the development of health insurance policy 
before the creation of the Health Care Financing Administration 
(HCFA), later renamed CMS. CMS Milestones 1937-2015 (July 2015).
    \502\ November 22, 1966 (31 FR 14813).
    \503\ The current Medicare bad debt regulations were originally 
proposed and finalized in 1966 and codified at Sec.  405.420.
---------------------------------------------------------------------------

     The debt must be related to covered services and derived 
from deductible and coinsurance amounts.
     The provider must be able to establish that reasonable 
collection efforts were made.
     The debt was actually uncollectible when claimed as 
worthless.
     Sound business judgment established that there was no 
likelihood of recovery at any time in the future.
    In 1987, Congress enacted legislation that implemented a moratorium 
prohibiting the Secretary and contractors from making changes to 
Medicare bad debt reimbursement policies that were in effect on August 
1, 1987 for hospitals. This is typically referred to as the ``Bad Debt 
Moratorium.'' (See section 4008(c) of the Omnibus Budget Reconciliation 
Act of 1987 (Pub. L. 100-203)). In section 3201 of the Middle Class Tax 
Relief and Job Creation Act of 2012 (Pub. L. 112-96), the Bad Debt 
Moratorium was repealed by Congress, effective for cost reporting 
periods beginning on or after October 1, 2012.
    Because the bad debt moratorium is no longer in existence, we 
believe it is appropriate to clarify certain Medicare bad debt policies 
that have been the subject of litigation, and generated interest and 
questions from stakeholders over the past several years. Hence, this 
proposed rule proposes to clarify, update and codify certain 
longstanding Medicare bad debt principles into the regulations by 
revising Sec.  413.89, ``Bad debts, charity, and courtesy allowances.'' 
Additionally, in this proposed rule, we would recognize the new 
Accounting Standards Update--Topic 606 for revenue recognition and 
classification of Medicare bad debts. We are also proposing technical 
corrections to the incorrect cross references in 42 CFR 412.622 and 
417.536 to refer to the Medicare bad debt reimbursement regulation at 
Sec.  413.89.
    We are proposing that the clarification and codification of our 
longstanding Medicare bad debt policies, where indicated herein, be 
effective for cost reporting periods beginning before, on, and after 
the effective date of this rule, because of the important public 
interest it would serve to do so as set forth in section 
1871(e)(1)(A)(ii) of the Act. These longstanding bad debt policies have 
existed in Medicare guidance, including the PRM, for several decades 
and providers and beneficiaries are familiar with and rely upon them. 
The clarification and codification of longstanding Medicare bad debt 
policies into the regulations with a retroactive effective date does 
not affect prior transactions or impose additional duties or adverse 
consequences upon providers or beneficiaries, nor does it diminish 
rights of providers or beneficiaries. The clarification and 
codification of longstanding Medicare bad debt policies into the 
regulations with a retroactive effective date also serves an important 
public interest to assist providers and beneficiaries by avoiding 
confusion as to which longstanding policy should be applied for which 
cost reporting period, as might arise if the effective date was instead 
proposed for cost reporting periods beginning on or after the effective 
date of this rule. Failing to adopt the clarification and codification 
of longstanding Medicare bad debt policies with a retroactive effective 
date might lead some providers to believe that those policies did not 
apply to earlier cost reporting periods, and thus might cause those 
providers to resubmit previously submitted cost reports. The 
clarification and codification of longstanding Medicare bad debt 
policies into the regulations with a retroactive effective date serves 
the important public interest of promoting fairness and economy to 
providers by saving them the time and resources required for such 
resubmissions, and by saving government resources and funds from the 
taxpayer-funded Medicare Trust Fund that would be expended in review of 
cost report resubmissions. Our specific proposals for revising our 
regulations are discussed in this section of this rule.
2. Proposed Revisions to Regulations
a. Reasonable Collection Effort, Non-Indigent Beneficiaries
    Providers are permitted to collect unpaid Medicare cost sharing 
amounts from beneficiaries, unless beneficiaries have been determined 
to be categorically or medically needy by State Medicaid Agencies to 
receive medical assistance from Medicaid, or determined to be indigent 
by the provider for Medicare bad debt purposes. If a beneficiary's 
Medicare cost sharing remains unpaid, in order to claim reimbursement 
from Medicare for the bad debt, providers must demonstrate that they 
have first made a reasonable effort to collect the beneficiary's unpaid 
deductible and/or coinsurance amounts. (See Sec.  413.89(e)(2) and the 
PRM, Chapter 3, Section 310.) This reasonable effort to collect the 
unpaid deductible and coinsurance amounts is, in part, based on the 
provider applying sound business judgment and has been a longstanding 
Medicare bad debt policy requirement articulated in the PRM since 1968. 
The PRM section 310 describes a ``reasonable collection effort'' and 
sets forth how providers must effectuate the reasonable collection 
effort, as a precondition to reimbursement of a provider's bad debt. We 
note that the provider's required collection efforts set forth in PRM 
section 310 apply only to non-indigent

[[Page 32868]]

beneficiaries; the provider's required collection efforts are different 
for beneficiaries who have been determined by the provider to be 
indigent, including medically indigent, or beneficiaries enrolled in 
Medicaid. In this proposed rule, we are proposing to clarify and codify 
the distinction between non-indigent beneficiaries and indigent 
beneficiaries for Medicare bad debt purposes.
    Specifically, we are proposing to amend Sec.  413.89(e)(2) by 
adding a new paragraph (e)(2)(i) to define, for Medicare bad debt 
purposes, a non-indigent beneficiary as a beneficiary who has not been 
determined to be categorically or medically needy by a State Medicaid 
Agency to receive medical assistance from Medicaid, and has not been 
determined to be indigent by the provider for Medicare bad debt 
purposes.
    These proposals would be effective for cost reporting periods 
beginning before, on, and after the effective date of this rule because 
the difference in collection efforts required by a provider for 
indigent and non-indigent beneficiaries has existed since the 
promulgation of Medicare bad debt policy and the definition of a non-
indigent beneficiary codifies the existing meaning of the term.
(1) Issuance of a Bill, PRM Section 310
    Under Medicare bad debt policy, a provider is required to 
demonstrate that it has made a reasonable effort to collect 
beneficiaries' unpaid deductibles and coinsurance amounts. PRM section 
310 sets forth that to be considered a reasonable collection effort, a 
provider's effort to collect Medicare deductible and coinsurance 
amounts must be similar to the effort the provider puts forth to 
collect comparable amounts from non-Medicare patients. It must involve 
the issuance of a bill on or shortly after discharge or death of the 
beneficiary to the party responsible for the patient's personal 
financial obligations. It also includes other actions such as 
subsequent billings, collection letters and telephone calls or personal 
contacts with this party which constitute a genuine, rather than a 
token, collection effort. The provider's collection effort may include 
using or threatening to use court action to obtain payment.
    Generally, providers will have financial incentives to issue bills 
to patients as soon as possible to collect the outstanding debt and 
remove it from their financial records, or present beneficiaries' 
unpaid deductible and coinsurance amounts to Medicare after a 
reasonable collection effort period for reimbursement of the Medicare 
reimbursable amount.
    Over the past several years, we have received feedback from 
stakeholders indicating that ``shortly after'' in PRM section 310 is 
too vague, as well as inquiries as to what timeframe ``shortly after'' 
means for providers to comply with the reasonable collection effort. 
Stakeholders have suggested that ``shortly after'' could be anywhere 
from 30 days to a year following the discharge or death of the 
beneficiary. The Merriam Webster definition of ``short(ly)'' \504\ is 
``not extended in time,'' ``brief,'' ``expeditious,'' or ``quick.'' 
Although the timeframe ``shortly after'' was drafted in the PRM section 
310 decades ago with an eye toward affording flexibility to providers, 
inquiries from stakeholders and variances in the application of 
``shortly after'' over the years have led us to believe that a more 
definitive timeframe should be considered while still maintaining the 
greatest flexibility for providers.
---------------------------------------------------------------------------

    \504\ https://www.merriam-webster.com/dictionary/short.
---------------------------------------------------------------------------

    We believe that a timeframe of 30 or 60 days would be too short 
because it may not allow providers with varying billing practices the 
ability to issue the bill within that timeframe. A timeframe of 90 or 
120 days would afford greater flexibility, as we have found this to be 
in the upper parameters of most providers' billing practices for the 
issuances of bills to patients.
    In addition to the queries over the definition of ``shortly 
after,'' stakeholders have questioned whether the benchmark event for 
the issuance of the bill should be the ``discharge or death of the 
beneficiary,'' or some other event. Generally, Medicare fee for service 
claims must be filed with the appropriate Medicare claims processing 
contractor no later than 12 months, or 1 calendar year, after the date 
the services were furnished.
    42 CFR 424.44. For institutional providers that have a span of 
dates of services (that is, from X date through X date), the 
``through'' date (that is, the last day of service) is used as the date 
of service for the 12 month (or 1 calendar year) timeframe for a 
provider to timely submit a bill (CMS Pub. 100-04, section 70.4). 
Following the processing of the claim, the provider receives a Medicare 
remittance advice evidencing the claim processing. Because providers 
have 12 months from the date of service to timely submit a bill to 
Medicare, we believe that requiring a provider to issue a bill for the 
beneficiary's unpaid cost sharing following the ``discharge or death of 
the beneficiary'' is a much shorter timeframe and does not afford 
flexibility to the provider when the provider has a much longer 
timeframe of 12 months from the date a service was provided to bill 
Medicare in accordance with the billing requirements. We note that 
providers usually issue a bill to a beneficiary, or the party who is 
financially responsible for the beneficiary's personal financial 
obligations, within 120 days of death or discharge. We believe that a 
more flexible option could be to require the provider to issue a bill 
for Medicare cost sharing no later than 120 days following the 
provider's receipt of the Medicare remittance advice for the processed 
claim, because this is similar to providers' usual billing timeframes, 
or some other event as discussed herein.
    We have received suggestions from stakeholders that the benchmark 
event for the provider to issue a bill to the beneficiary for Medicare 
cost sharing should be after the provider's receipt of payment from the 
beneficiary's secondary payer,\505\ if any. In this instance, a 
beneficiary may have other insurance, secondary to Medicare that may 
also have a coverage liability to pay for the service provided to the 
beneficiary. Secondary insurance may pay some or all of the costs left 
after the primary insurer, Medicare, has paid (for example, deductibles 
and/or coinsurance amounts). In this regard, the provider must bill 
Medicare and the secondary payer in order to determine the 
beneficiary's accurate and outstanding Medicare cost sharing liability. 
Because there is no minimum date by which a provider must issue a bill 
to the party responsible for the beneficiary's cost sharing, and 
providers can claim Medicare bad debt in the cost reporting period in 
which the debt was deemed worthless, there is no disadvantage to the 
provider for us to adopt one or all of the aforementioned benchmark 
scenarios upon which a provider must issue a bill.
---------------------------------------------------------------------------

    \505\ This secondary payer is other than Medicaid for a dual 
eligible beneficiary.
---------------------------------------------------------------------------

    Longstanding Medicare bad debt policy also requires that a 
provider's reasonable collection effort include other actions such as 
subsequent billings, collection letters and telephone calls or personal 
contacts with this party which constitute a genuine, rather than token, 
collection effort.'' Additionally, providers must furnish documentation 
to its contractor that includes the provider's bad debt collection 
policy which describes the collection process for Medicare and non-
Medicare

[[Page 32869]]

patients; the beneficiary's account history documents which show the 
dates of various collection actions such as the issuance of bills to 
the beneficiary, follow-up collection letters, reports of telephone 
calls and personal contact, etc.; and the beneficiary's file with 
copies of the bill(s) and follow-up notices.
    Therefore, we are proposing to amend Sec.  413.89(e)(2) by adding a 
new paragraph (e)(2)(i)(A) to specify the reasonable collection effort 
requirement for a non-indigent beneficiary must be similar to the 
effort the provider, and/or the collection agency acting on the 
provider's behalf, puts forth to collect comparable amounts from non-
Medicare patients. It must involve the issuance of a bill to the 
beneficiary or the party responsible for the beneficiary's personal 
financial obligations on or before 120 days after: (1) The date of the 
Medicare remittance advice; or (2) the date of the remittance advice 
from the beneficiary's secondary payer, if any; whichever is latest. A 
provider's reasonable collection effort also includes other actions 
such as subsequent billings, collection letters and telephone calls or 
personal contacts with this party which constitute a genuine, rather 
than token, collection effort. Additionally, a provider must maintain 
and, upon request, furnish documentation to its contractor that 
includes the provider's bad debt collection policy which describes the 
collection process for Medicare and non-Medicare patients; the 
beneficiary's account history documents which show the dates of various 
collection actions such as the issuance of bills to the beneficiary, 
follow-up collection letters, reports of telephone calls and personal 
contact, etc.; and the beneficiary's file with copies of the bill(s) 
and follow-up notices.
    In this proposed rule, we are proposing that these revisions, 
except for Sec.  413.89(e)(2)(i)(A)(2) and (3), would be effective for 
cost reporting periods beginning before, on and after the effective 
date of this rule. The provisions proposed in Sec.  
413.89(e)(2)(i)(A)(3), regarding the requirement to issue a bill to the 
beneficiary or the party responsible for the beneficiary's personal 
financial obligations based on the remittance advice date from Medicare 
or the beneficiary's secondary payer, if any, would be effective for 
cost reporting periods beginning on or after the effective date of this 
rule.
    In this proposed rule, we are also proposing that the proposals for 
Sec.  413.89(e)(2)(i)(A)(2) regarding the prior longstanding Medicare 
bad debt policy requiring the issuance of a bill to the beneficiary or 
the party responsible for the beneficiary's personal financial 
obligations on or shortly after discharge or death of the beneficiary 
would be effective for cost reporting periods beginning before the 
effective date of this rule.
(2) 120-Day Collection Effort and Reporting Period for Writing Off Bad 
Debts
    Under Medicare bad debt policy, PRM section 310.2 sets forth a 
``presumption of noncollectibility,'' which provides that if after 
reasonable and customary attempts to collect a bill, the debt remains 
unpaid more than 120 days from the date the first bill is mailed to the 
beneficiary, the debt may be deemed uncollectible.
    This means that a provider must make reasonable and customary 
attempts to collect a bill for at least 120 days from (and including) 
the date the first bill is mailed to the beneficiary (or the party 
responsible for the beneficiary's personal financial obligations), 
including when a provider uses a collection agency to collect a bill. 
If the debt remains unpaid on the 121st day from the date the first 
bill is mailed to the beneficiary, the provider can cease collection 
efforts and presume that the account is non-collectible, and designate 
the unpaid deductible and coinsurance amounts as an uncollectible bad 
debt.
    Over the past several years, questions have arisen from 
stakeholders with regard to the effect on the collection effort when a 
provider receives partial payments during the 120-day collection effort 
time period. We have always intended that when a partial payment is 
received within the required 120-day collection effort period, the 
collection effort is not completed and the 120-day time period restarts 
on the day the partial payment is received. The language in the PRM 
section 310.2 supports this reasoning as it sets forth ``if, after 120 
days, a payment is not received, the unpaid amount can be written 
off.'' The corollary is that if, within the 120 days, a partial payment 
is received, the remaining uncollected amount cannot be written off to 
Medicare bad debt because the collection effort is active and ongoing 
by way of the response from the beneficiary submitting a payment. The 
partial payment received evidences the beneficiary's willingness to pay 
the debt, at least in part, and the provider must further engage with 
the beneficiary and follow up, by way of continuing the collection 
effort and sending additional collection letters or bills to the 
beneficiary for another 120-day collection effort time period. The 
purpose of Medicare bad debt is to reimburse providers for 
beneficiaries' unpaid deductibles and/or coinsurance amounts. It is 
reasonable to place a date of finality on the collection effort time 
period; hence, the 120-day minimum collection time period. However, 
when partial payments are received within the 120-day time period, it 
is reasonable to presume the remaining unpaid amount is collectible and 
expect the provider to continue the collection effort instead of 
presuming it to be non-collectible and requesting Medicare to reimburse 
the provider for what the beneficiary is actively engaging to pay. This 
rationale constitutes a reasonable collection effort as required by 
Sec.  413.89(e)(2).
    Requiring the 120-day collection effort timeframe to start anew 
when a partial payment is received during the 120 days is not 
burdensome to the provider and requires little additional resources 
from the provider because the account is still open on the provider's 
accounting books, and has not yet been written off as a bad debt. 
Additionally, because ``uncollectible deductibles and coinsurance 
amounts are recognized as allowable bad debts in the reporting period 
in which the debts are determined to be worthless,'' (PRM, Chapter 3, 
Section 314), the provider can claim the unpaid amounts as a Medicare 
bad debt after the additional 120-day collection effort time period, 
provided that no additional payment is received that would require an 
extension of the 120-day collection effort time period again.
    We are proposing to amend Sec.  413.89(e)(2) by adding a new 
paragraph (e)(2)(i)(A)(5)(ii) to specify that when the provider 
receives a partial payment within the minimum 120-day required 
collection effort period, the provider must continue the collection 
effort and the day the partial payment is received is day one of the 
new collection period. For each subsequent partial payment received 
during a 120-day collection effort period, the provider must continue 
the collection effort and the day the subsequent partial payment is 
received is day one of the new collection period. The provider is 
permitted to end the collection effort at the end of a 120-day 
collection effort period when no payments have been received during 
those consecutive 120 days. These revisions would be effective for cost 
reporting periods beginning before, on and after the effective date of 
this rule because we are proposing to clarify and codify our 
longstanding policy pertaining to the required 120-day collection 
effort.

[[Page 32870]]

    In this proposed rule, we are also proposing to codify into the 
regulations our longstanding policy as set forth in PRM section 316, 
Recovery of Bad Debts, which specifies required procedures for when a 
provider receives a payment, or recovery, for an amount that was 
previously claimed as a Medicare bad debt, and paid, in a prior cost 
reporting period. Consistent with this proposal, we are proposing to 
amend Sec.  413.89(f) by adding language to specify that, effective for 
cost reporting periods beginning before, on and after October 1, 2020, 
the deductible and coinsurance amounts uncollected from beneficiaries 
are to be written off and recognized as allowable bad debts in the cost 
reporting period in which the accounts are deemed to be worthless. Any 
payment on the account made by the beneficiary, or a responsible party, 
after the write-off date but before the end of the cost reporting 
period, must be used to reduce the final bad debt for the account 
claimed in that cost report.
    In some cases an amount written off as a bad debt and reimbursed by 
the program in a prior cost reporting period may be recovered in a 
subsequent accounting period; in such situations, the recovered amount 
must be used to reduce the provider's reimbursable costs in the period 
in which the amount is recovered. However, the amount of such reduction 
in the period of recovery must not exceed the actual amount reimbursed 
by the program for the related bad debt in the applicable prior cost 
reporting period. Because this is has been our longstanding policy as 
set forth in the PRM for several decades, we are codifying this policy 
into the regulations to also apply to cost reporting periods beginning 
before, on and after the effective date of this rule.
(3) Similar Collection Effort Required, Including Collection Agency 
Use, PRM Section 310
    Under Medicare bad debt policy, Medicare regulations at Sec.  
413.89(e)(2) require that providers engage in reasonable collection 
efforts. Our manual guidance currently states that, ``[t]o be 
considered a reasonable collection effort, a provider's effort to 
collect Medicare deductible and coinsurance amounts must be similar to 
the effort the provider puts forth to collect comparable amounts from 
non-Medicare patients.'' PRM section 310. As such, a provider's 
dissimilar debt collection practices for Medicare and non-Medicare 
patient accounts do not constitute a provider's ``reasonable collection 
effort'' to claim reimbursement from Medicare for a bad debt, whether 
the collection effort from the provider is an in-house collection 
effort or if the provider elects to refer bad debt accounts to a 
collection agency for an outside collection effort. This policy has 
been the subject of dispute by stakeholders in the past and we believe 
that a clarification of the policy is necessary with incorporation of 
the PRM guidance into the regulations.
    If a provider elects to refer its non-Medicare accounts to a 
collection agency, the provider must similarly refer its Medicare 
accounts of ``like amount.'' The PRM section 310.A states that where a 
collection agency is used, Medicare expects the provider to refer all 
uncollected patient charges of like amount to the agency without regard 
to class of patient. The ``like amount'' requirement may include 
uncollected charges above a specified minimum amount. Therefore, if a 
provider refers to a collection agency its uncollected non-Medicare 
patient charges which in amount are comparable to the individual 
Medicare deductible and coinsurance amounts due the provider from its 
Medicare patient, Medicare requires the provider to also refer its 
uncollected Medicare deductible and coinsurance amounts to the 
collection agency.
    When the provider uses a collection agency to perform a reasonable 
collection effort on its behalf, the provider must ensure that the 
collection agency's collection effort is similar to the effort the 
collection agency puts forth to collect comparable amounts from non-
Medicare patients. This means that for similar, comparable amounts of 
the collection accounts, the collection agency must use similar 
collection practices for both accounts.
    The collection agency's collection effort can include subsequent 
billings, collection letters, and telephone calls or personal contacts 
with the party who is financially responsible for the beneficiary's 
personal financial obligation which constitute a genuine, rather than a 
token, collection effort. The collection agency's collection effort may 
also include using or threatening to use court action to obtain 
payment. Where the collection agency does not follow the reasonable 
collection effort requirement, Medicare does not recognize the fees as 
an allowable administrative cost. Collection accounts that remain at a 
collection agency, for whatever reason, including accounts that are 
monitored passively by the collection agency, cannot be claimed by the 
provider as a Medicare bad debt. This is because during the period the 
unpaid account remains at the collection agency, the provider cannot 
meet the fourth regulatory requirement in Sec.  413.89(e)(4) that 
``sound business judgment established that there was no likelihood of 
recovery at any time in the future.'' While an account remains at a 
collection agency, there is always a likelihood of at least some 
recovery on the account. The purpose of having an account at a 
collection agency is to collect on the account, even if the account is 
in a passive collection status. Hence, the very act of having an 
account at a collection agency is deemed to be a collection effort 
undertaken by the provider. As such, the provider cannot establish that 
there is ``no likelihood of recovery at any time in the future'' for 
the account and the provider is unable to claim the account as an 
allowable Medicare bad debt.
    The fee charged by the collection agency is its charge for 
providing the collection service and is not considered a Medicare bad 
debt. Where a provider uses the services of a collection agency and the 
collection agency performs a reasonable collection effort, Medicare 
recognizes the fees the collection agency charges the provider as an 
allowable administrative cost. When a collection agency obtains payment 
of an account receivable, the gross amount collected reduces the 
patient's account receivable by the same amount and must be credited to 
the patient's account. The collection fee deducted by the agency is 
charged to administrative costs.
Example 1--Collection Agency Charges Percent Fee
    The provider sends a beneficiary's account of $400 to the 
collection agency and the collection agency's fee for its service is 30 
percent of the collected amount. If the collection agency collects $220 
from the beneficiary, the collection agency keeps $66 (30 percent of 
$220) as its fee for the collection services and remits $154 ($220 less 
$66) to the provider. The provider records the full amount collected by 
the collection agency ($220) in the beneficiary's account receivable 
and records the collection fee ($66) in administrative costs. Once the 
collection agency completes the required collection efforts on this 
account, returns the account back to the provider and the provider 
deems the account worthless, the provider can claim on its cost report 
the amount of $180 ($400 less $220) as a Medicare bad debt (subject to 
further statutorily mandated reductions as set forth in Sec.  
413.89(h)). The provider cannot claim the $66 collection agency fee as 
a Medicare bad debt.

[[Page 32871]]

Example 2--Collection Agency Charges Flat Fee
    The provider sends a beneficiary's account of $400 to the 
collection agency and the collection agency's flat fee is $100 per 
account for its services. If the collection agency collects $250 from 
the beneficiary, the collection agency keeps $100 as its fee for the 
collection services and remits $150 ($250 less $100) to the provider. 
The provider records the full amount collected by the collection agency 
($250) in the beneficiary's account receivable and records the 
collection fee ($100) in administrative costs. Once the collection 
agency completes the required collection effort on this account, 
returns the account back to the provider and the provider deems the 
account worthless, the provider can claim on its cost report the amount 
of $150 ($400 less $250) as a Medicare bad debt (subject to further 
statutory mandated reductions as set forth in Sec.  413.89(h)). The 
provider cannot claim the $100 collection agency fee as a Medicare bad 
debt.
    We therefore are proposing to amend Sec.  413.89(e)(2) by adding a 
new paragraph (e)(2)(i)(A) to specify that a provider's effort to 
collect Medicare deductible and coinsurance amounts must be similar to 
the effort the provider puts forth to collect comparable amounts from 
non-Medicare patients. A provider's dissimilar debt collection 
practices for Medicare and non-Medicare patient accounts do not 
constitute a reasonable collection effort to claim reimbursement from 
Medicare for a bad debt, whether the collection effort from the 
provider is an in-house collection effort or if the provider elects to 
refer bad debt accounts to a collection agency for an outside 
collection effort. A provider may use a collection agency to perform a 
reasonable collection effort on its behalf. The provider must ensure 
that the collection agency's collection effort is similar to the effort 
the collection agency puts forth to collect comparable amounts from 
non-Medicare patients. The collection agency's collection effort can 
include subsequent billings, collection letters, and telephone calls or 
personal contacts with this party which constitute a genuine, rather 
than a token, collection effort. The collection agency's collection 
effort may include using or threatening to use court action to obtain 
payment. The fee charged by the collection agency is its charge for 
providing the collection service and is not considered a Medicare bad 
debt. Where a provider uses the services of a collection agency and the 
collection agency performs a reasonable collection effort, Medicare 
recognizes the fees the collection agency charges the provider as an 
allowable administrative cost. Where the collection agency does not 
follow the reasonable collection effort requirement, Medicare does not 
recognize the fees as an allowable administrative cost. Collection 
accounts that remain at a collection agency, for whatever reason, 
including accounts that are monitored passively by the collection 
agency, cannot be claimed by the provider as a Medicare bad debt. When 
a collection agency obtains payment of an account receivable, the gross 
amount collected reduces the patient's account receivable by the same 
amount and must be credited to the patient's account. The collection 
fee deducted by the agency is charged to administrative costs.
    These revisions would be effective for cost reporting periods 
beginning before, on and after the effective date of this rule because 
we are clarifying and codifying our longstanding policy.
(4) Documentation Required--Reasonable Collection Effort for Non-
Indigent Beneficiaries
    Medicare's longstanding bad debt policy requires that as part of a 
provider's reasonable collection effort for beneficiaries, including 
non-indigent beneficiaries, the provider must maintain and, upon 
request, furnish to the Medicare contractor documentation of the 
provider's collection effort, whether the provider performs the 
collection effort in house or whether the provider uses a collection 
agency to perform the required collection effort on the provider's 
behalf. PRM section 310.B. The documentation of the collection effort 
must include: The provider's bad debt collection policy which describes 
the collection process for Medicare and non-Medicare patients; the 
patient account history documents which show the dates of various 
collection actions such as the issuance of bills, follow-up collection 
letters, reports of telephone calls and personal contact, etc. Unpaid 
deductible and coinsurance amounts without collection effort 
documentation are not considered as allowable bad debts.
    Therefore, we propose to amend Sec.  413.89(e)(2) by adding a new 
paragraph (e)(2)(i)(A)(6) to specify the requirements a provider must 
follow in order to establish the provider's reasonable collection 
effort for non-indigent beneficiaries.
    Because these are clarifications of codifications of longstanding 
Medicare bad debt policy, these revisions would be effective for cost 
reporting periods beginning before, on and after the effective date of 
the final rule.
b. Reasonable Collection Effort, Beneficiaries Determined Indigent by 
Provider Using Required Criteria
    Under PRM, Chapter 3, Section 312, a provider may determine a 
beneficiary to be indigent for purposes of claiming a beneficiary's 
unpaid deductible and/or coinsurance amounts as a Medicare bad debt. A 
provider can determine a beneficiary's indigence in one of two ways: 
(1) When the beneficiary is eligible for Medicaid as either a 
categorically or medically needy individual (that is, a dual eligible 
Medicare beneficiary); or (2) the provider determines a non-dual 
eligible Medicare beneficiary, to be indigent by applying the 
provider's customary methods for determining a patient to be indigent 
under the evaluation criteria in PRM section 312. A. through D. Once 
indigence is determined by the provider, and the provider concludes 
that there has been no improvement in the beneficiary's financial 
condition, the debt may be deemed uncollectible without the provider 
having to collect the unpaid Medicare cost sharing liability from 
beneficiaries by applying the requirements set forth in PRM section 310 
for non-indigent beneficiaries.
    Over the past several years, the criteria set forth in PRM section 
312 regarding the determination of indigence have been the subject of 
litigation as questions have been raised as to whether the criteria are 
mandatory. In this proposed rule, we are proposing to clarify and 
codify our longstanding policy and criteria set forth in PRM section 
312 A. through D. (setting for the requirements for a facility's 
determination of indigency).
    Stakeholders have asked why PRM section 312.C requires that the 
beneficiary's total resources be considered when a provider evaluates a 
beneficiary's indigence. We believe that each beneficiary's unique 
total resources must be evaluated to determine whether a beneficiary is 
indigent. This evaluation must include, but is not limited to, an 
analysis of assets (only those convertible to cash, and unnecessary for 
the beneficiary's daily living), liabilities, and income and expenses, 
as well as any extenuating circumstances that would affect the 
determination of the beneficiary's indigence.
    Therefore, we are proposing to amend Sec.  413.89(e)(2) by adding 
new paragraph (e)(2)(ii) to define an indigent non-dual eligible 
beneficiary as a Medicare beneficiary who is determined to be indigent 
by the provider and not eligible for Medicaid as categorically or

[[Page 32872]]

medically needy. We are also proposing to amend Sec.  413.89(e)(2) by 
adding new paragraph (e)(2)(ii)(A) to specify that to determine a 
beneficiary to be an indigent non-dual eligible beneficiary, the 
provider must apply its customary methods for determining whether the 
beneficiary is indigent under the following requirements: (1) The 
beneficiary's indigence must be determined by the provider, not by the 
beneficiary; that is, a beneficiary's signed declaration of their 
inability to pay their medical bills and/or deductibles and coinsurance 
amounts cannot be considered proof of indigence; (2) the provider must 
take into account a beneficiary's total resources which includes, but 
is not limited to, an analysis of assets (only those convertible to 
cash and unnecessary for the beneficiary's daily living), liabilities, 
and income and expenses. While a provider must take into account a 
beneficiary's total resources in determining indigence, any extenuating 
circumstances that would affect the determination of the beneficiary's 
indigence must also be considered; and (3) the provider must determine 
that no source other than the beneficiary would be legally responsible 
for the beneficiary's medical bill; for example, a legal guardian.
    We are also proposing to amend Sec.  413.89(e)(2) by adding new 
paragraph (e)(2)(ii)(B) to specify that as part of its determination of 
indigence, the provider must maintain and furnish, upon request to its 
Medicare contractor, documentation (for example, a Policy for 
Determination of Indigence) describing the method by which indigence or 
medical indigence was determined and the beneficiary specific 
documentation which supports the provider's documentation of each 
beneficiary's indigence or medical indigence. Once indigence is 
determined and the provider concludes that there has been no 
improvement in the beneficiary's financial status, the bad debt may be 
deemed uncollectible without applying a collection effort. Unpaid 
deductible and coinsurance amounts without the provider's documentation 
of its determination of indigence will not be considered as allowable 
bad debts.
    In this proposed rule, we are proposing that these revisions would 
be effective for cost reporting periods beginning before, on and after 
the effective date of this rule because they are clarifications and 
codifications of longstanding Medicare policies.
c. Reasonable Collection Effort, Dual Eligible Beneficiaries and the 
Medicaid Remittance Advice
    Dual eligible beneficiaries are Medicare beneficiaries who are 
enrolled in Medicare (either Part A, Part B, or both), and are also 
enrolled in ``full Medicaid'' coverage and/or the Medicare Savings 
Program (MSP).\506\ Authorized under sections 1902 (a)(10)(E) and 
1905(p) and (s) of the Act, the MSP includes four mandatory Medicaid 
eligibility groups that assist low income Medicare beneficiaries with 
their Medicare expenses.\507\ One specific category of MSP is the 
Qualified Medicare Beneficiaries (QMB) program. Under 1905(p)(1) of the 
Act, a QMB is an individual who is entitled to hospital insurance 
benefits under Part A of Medicare, with income not exceeding 100 
percent of the Federal poverty level, and resources not exceeding three 
times the SSI limit.
---------------------------------------------------------------------------

    \506\ ``Full Medicaid'' coverage refers to the package of 
services, beyond coverage of Medicare premiums and cost-sharing, 
that certain individuals are entitled to when they qualify under 
eligibility groups covered under a state's Medicaid program.
    \507\ The MSP includes the Qualified Medicare Beneficiary, 
Specified Low-Income Medicare Beneficiary Qualifying Individual, and 
Qualified Disabled and Working Individual programs. Depending upon 
the MSP group the individual is enrolled in, the MSP pays all or 
some of an individual's Medicare expenses, including Parts A and B 
premiums, deductibles, coinsurance and copayments.
---------------------------------------------------------------------------

    Section 1902(a)(10)(E) of the Act directs State Medicaid Agencies 
to pay providers for QMB cost sharing amounts as defined in section 
1905(p)(3) of the Act. Under section 1905(p)(3) of the Act, ``Medicare 
cost sharing'' includes costs incurred with respect to a QMB, ``without 
regard to whether the costs incurred were for items and services for 
which medical assistance is otherwise available under the plan.'' The 
``Medicare cost sharing'' includes Medicare Part A and B coinsurance 
and deductibles. Section 1902(n)(2) of the Act permits the State to 
limit payment for QMB cost sharing to the amount necessary to provide a 
total payment to the provider (including Medicare, Medicaid, required 
nominal Medicaid copayments, and third party payments) equal to the 
amount a State would have paid for the service under the state plan.
    State Medicaid Management Information Systems (MMIS), funded under 
section 1903(a)(3) of the Act are required, as an express condition of 
a State receiving enhanced federal matching funds for the design, 
development, installation and administration of their MMIS systems, to 
process Medicare crossover \508\ claims, including QMB cost sharing, 
for adjudication of Medicaid payment of Medicare cost sharing amounts, 
including deductibles and coinsurance for Medicare services. The MMIS 
is also required to furnish the provider with a Medicaid remittance 
advice (RA), a document that outlines the State's cost sharing 
liability for a particular service or set of services for the patient/
beneficiary.\509\ The Medicaid RA will also show whether the State has 
no liability for Medicare cost sharing for a beneficiary's service 
pursuant to the State plan.\510\ The MMIS must process all Medicare 
crossover claims for QMBs, including Medicare-adjusted claims that are 
submitted by Medicaid-enrolled providers, even if a service or provider 
category is not currently recognized in the Medicaid State Plan. 
However, we recognize that there may be instances where the Medicare 
crossover claim process does not occur automatically and providers must 
instead submit their Medicare claims manually to Medicaid for 
adjudication and determination of the state's cost sharing liability. 
The most direct and logical way to know a State's cost sharing 
liability for a QMB is from the Medicaid RA. If a State Medicaid 
program had Medicare cost sharing responsibility and refused to pay, or 
failed to process a Medicare crossover claim to determine its cost 
sharing liability, it would be out of compliance with its Medicaid 
State plan and would be subject to enforcement action by CMS.
---------------------------------------------------------------------------

    \508\ ``Crossover'' claims are initiated when a Medicare 
certified provider submits a claim to its Medicare contractor for 
processing of the Medicare covered service and the claim ``crosses 
over'' to Medicaid for the State to determine and set forth the 
State's cost sharing liability towards beneficiaries' Medicare cost 
sharing. This crossover claim includes the primary payment amount 
from Medicare.
    \509\ http://www.medicaid.gov/Federal-Policy-Guidance/downloads/CIB-06-07-2013.pdf.
    \510\ http://www.medicaid.gov/Federal-Policy-Guidance/downloads/CIB-06-07-2013.pdf.
---------------------------------------------------------------------------

    A State's requirement to determine its cost sharing liability for 
QMBs was also set forth at section 3490.14(A) of the State Medicaid 
Manual (SMM) (CMS Pub. 45); Payment of Medicare Part A and Part B 
Deductibles and Coinsurance--State Agency Responsibility, when paper 
claims were submitted by Medicare providers to the State to determine 
its cost sharing liability. Specifically, section 3490.14(A)(1) and (2) 
of the SMM required the State Agency to provide, through the State 
Plan, the payment rates applicable for services that are either covered 
or not covered by the State Plan, in order to determine the

[[Page 32873]]

amount of Medicare coinsurance and deductibles that the State was 
responsible to pay. Because a QMB's financial situation and Medicaid 
eligibility status may change over the course of a very short period of 
time and the State is required to maintain the most current patient 
eligibility and financial information, the State is in the best 
position to fulfill its statutory requirement and make the most 
accurate determination of its cost sharing liability for any unpaid 
Medicare deductibles and coinsurance.
    Providers are prohibited under section 1902(n)(3) of the Act from 
seeking to collect payment from a QMB for Medicare deductibles or 
coinsurance, even if the Medicaid State plan's cost sharing liability 
is less than the total amount of the Medicare deductibles and 
coinsurance. Medicare may reimburse providers who provide Medicare 
covered services to dual eligible beneficiaries the difference between 
beneficiaries' unpaid Medicare cost sharing and the State's Medicare 
cost sharing liability for the beneficiary, up to the allowable 
Medicare bad debt amount if the provider has made a reasonable 
collection effort. To satisfy the reasonable collection effort, a 
provider that has furnished services to a dual eligible beneficiary 
must determine whether the State's Title XIX Medicaid Program (or a 
local welfare agency, if applicable) is responsible to pay all or a 
portion of the beneficiary's Medicare deductible and/or coinsurance 
amounts. A provider satisfies this by billing the State or State 
designee such as a Medicaid managed care organization (MCO), to 
determine any Medicare cost sharing amounts for which the State may be 
liable to the provider. This is known as the ``must-bill policy'' for 
dual eligible beneficiaries and is outlined in PRM sections 312 and 
322.
    In accordance with PRM section 312, providers seeking Medicare 
reimbursement for bad debts for dual eligible beneficiaries' cost 
sharing are required to: (1) Bill the State Medicaid program to 
determine that no source other than the patient would be legally 
responsible for the patient's medical bill; for example, title XIX, 
local welfare agency and guardian (the ``must bill requirement''); and 
(2) obtain and submit to the Contractor, a Medicaid RA from the State 
Medicaid program (the ``RA requirement''). The must-bill policy and the 
RA requirement to document the States' cost sharing liability are both 
longstanding policies of CMS, as shown in PRM sections 312 and 322 
themselves: Administrative decisions applying the policies; and section 
4499, exhibit 15.08 of the Medicare Intermediary Manual (CMS Pub. 13-4) 
(December 1985).
    It has always been our position that the must-bill policy and the 
RA requirement are necessary to ensure that the provider obtains 
contemporaneous documentation that can be maintained in the usual 
course of the provider's business as required by Sec.  413.20(a). The 
historical background of the RA requirement is also set forth in PRM 
section 322, Medicare Bad Debts Under State Welfare Programs:
    Thus, when Medicare certified providers provide services to QMBs 
and claim bad debt to Medicare for unpaid cost sharing amounts, 
Medicare bad debt policy requires providers to bill the State and 
submit to their contractors the Medicaid RA as documentation to 
evidence the State's liability for dual eligible beneficiaries' 
deductible and/or coinsurance amounts. If a provider does not bill the 
State and submit the Medicaid RA to Medicare with its claim for bad 
debt reimbursement for dual eligible beneficiaries, the result is that 
unpaid deductible and coinsurance amounts cannot be included as an 
allowable Medicare bad debt.
    In 2003, the Medicare ``must bill'' policy was upheld by the 9th 
Circuit Court of Appeals in Community Hospital of the Monterey 
Peninsula v. Thompson, including the use of a Medicaid RA to determine 
the State's liability. Community Hosp. of Monterey Peninsula v. 
Thompson, 323 F.3d 782 (9th Cir. 2003). In August 2004, CMS issued a 
Joint Signature Memorandum (``JSM'') 370, reiterating the ``must bill'' 
policy for dual eligible beneficiaries. Specifically, the JSM 370 
reiterated that where the State owes none or only a portion of the dual 
eligible beneficiary's deductible or coinsurance, the unpaid cost 
sharing for the beneficiary is not reimbursable to the provider by 
Medicare until the provider bills the State, and the State refuses 
payment by producing a Medicaid RA.
    In October 2004, we issued a newsletter that reiterated and 
clarified the contents of the JSM by stating that in instances where 
the State owes none or only a portion of the dual eligible patient's 
deductible or copayment, the unpaid liability for the bad debt is not 
reimbursable to the provider by Medicare until the provider bills the 
State, and the State refuses payment (with a State Remittance Advice).
    In order to satisfy the regulatory requirement that a bad debt is 
uncollectible, the provider must bill the State Medicaid Agency and 
receive a Medicaid RA that contains a formal denial from the State or a 
statement setting forth the State's cost sharing liability. A State's 
failure to process a bill for determination of its cost sharing equates 
to a provider's failure to determine the cost sharing liability of the 
State. The burden remains on the provider to work with the State to 
determine the State's cost sharing amounts. This burden is not 
transferred to the Medicare program and the Medicare program has no 
duty to determine a State's cost sharing liability. A provider cannot 
substitute an estimate of the State's cost sharing liability for the 
Medicaid RA, as this does not satisfy the regulatory requirement of 
demonstrating that the bad debt is uncollectible. Any amount that the 
State is obligated to pay, either by statute or under the terms of its 
approved Medicaid State plan, will not be included as an allowable 
Medicare bad debt, regardless of whether the State actually pays its 
obligated amount to the provider. However, the deductible and/or 
coinsurance amount, or any portion thereof, that the State is not 
obligated to pay and which remains unpaid by the beneficiary can be 
included as an allowable Medicare bad debt.
    Prior to the implementation of automated claims processing, section 
3490.14(B) of the SMM previously provided a mechanism whereby providers 
could bill the State for the determination of the State's cost sharing 
amounts without actually being or becoming a Medicaid provider. In 
accordance with section 3490.14(B), ``Subject to State law a provider 
has the right to accept a patient either as private pay only, as a QMB 
only, or (if the patient is both a QMB and Medicaid eligible) as a full 
Medicaid patient, but the provider must advise the patient, for payment 
purposes, how he/she is accepted. Medicaid payment of Medicare 
deductible and coinsurance amounts may be made only to Medicaid 
participating providers, even though a Medicare service may not be 
covered by the Medicaid State plan. A provider agreement necessary for 
participation for this purpose (for example, for furnishing the 
services to the individual as a QMB) may be executed through the 
submission of a claim to the Medicaid agency requesting Medicaid 
payment for Medicare deductibles and coinsurance for QMBs.'' Although 
this SMM provision is no longer in effect, we believe State Medicaid 
Agencies have a statutory obligation to determine any Medicare cost 
sharing for QMBs, however some States do not recognize certain Medicare 
provider types or services under the State Medicaid program and do not 
process Medicare

[[Page 32874]]

crossover claims and issue a Medicaid RA.
    Some States' noncompliance with the statutory requirement to 
process Medicare crossover claims and produce a Medicaid RA have 
resulted in numerous appeals filed by providers whose claims for 
reimbursement of unpaid Medicare cost sharing from services provided to 
dual eligible beneficiaries were denied for Medicare bad debt 
reimbursement because the State did not process the Medicare crossover 
claim and issue a Medicaid RA to the provider.
    In 2013, CMS attempted to address States' non-compliance with the 
Federal statutory requirements at sections 1902(a)(10)(E), 1902(n) and 
1903(a)(3) of the Act, by issuing an Informational Bulletin,\511\ which 
reminded States of the Federal statutory requirement to process 
Medicare cost sharing claims for QMBs from Medicare-certified 
providers, and to be able to document proper processing of such claims. 
A State's non-compliance with the Federal statutory requirements 
conflicts with Medicare's must bill policy, resulting in the State's 
non-compliance and leaving providers disadvantaged.
---------------------------------------------------------------------------

    \511\ https://www.medicaid.gov/federal-policy-guidance/downloads/cib-06-07-2013.pdf.
---------------------------------------------------------------------------

    We continue to believe that the best documentation to evidence 
States' cost sharing liability for a dual eligible beneficiary is the 
Medicaid RA, and that the Medicare requirements for the provider to 
bill the State and submit the RA to its contractor should remain. Where 
the State processes a Medicare crossover claim and issues a Medicaid RA 
to the provider that details the State's Medicare cost sharing 
liability, we believe that providers must continue to provide the 
Medicaid RA in order to claim Medicare bad debt. Therefore, we are 
proposing that the provider must bill that State and submit the 
Medicaid RA to Medicare to evidence the State's Medicare cost sharing 
liability, so that any State Medicare cost sharing liability can be 
deducted from the Medicare bad debt reimbursement.
    Consistent with this proposal, we are proposing to amend Sec.  
413.89(e)(2) by adding a new paragraph (e)(2)(iii) to clarify and 
codify that that, effective for cost reporting periods beginning on and 
before the effective date of this rule, to be considered a reasonable 
collection effort, a provider that has furnished services to a dual 
eligible beneficiary must determine whether the State's Title XIX 
Medicaid Program (or a local welfare agency, if applicable) is 
responsible to pay all or a portion of the beneficiary's Medicare 
deductible and/or coinsurance amounts. To make this determination, the 
provider must submit a bill to its Medicaid/title XIX agency (or to its 
local welfare agency) to determine the State's cost sharing obligation 
to pay all or a portion of the applicable Medicare deductible and 
coinsurance. (This is effectuated by the provider submitting a bill to 
Medicare for payment and the MAC administering the payment process 
automatically `crosses over' the bill to the applicable Medicaid/title 
XIX agency for determination of the State's obligation, if any, toward 
the cost sharing.) The provider must then submit to its contractor a 
Medicaid RA reflecting the State's payment decision. Any amount that 
the State is obligated to pay, either by statute or under the terms of 
its approved Medicaid State plan, will not be included as an allowable 
Medicare bad debt, regardless of whether the State actually pays its 
obligated amount to the provider. However, the Medicare deductible and/
or coinsurance amount, or any portion thereof that the State is not 
obligated to pay, can be included as an allowable Medicare bad debt. A 
provider's failure to bill the State and produce to its Medicare 
contractor documentation, including the RA reflecting the State's 
verification that it processed a bill to determine its liability, will 
result in unpaid deductible and coinsurance amounts not being included 
as an allowable Medicare bad debt. Unpaid deductible and coinsurance 
amounts without collection effort documentation will not be considered 
as allowable bad debts.
    We are proposing that these revisions be effective for cost 
reporting periods beginning before, on and after the effective date of 
this rule because they clarify and codify our longstanding policy to 
require that the provider effectuate a reasonable collection effort by 
billing the party (state) responsible for the Medicare cost sharing of 
the beneficiary. The result of the provider billing the State and the 
State processing the Medicare crossover claim is the provider's receipt 
of the Medicaid RA which is necessary to evidence the State's Medicare 
cost sharing liability.
    Although the best documentation to evidence a State's Medicare cost 
sharing liability for a dual eligible beneficiary is the Medicaid RA, 
we acknowledge that challenges exist for providers when States do not 
comply with the Federal statutory requirements. So as not to 
disadvantage providers in States that are not in compliance with the 
Federal statute, we are considering alternatives for providers to 
comply with the ``must bill'' policy and still evidence a State's cost 
sharing liability (or absence thereof) for dual eligible beneficiaries 
when a State does not process a Medicare crossover claim and issue a 
Medicaid RA to providers that could be finalized in the final rule. For 
example, alternative documentation to a Medicaid RA could be obtained 
by providers from a State that demonstrates it will not enroll the 
provider in Medicaid, or a certain class of a type of provider, for the 
limited purpose of processing a claim for determining cost sharing 
liability. Providers could obtain alternative documentation to a RA 
such as a State Medicaid notification where the State has no legal 
obligation to pay the beneficiary's Medicare cost sharing. In a State 
that has a Medicare cost sharing liability for a beneficiary's service, 
the Medicaid State Plan may set forth the Medicare cost sharing 
liability for particular services. Alternatively, in a State that has a 
Medicare cost sharing liability for a beneficiary's service, the State 
could obtain alternative documentation to a Medicaid RA that sets forth 
the State's Medicare cost sharing liability that would then be deducted 
from the provider's Medicare bad debt reimbursement. In addition to 
verifying the state's cost sharing liability, it will also be important 
that any alternative documentation to a Medicaid RA accurately verifies 
a beneficiary's eligibility for Medicaid for the date of service. We 
are considering adopting a policy in the final rule to the effect that 
when a State does not process a Medicare crossover claim and issue a 
Medicaid RA, the provider could obtain, and submit to its Medicare 
contractor, some form of alternative documentation to evidence a 
state's Medicare cost sharing liability (or absence thereof). We 
welcome suggestions from stakeholders regarding the best alternative 
documentation to the Medicaid RA that a provider could obtain and 
submit to Medicare to evidence a beneficiary's Medicaid eligibility for 
the date of service and the State's Medicare cost sharing liability (or 
absence thereof) and regarding whether we should or could adopt such a 
policy effective for past cost reporting periods, including whether 
doing so would serve an important public interest by allowing providers 
with cases currently pending before the PRRB an avenue for timely and 
cost-effective resolution.
d. Accounting Standard Update Topic 606 and Accounting for Medicare Bad 
Debt
(1) Accounting Standard Update Topic 606
    The principles of cost reimbursement require that providers 
maintain

[[Page 32875]]

sufficient financial records and statistical data for proper 
determination of costs payable under the program. Sec.  413.20(a). 
Additionally, providers must use standardized definitions and follow 
accounting, statistical, and reporting practices that are widely 
accepted in the hospital and related fields. Sec.  413.20(a). Medicare 
accounting standards follow the general accounting standards unless the 
Secretary declares otherwise on a particular matter. Sec.  413.20(a). 
The regulations at Sec.  413.89(c) provide that normal accounting 
treatment: Reduction in revenue. Bad debts, charity, and courtesy 
allowances represent reductions in revenue. The failure to collect 
charges for services furnished does not add to the cost of providing 
the services. Such costs have already been incurred in the production 
of the services. In this regard, providers are required to record bad 
debts and uncollectible accounts as a direct reduction of net patient 
revenue rather than an operating expense in their financial records.
    Additionally, PRM section 314 Accounting Period for Bad Debts, 
provides further guidance to providers for the accounting treatment of 
Medicare bad debts and sets forth 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. 
Allowable bad debts must be related to specific amounts which have been 
determined to be uncollectible. Since bad debts are uncollectible 
accounts receivable and notes receivable, the provider should have the 
usual accounts receivable records-ledger cards and source documents to 
support its claim for a bad debt for each account included.'' PRM 
section 314. PRM section 320 sets forth methods of determining bad debt 
expense, where ``accounts receivable are analyzed and a determination 
made as to specific accounts which are deemed uncollectible. The 
amounts deemed to be uncollectible are charged to an expense account 
for uncollectible accounts. The amounts charged to the expense account 
for bad debts should be adequately identified as to those which 
represent deductible and coinsurance amounts applicable to 
beneficiaries and those which are applicable to other than 
beneficiaries or which are for other than covered services. Those bad 
debts which are applicable to beneficiaries for uncollectible 
deductible and coinsurance amounts are included in the calculation of 
reimbursable bad debts.''
    The Financial Accounting Standards Board's (FASB) Accounting 
Standards Update (ASU) 2014-09, Revenue from Contracts with Customers 
(Topic 606), (hereinafter ``ASU Topic 606''), was published in May 2014 
with the first implementation period in 2018. Under the ASU Topic 606, 
there are changes in the national accounting standard for revenue 
recognition of patient-related bad debts and uncollectible accounts, as 
well as changes to terminology regarding bad debts. These changes are 
for all industries and organizations nationwide, including the 
healthcare sector and providers. Under the ASU Topic 606, an amount 
representing a bad debt would generally no longer be reported 
separately as an operating expense in the provider's financial 
statements, but will be treated as an ``implicit price concession,'' 
and included as a reduction in patient revenue. Additionally, under the 
ASU Topic 606 standards, bad debts are now considered to be 
``reductions in patient revenue'' instead of ``uncollectible accounts 
receivable and notes receivable'' in accordance with the current 
language in PRM section 316. Additionally, under the ASU Topic 606 
standards, the provider should have the usual ``accounting recordations 
for the reductions in revenue'' instead of ``accounts receivable 
records ledger cards'' pursuant to the current language in PRM section 
316.
    Although ASU Topic 606 requires different reporting of providers 
and terminology for bad debts (implicit price concessions), there is no 
change in the required criteria a provider must meet to qualify a 
beneficiary's bad debt account for Medicare bad debt reimbursement 
under Sec.  413.89. Therefore, in this proposed rule, we are proposing 
to recognize the ASU Topic 606 terminology in Sec.  413.89. 
Specifically, we are proposing to recognize that bad debts, also known 
as ``implicit price concessions,'' are amounts considered to be 
uncollectible from accounts that were created or acquired in providing 
services. ``Implicit price concessions'' are designations for 
uncollectible claims arising from the furnishing of services, and may 
be collectible in money in the relatively near future and are recorded 
in the provider's accounting records as a component of net patient 
revenue.
    We are proposing to amend Sec.  413.89(b)(1) by adding new 
paragraph (b)(1)(i) to specify that for cost reporting periods 
beginning before October 1, 2020, bad debts are amounts considered to 
be uncollectible from accounts and notes receivable that were created 
or acquired in providing services. ``Accounts receivable'' and ``notes 
receivable'' are designations for claims arising from the furnishing of 
services, and are collectible in money in the relatively near future. 
Consistent with this proposal, we are also proposing to amend Sec.  
413.89(b)(1) by adding new paragraph (b)(1)(ii) to specify that for 
cost reporting periods beginning on or after October 1, 2020, bad 
debts, also known as ``implicit price concessions,'' are amounts 
considered to be uncollectible from accounts that were created or 
acquired in providing services. ``Implicit price concessions'' are 
designations for uncollectible claims arising from the furnishing of 
services, and may be collectible in money in the relatively near future 
and are recorded in the provider's accounting records as a component of 
net patient revenue. We are also proposing to amend Sec.  413.89(c) by 
adding new paragraph (c)(1) to specify that effective for cost 
reporting periods beginning before October 1, 2020 bad debts, charity, 
and courtesy allowances represent reductions in revenue. The failure to 
collect charges for services furnished does not add to the cost of 
providing the services. Such costs have already been incurred in the 
production of the services. We are also proposing to amend Sec.  
413.89(c) by adding new paragraph (c)(2) to specify that, effective for 
cost reporting periods beginning on or after October 1, 2020, bad 
debts, also known as ``implicit price concessions,'' charity, and 
courtesy allowances represent reductions in revenue. The failure to 
collect charges for services furnished does not add to the cost of 
providing the services. Such costs have already been incurred in the 
production of the services.
(2) Medicare Bad Debt and Contractual Allowances
    Medicare regulations require providers to follow standardized 
definitions, accounting, statistics, and reporting practices that are 
widely accepted in the hospital and related fields. PRM section 320 
sets forth methods of determining bad debt expense, where accounts 
receivable are analyzed and a determination made as to specific 
accounts which are deemed uncollectible. The amounts deemed to be 
uncollectible are charged to an expense account for uncollectible 
accounts. The amounts charged to the expense account for bad debts 
should be adequately identified as amounts that represent deductible 
and coinsurance amounts applicable to Medicare beneficiaries, including 
QMBs, amounts that are applicable to non-beneficiaries, or amounts that 
are for other than covered services. Those bad debts which are 
applicable to Medicare

[[Page 32876]]

beneficiaries, including QMBs, for uncollectible deductible and 
coinsurance amounts are included in the calculation of reimbursable bad 
debts.''
    Based on recent questions received, it appears that many providers 
are not accurate in their accounting classification method of writing-
off a beneficiary's deductible and coinsurance amounts for Medicare-
Medicaid crossover claims, by incorrectly writing off Medicare-Medicaid 
crossover bad debts to a contractual allowance account. Contractual 
allowances, also known as contractual adjustments, are the difference 
between what a healthcare provider bills for the service rendered 
versus what it will contractually be paid (or should be paid) based on 
the terms of its contracts with third-party insurers and/or government 
programs.\512\ Some providers have been writing Medicare-Medicaid 
crossover bad debt amounts off to a contractual allowance account 
because they are unable to bill the beneficiary for the difference 
between the billed amount and the Medicaid claim payment amount. Other 
providers are writing these amounts off to a contractual allowance 
account because the Medicaid remittance advice referenced the unpaid 
amount as a ``Medicaid contractual allowance.''
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    These Medicare-Medicaid crossover claim amounts do not meet the 
classification requirements for a Medicare bad debt as set forth in PRM 
section 320 and are not compliant with Sec.  413.20 because these 
amounts were written off to a contractual adjustment or allowance 
account instead of a bad debt expense account.
    In this proposed rule, we are proposing to clarify that Medicare 
bad debts must not be written off to a contractual allowance account 
but must be charged to an expense account for uncollectible accounts 
(bad debt or implicit price concession). Consistent with this proposal, 
we are proposing to amend Sec.  413.89(c) by adding paragraph (c)(3) to 
specify that, effective for cost reporting periods beginning on or 
after October 1, 2020, Medicare bad debts must not be written off to a 
contractual allowance account but must be charged to an expense account 
for uncollectible accounts (bad debt or implicit price concession).
e. Technical Corrections in 42 CFR Parts 412 and 417
    A technical correction is required for 42 CFR 412.622(b)(2)(i) 
which incorrectly refers to 42 CFR 413.80 instead of the correct 
citation of Sec.  413.89, which is the regulation that sets forth rules 
pertaining to the bad debts of Medicare beneficiaries.
    A technical correction is also required for 42 CFR 417.536(g) which 
incorrectly refers to Sec.  413.80 instead of the correct citation of 
Sec.  413.89, which sets forth that bad debts, charity, and courtesy 
allowances are deductions from revenue and are not to be included in 
allowable costs.

X. 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 2020 ``Report 
to the Congress: Medicare Payment Policy'' and have given the 
recommendations in the report consideration in conjunction with the 
proposed policies set forth in this proposed rule. MedPAC 
recommendations for the IPPS for FY 2021 are addressed in Appendix B to 
this proposed rule.
    For further information relating specifically to the MedPAC reports 
or to obtain a copy of the reports, contact MedPAC at (202) 653-7226, 
or visit MedPAC's website at: http://www.medpac.gov.

XI. Other Required Information

A. Publicly Available Files

    IPPS-related data are available on the internet for public use. The 
data can be found on the CMS website at: http://www.cms.hhs.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html. 
Following is a listing of the IPPS-related data files that are 
available.
    Commenters interested in discussing any data files used in 
construction of this proposed rule should contact Michael Treitel at 
(410) 786-4552.
1. CMS Wage Data Public Use File
    This file contains the hospital hours and salaries from Worksheet 
S-3, parts II and III from FY 2017 Medicare cost reports used to create 
the proposed FY 2021 IPPS wage index. Multiple versions of this file 
are created each year. For a discussion of the release of different 
versions of this file, we refer readers to section III.L. of the 
preamble of this proposed rule.
    Media: internet at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files.html.
    Periods Available: FY 2007 through FY 2021 IPPS Update.
2. CMS Occupational Mix Data Public Use File
    This file contains the CY 2016 occupational mix survey data to be 
used to compute the occupational mix adjusted wage indexes. Multiple 
versions of this file are created each year. For a discussion of the 
release of different versions of this file, we refer readers to section 
III.L. of the preamble of this proposed rule.
    Media: internet at: https://www.cms.gov/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files.html.
    Period Available: FY 2021 IPPS Update.
3. Provider Occupational Mix Adjustment Factors for Each Occupational 
Category Public Use File
    This file contains each hospital's occupational mix adjustment 
factors by occupational category. Two versions of these files are 
created each year to support the rulemaking.
    Media: internet at: https://www.cms.gov/Medicare/Medicare-Fee-for-AService-Payment/AcuteInpatientPPS/Wage-Index-Files.html.
    Period Available: FY 2021 IPPS Update.
4. Other Wage Index Files
    CMS releases other wage index analysis files after each proposed 
and final rule.
    Media: internet at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files.html.
    Periods Available: FY 2005 through FY 2021 IPPS Update.
5. FY 2021 IPPS FIPS CBSA State and County Crosswalk
    This file contains a crosswalk of State and county codes used by 
the Federal Information Processing Standards (FIPS), county name, and a 
list of Core-Based Statistical Areas (CBSAs).
    Media: internet at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html (on the navigation panel 
on the left side of the page, click on the FY 2021 proposed rule home 
page or the FY 2021 final rule home page) or https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Acute-Inpatient-Files-for-Download.html.

[[Page 32877]]

    Period Available: FY 2021 IPPS Update.
6. HCRIS Cost Report Data
    The data included in this file contain cost reports with fiscal 
years ending on or after September 30, 1996. These data files contain 
the highest level of cost report status.
    Media: internet at: https://www.cms.gov/Research-Statistics-Data-and-Systems/Downloadable-Public-Use-Files/Cost-Reports/Cost-Reports-by-Fiscal-Year.html.
    (We note that data are no longer offered on a CD. All of the data 
collected are now available free for download from the cited website.)
7. Provider-Specific File
    This file is a component of the PRICER program used in the MAC's 
system to compute DRG/MS-DRG payments for individual bills. The file 
contains records for all prospective payment system eligible hospitals, 
including hospitals in waiver States, and data elements used in the 
prospective payment system recalibration processes and related 
activities. Beginning with December 1988, the individual records were 
enlarged to include pass-through per diems and other elements.
    Media: internet at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ProspMedicareFeeSvcPmtGen/psf_text.html.
    Period Available: Quarterly Update.
8. CMS Medicare Case-Mix Index File
    This file contains the Medicare case-mix index by provider number 
based on the MS-DRGs assigned to the hospital's discharges using the 
GROUPER version in effect on the date of the discharge. The case-mix 
index is a measure of the costliness of cases treated by a hospital 
relative to the cost of the national average of all Medicare hospital 
cases, using DRG/MS-DRG weights as a measure of relative costliness of 
cases. Two versions of this file are created each year to support the 
rulemaking.
    Media: internet at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Acute-Inpatient-Files-for-Download.html, or for the more recent data files, https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html 
(on the navigation panel on the left side of page, click on the 
specific fiscal year proposed rule home page or fiscal year final rule 
home page desired).
    Periods Available: FY 1985 through FY 2021.
9. MS-DRG Relative Weights (Also Table 5--MS-DRGs)
    This file contains a listing of MS-DRGs, MS-DRG narrative 
descriptions, relative weights, and geometric and arithmetic mean 
lengths of stay for each fiscal year. Two versions of this file are 
created each year to support the rulemaking.
    Media: internet at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Acute-Inpatient-Files-for-Download.html, or for the more recent data files, https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html 
(on the navigation panel on the left side of page, click on the 
specific fiscal year proposed rule home page or the fiscal year final 
rule home page desired).
    Periods Available: FY 2005 through FY 2021 IPPS Update.
10. IPPS Payment Impact File
    This file contains data used to estimate payments under Medicare's 
hospital inpatient prospective payment systems for operating and 
capital-related costs. The data are taken from various sources, 
including the Provider-Specific File, HCRIS Cost Report Data, MedPAR 
Limited Data Sets, and prior impact files. The data set is abstracted 
from an internal file used for the impact analysis of the changes to 
the prospective payment systems published in the Federal Register. Two 
versions of this file are created each year to support the rulemaking.
    Media: internet at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Historical-Impact-Files-for-FY-1994-through-Present.html, or for the more recent data files, https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html (on the navigation panel on the left side 
of page, click on the specific fiscal year proposed rule home page or 
fiscal year final rule home page desired).
    Periods Available: FY 1994 through FY 2021 IPPS Update.
11. AOR/BOR Tables
    This file contains data used to develop the MS-DRG relative 
weights. It contains mean, maximum, minimum, standard deviation, and 
coefficient of variation statistics by MS-DRG for length of stay and 
standardized charges. The BOR tables are ``Before Outliers Removed'' 
and the AOR is ``After Outliers Removed.'' (Outliers refer to 
statistical outliers, not payment outliers.)
    Two versions of this file are created each year to support the 
rulemaking.
    Media: internet at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Acute-Inpatient-Files-for-Download.html, or for the more recent data files, https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html 
(on the navigation panel on the left side of page, click on the 
specific fiscal year proposed rule home page or fiscal year final rule 
home page desired).
    Periods Available: FY 2005 through FY 2021 IPPS Update.
12. Prospective Payment System (PPS) Standardizing File
    This file contains information that standardizes the charges used 
to calculate relative weights to determine payments under the hospital 
inpatient operating and capital prospective payment systems. Variables 
include wage index, cost-of-living adjustment (COLA), case-mix index, 
indirect medical education (IME) adjustment, disproportionate share, 
and the Core-Based Statistical Area (CBSA). The file supports the 
rulemaking.
    Media: internet at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html (on the navigation panel 
on the left side of the page, click on the FY 2021 proposed rule home 
page or the FY 2021 final rule home page) or https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Acute-Inpatient-Files-for-Download.html.
    Period Available: FY 2021 IPPS Update.
13. MS-DRG Relative Weights Cost Centers File
    This file provides the lines on the cost report and the 
corresponding revenue codes that we used to create the 19 national cost 
center cost-to-charge ratios (CCRs) that we used in the relative weight 
calculation.
    Media: internet at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html (on the navigation panel 
on the left side of the page, click on the FY 2021 proposed rule home 
page or the FY 2021 final rule home page) or https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Acute-Inpatient-Files-for-Download.html.
    Period Available: FY 2021 IPPS Update.

[[Page 32878]]

14. Hospital Readmissions Reduction Program Supplemental File
    Updated data are not available at this time. Therefore, we refer 
readers to the FY 2020 IPPS/LTCH PPS final rule supplemental file, 
which has the most recent finalized payment adjustment factor 
components and is the same data as would have been used to create the 
FY 2021 IPPS/LTCH PPS proposed rule supplemental file.
    Media: internet at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html (on the navigation panel 
on the left side of the page, click on the FY 2021 proposed rule home 
page or the FY 2021 final rule home page) or https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Acute-Inpatient-Files-for-Download.html.
    Period Available: FY 2021 IPPS Update.
15. Medicare Disproportionate Share Hospital (DSH) Supplemental File
    This file contains information on the calculation of the 
uncompensated care payments for FY 2021. Variables include the data 
used to determine a hospital's share of uncompensated care payments, 
total uncompensated care payments and estimated per claim uncompensated 
care payment amounts. The file supports the rulemaking.
    Media: internet at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html (on the navigation panel 
on the left side of the page, click on the FY 2021 proposed rule home 
page or the FY 2021 final rule home page) or https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Acute-Inpatient-Files-for-Download.html.
    Period Available: FY 2021 IPPS Update.
16. New Technology Thresholds File
    This file contains the cost thresholds by MS-DRG that are generally 
used to evaluate applications for new technology add-on payments for 
the fiscal year that follows the fiscal year that is otherwise the 
subject of the rulemaking. As we discuss in section II.F.5.i. of the 
preamble of this proposed rule, we are proposing to apply the proposed 
threshold value for proposed new MS-DRG 018 in evaluating the cost 
criterion for the CAR T-cell therapy technologies for purposes of FY 
2021 new technology add-on payments. As also discussed in section 
II.G.5.i of the preamble of this proposed rule, beginning with FY 2022, 
we are proposing to use the proposed threshold values associated with 
the proposed rule for that fiscal year to evaluate the cost criterion 
for all other applications for new technology add-on payments and 
previously approved technologies that may continue to receive new 
technology add-on payments, if those technologies would be assigned to 
a proposed new MS-DRG for that same fiscal year. (We note that the 
information in this file was previously provided in Table 10 of the 
annual IPPS proposed and final rules (83 FR 41739).)
    Media: internet at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html (on the navigation panel 
on the left side of the page, click on the applicable fiscal year's 
proposed rule or final rule home page) or https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Acute-Inpatient-Files-for-Download.html.
    Periods Available: For FY 2021 and FY 2022 applications.

B. Collection of Information Requirements

1. Statutory Requirement for Solicitation of Comments
    Under the Paperwork Reduction Act (PRA) 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 PRA of 1995 requires that 
we solicit comment on the following issues:
     The need for the information collection and its usefulness 
in carrying out the proper functions of our agency.
     The accuracy of our estimate of the information collection 
burden.
     The quality, utility, and clarity of the information to be 
collected.
     Recommendations to minimize the information collection 
burden on the affected public, including automated collection 
techniques.
    In this proposed rule, we are soliciting public comment on each of 
these issues for the following sections of this document that contain 
information collection requirements (ICRs).
2. ICRs Regarding PRRB Electronic Filing (Sec. Sec.  405.1801 Through 
405.1889)
    As stated earlier in section IX.B.3 of the preamble of this 
proposed rule, we propose to amend the regulations at 42 CFR 405.1801 
through 405.1889 to allow the PRRB to make use of the system mandatory 
in PRRB appeals. Proposed Sec.  405.1801 states that except for 
subpoena requests being sent to a nonparty pursuant to Sec.  
405.1857(c), the reviewing entity may prescribe the method(s) by which 
a party must make a submission, including the requirement to use an 
electronic filing system for submission of documents. Proposed 
amendments to the regulations at 42 CFR 405.1843 make clear that 
parties to a Board appeal must familiarize themselves with the 
instructions for handling a PRRB appeal, including any and all 
requirements related to the electronic or online filing of documents 
for future mandatory filing.
    The burden associated with the requirements in discussed in this 
section is the time and effort necessary to review instructions and 
register for the electronic submission system as well as the time and 
effort to gather develop and submit various documents associated with a 
PRRB appeal. While these requirements impose burden, we believe the 
requirements are exempt from the PRA in accordance with the 
implementing regulations of the PRA at 5 CFR 1320.4. Information 
collected during the conduct of a criminal investigation or civil 
action or during the conduct of an administrative action, 
investigation, or audit involving an agency against specific 
individuals or entities is not subject to the PRA.
3. ICRs for Requests for Changes to the Medicare Severity Diagnosis-
Related Group (MS-DRG) Classifications
    As discussed in section II.D. of the preamble of this proposed 
rule, the public may request changes to the MS-DRG classifications to 
reflect changes in treatment patterns, technology, and any other 
factors that may change the relative use of hospital resources. The 
burden associated with requesting changes to the MS-DRG classifications 
will be discussed in a forthcoming information collection request, 
which is currently under development. However, upon completion of the 
ICR, we will publish the required 60-day and 30-day notices to solicit 
public comments in accordance with the requirements of the PRA.
4. ICRs Relating to the Hospital Readmissions Reduction Program
    In section IV.K. of the preamble of this proposed rule, we discuss 
proposed requirements for the Hospital Readmissions Reduction Program. 
In this proposed rule, we are not removing or adopting any new measures 
into the Hospital Readmissions Reduction Program. All six of the 
Hospital

[[Page 32879]]

Readmissions Reduction Program's measures are claims-based measures. We 
do not believe that continuing to use these claims-based measures 
creates or reduces any burden for hospitals because they will continue 
to be collected using Medicare FFS claims that hospitals are already 
submitting to the Medicare program for payment purposes.
5. ICRs for the Hospital Value-Based Purchasing (VBP) Program
    In section IV.L. of the preamble of this proposed rule, we provide 
estimated and newly established performance standards for the Hospital 
VBP Program for certain measures for the FY 2023, FY 2024, FY 2025, and 
FY 2026 program years. We do not believe that updating program 
performance standards will create or reduce any burden for hospitals. 
Data submissions for the Hospital VBP Program are associated with the 
Hospital Inpatient Quality Reporting Program under OMB control number 
0938-1022, the National Healthcare Safety Network under OMB control 
number 0920-0666, and the Hospital Consumer Assessment of Healthcare 
Providers and Systems (HCAHPS) survey under OMB control number 0938-
0981. Because the FY 2023 Hospital VBP Program will use data that are 
also used to calculate quality measures in other programs and Medicare 
fee-for-service claims data that hospitals are already submitting to 
CMS for payment purposes, the program does not anticipate any change in 
burden associated with this proposed rule.
6. ICRs Relating to the Hospital-Acquired Condition (HAC) Reduction 
Program
    In section IV.M. of the preamble of this proposed rule, we discuss 
proposed requirements for the HAC Reduction Program. In this proposed 
rule, we are not proposing to remove any measures or adopt any new 
measures into the HAC Reduction Program. The HAC Reduction Program has 
adopted six measures. We do not believe that the claims-based CMS PSI 
90 measure in the HAC Reduction Program creates or reduces any burden 
for hospitals because it is 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 (expiration November 30, 2021), 
and therefore will not impact our burden estimates.
    In the FY 2019 IPPS/LTCH PPS final rule (83 FR 41478 through 
41484), we finalized our policy to validate NHSN HAI measures under the 
HAC Reduction Program, which will require hospitals to submit 
validation templates for the NHSN HAI measures beginning with Q3 CY 
2020 discharges. OMB has currently approved 43,200 hours of burden and 
approximately $1.6 million under OMB control number 0938-1352 
(expiration date January 31, 2021), accounting for information 
collection burden experienced by up to 600 IPPS hospitals selected for 
validation under the HAC Reduction Program for the FY 2023 program year 
and each subsequent year. In section IV.M.6. of the preamble of this 
proposed rule, we propose to change the pool of hospitals selected for 
validation under the HAC Reduction Program from up to 600 hospitals to 
up to 400 hospitals, as similarly proposed under the Hospital IQR 
Program, as discussed in section VIII.A. of the preamble of this 
proposed rule. In this FY 2021 IPPS/LTCH PPS proposed rule, we are 
updating our burden calculation using the most recent data from the 
Bureau of Labor Statistics, which reflects a median hourly wage of 
$19.40 \513\ per hour for a Medical Records and Health Information 
Technician professional. We calculate the cost of overhead, including 
fringe benefits, at 100 percent of the hourly wage estimate, consistent 
with the previous year. This is necessarily a rough adjustment, both 
because fringe benefits and overhead costs vary significantly from 
employer-to-employer and because methods of estimating these costs vary 
widely from study-to-study. Nonetheless, we believe that doubling the 
hourly wage rate ($19.40 x 2 = $38.80) to estimate total cost is a 
reasonably accurate estimation method. Accordingly, we calculate cost 
burden to hospitals using a wage plus benefits estimate of $38.80 per 
hour.
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    We previously estimated a reporting burden of 80 hours (20 hours 
per record x 1 record per hospital per quarter x 4 quarters) per 
hospital selected for validation per year to submit the CLABSI and 
CAUTI templates, and 64 hours (16 hours per record x 1 record per 
hospital per quarter x 4 quarters) per hospital selected for validation 
per year to submit the MRSA and CDI templates for a total of 43,200 
hours ([80 hours x 300 hospitals] + [64 hours x 300 hospitals]). Based 
on our proposals in this proposed rule, we estimate a new total burden 
of 28,800 hours ([80 hours per hospital to submit CLABSI and CAUTI 
templates x 200 hospitals selected for validation] + [64 hours per 
hospital to submit MRSA and CDI templates x 200 hospitals selected for 
validation]), reflecting a total burden decrease of 14,400 hours 
(43,200 hours-28,800 hours), and a new total burden cost of 
approximately $1,117,440 (28,800 hours x $38.80 per hour).\514\ We will 
submit the revised information collection estimates to OMB for approval 
under OMB control number 0938-1352.
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7. 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 Update (RHQDAPU) Program) was 
originally established to implement section 501(b) of the MMA, Public 
Law 108-173. OMB has currently approved 1,612,710 hours of burden and 
approximately $60.7 million under OMB control number 0938-1022, 
accounting for information collection burden experienced by 
approximately 3,300 IPPS hospitals and 1,100 non-IPPS hospitals for the 
FY 2022 payment determination. In this proposed rule, we describe the 
burden changes with regard to collection of information under OMB 
control number 0938-1022 (expiration date December 31, 2022) for IPPS 
hospitals due to the proposed policies in this proposed rule.
    In section VIII.A.5.b. of the preamble to this proposed rule, we 
are proposing to progressively increase the numbers of quarters of eCQM 
data reported, from one self-selected quarter of data to four quarters 
of data over a 3-year period, by requiring hospitals to report two 
quarters of data for the CY 2021 reporting period/FY 2023 payment 
determination, three quarters of data for the CY 2022 reporting period/
FY 2024 payment determination, and four quarters of data beginning with 
the CY 2023 reporting period/FY 2025 payment determination and for 
subsequent years. We expect these policies will increase our collection 
of information burden estimates. Details on these policies as well as 
the expected burden changes are discussed further in this section of 
this rule.

[[Page 32880]]

    In section VIII.A. of the preamble to this proposed rule, we are 
proposing to begin public display of eCQM data beginning with data 
reported by hospitals for the CY 2021 reporting period and for 
subsequent years. As discussed further in this proposed rule, we do not 
expect this policy to affect our information collection burden 
estimates.
    In section VIII.A.11. of the preamble to this proposed rule, we 
also are proposing several changes to streamline validation processes 
under the Hospital IQR Program. We are proposing to: (1) Require the 
use of electronic file submissions via a CMS-approved secure file 
transmission process and no longer allow the submission of paper copies 
of medical records or copies on digital portable media such as CD, DVD, 
or flash drive; starting with validation affecting the FY 2024 payment 
determination; (2) combine the validation processes for chart-
abstracted measures and eCQMs for validation affecting the FY 2024 
payment determination by: (a) Aligning data submission quarters; (b) 
combining hospital selection, including: (i) Reducing the pool of 
hospitals randomly selected for chart-abstracted measure validation; 
and (ii) integrating and applying targeting criteria for eCQM 
validation; (c) removing previous exclusion criteria; and (d) combining 
scoring processes by providing one combined validation score for the 
validation of chart-abstracted measures and eCQMs with the eCQM portion 
of the combined score weighted at zero; and (3) formalize the process 
for conducting educational reviews for eCQM validation affecting the FY 
2023 payment determination in alignment with current processes for 
providing feedback for chart-abstracted validation results. As 
discussed further in this proposed rule, we expect our proposed policy 
to align the hospital selection process will increase our information 
collection burden estimates. We do not expect the other proposed 
validation policies to affect our information collection burden 
estimates. Details on these policies as well as the expected burden 
changes are discussed further in this section of this rule.
    In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42602 through 
42605), we estimated that reporting measures for the Hospital IQR 
Program could be accomplished by staff with a median hourly wage of 
$18.83 per hour. We note that since then, more recent wage data have 
become available, and we are updating the wage rate used in these 
calculations in this proposed rule. The most recent data from the 
Bureau of Labor Statistics reflects a median hourly wage of $19.40 per 
hour for a Medical Records and Health Information Technician 
professional.\515\ We calculated the cost of overhead, including fringe 
benefits, at 100 percent of the median hourly wage, consistent with 
previous years. This is necessarily a rough adjustment, both because 
fringe benefits and overhead costs vary significantly by employer and 
methods of estimating these costs vary widely in the literature. 
Nonetheless, we believe that doubling the hourly wage rate ($19.40 x 2 
= $38.80) to estimate total cost is a reasonably accurate estimation 
method. Accordingly, we will calculate cost burden to hospitals using a 
wage plus benefits estimate of $38.80 per hour throughout the 
discussion in this section of this rule for the Hospital IQR Program.
---------------------------------------------------------------------------

    \515\ U.S. Bureau of Labor Statistics. Occupational Outlook 
Handbook, Medical Records and Health Information Technicians. 
Available at: https://www.bls.gov/ooh/healthcare/medical-records-and-health-information-technicians.htm.
---------------------------------------------------------------------------

b. Information Collection Burden Estimates for Proposed Policies 
Related to eCQM Reporting and Submission Requirements for the CY 2021 
Reporting Period/FY 2023 Payment Determination, the CY 2022 Reporting 
Period/FY 2024 Payment Determination, and the CY 2023 Reporting Period/
FY 2025 Payment Determination and Subsequent Years
    In the FY 2020 IPPS/LTCH PPS final rule, we finalized eCQM 
reporting and submission requirements such that hospitals submit one, 
self-selected calendar quarter of data for four eCQMs for the CYs 2020 
and 2021 reporting periods/FYs 2022 and 2023 payment determinations (84 
FR 42503) and one, self-selected calendar quarter of data for three 
self-selected eCQMs and the Safe Use of Opioids--Concurrent Prescribing 
eCQM for the CY 2022 reporting period/FY 2024 payment determination (84 
FR 42505). Our related information collection estimates were discussed 
at (84 FR 42604).
    In sections VIII.A.10.e.(1). through (4). of the preamble to this 
proposed rule, we are proposing to progressively increase the number of 
quarters of eCQM data reported, from one self-selected quarter of data 
to four quarters of data over a 3-year period, by requiring hospitals 
to report: (1) Two quarters of data for the CY 2021 reporting period/FY 
2023 payment determination, while continuing to require hospitals to 
report four self-selected eCQMs; (2) three quarters of data for the CY 
2022 reporting period/FY 2024 payment determination, while continuing 
to report three self-selected eCQMs and the Safe Use of Opioids; and 
(3) four quarters of data beginning with the CY 2023 reporting period/
FY 2025 payment determination and for subsequent years, while 
continuing to require hospitals to report three self-selected eCQMs and 
the Safe Use of Opioids--Concurrent Prescribing eCQM. We believe there 
would be a progressive increase to the burden estimate over the 3-year 
period due to these proposed policies.
    We previously estimated the information collection burden 
associated with the eCQM reporting and submission requirements to be 40 
minutes per hospital per year (10 minutes x 4 eCQMs x 1 quarter = 40 
minutes), or 0.67 hours per hospital per year (40 minutes/60). We 
estimated a total annual burden of 2,200 hours across all IPPS 
hospitals (0.67 hours x 3,300 IPPS hospitals). Using the updated wage 
estimate as described previously, we estimate this to represent a total 
annual cost of $85,360 ($38.80 hourly wage x 2,200 annual hours) across 
all IPPS hospitals. Based on our proposal to progressively increase the 
number of quarters of data reported, from one self-selected quarter of 
data to four quarters of data over a 3-year period, we estimate an 
annual burden increase of 2,200 hours and $85,360 for all participating 
IPPS hospitals for each of the CY 2021 reporting period/FY 2023 payment 
determination, CY 2022 reporting period/FY 2024 payment determination, 
and CY 2023 reporting period/FY 2025 payment determination by 
increasing the number of quarters of eCQM data required to be reported 
by hospitals from one self-selected quarter of data to two quarters of 
data, then to three quarters of data, and finally to four quarters of 
data, respectively, for a total increase of 6,600 hours (2,200 hours + 
2,200 hours + 2,200 hours) and $256,080 ($85,360 + $85,360 + $85,360) 
across a 3-year period for all participating IPPS hospitals.
c. Information Collection Burden Estimate for Proposed eCQM Public 
Display Requirements Beginning With the CY 2021 Reporting Period/FY 
2023 Payment Determination
    In section VIII.A.13.b. of the preamble to this proposed rule, we 
are proposing to begin public display of eCQM data beginning with data 
reported by hospitals for the CY 2021 reporting period and for 
subsequent years. Because hospitals would not have any additional 
information collection requirements, we believe there would be no 
change to the information collection burden estimate due to this 
policy, but

[[Page 32881]]

acknowledge that there are other types of burden associated with this 
proposal. For example, there is burden associated with the optional 
reviewing of hospital-specific reports during the public reporting 
preview; however, we believe this burden is nominal because hospitals 
already review these reports with respect to other types of measures 
for the Hospital IQR Program.
d. Information Collection Burden Estimate for Proposed Updates to the 
Processes for Validation of Hospital IQR Program Measure Data
    In section VIII.A.11. of the preamble to this proposed rule, we are 
proposing to make several changes to streamline the validation process. 
We are proposing to: (1) Require the use of electronic file submissions 
via a CMS-approved secure file transmission process and no longer allow 
the submission of paper copies of medical records or copies on digital 
portable media such as CD, DVD, or flash drive, beginning with 
validation of Q1 2021 data affecting the FY 2024 payment determination; 
(2) combine the validation processes for chart-abstracted measures and 
eCQMs by: (a) Aligning data submission quarters, with the validation 
quarters affecting the FY 2023 payment determination serving as a 
transition year before being fully aligned as to validation quarters 
affecting the FY 2024 payment determination; (b) combining hospital 
selection, including: (i) Reducing the pool of hospitals randomly 
selected for chart-abstracted measure validation, and (ii) integrating 
and applying targeting criteria for eCQM validation, beginning with 
validation affecting the FY 2024 payment determination; (c) removing 
previous exclusion criteria; and (d) combining scoring processes by 
providing one combined validation score for the validation of chart-
abstracted measures and eCQMs with the eCQM portion of the combined 
score weighted at zero, beginning with validation affecting the FY 2024 
payment determination; and (3) formalize the process for conducting 
educational reviews for eCQM validation in alignment with current 
processes for providing feedback for chart-abstracted validation 
results, beginning with eCQM validation affecting the FY 2023 payment 
determination.
    As noted in the FY 2017 IPPS/LTCH IPPS final rule (81 FR 57261), we 
have been reimbursing hospitals directly for expenses associated with 
submission of medical records for data validation; specifically, we 
reimburse hospitals at 12 cents per photocopied page; for hospitals 
providing medical records 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, along with $3.00 per record; and for 
hospitals providing medical records as electronic files submitted via 
secure file transmission, we reimburse hospitals at $3.00 per record. 
In addition, in the FY 2017 IPPS/LTCH IPPS final rule (81 FR 57261), we 
finalized that for eCQM validation, we reimburse hospitals at $3.00 per 
record for providing medical records as electronic files submitted via 
secure file transmission (paper copies and digital portable media are 
not accepted for eCQM validation). Because we directly reimburse, we do 
not anticipate any net change in information collection burden 
associated with our proposal to require electronic file submissions of 
medical records via secure file transmission for hospitals selected for 
chart-abstracted measures validation; hospitals would continue to be 
reimbursed at $3.00 per record.
    We do not anticipate any net change in information collection 
burden associated with our proposals to align the data submission 
quarters, to combine the hospital selection process by reducing the 
pool of hospitals randomly selected for validation for chart-abstracted 
measures from 400 hospitals to up to 200 hospitals, or to combine the 
scoring processes to provide one combined validation score for the 
validation of chart-abstracted measures and eCQMs. However, we refer 
readers to section I.K. of Appendix A of this proposed rule for a 
discussion of the potential burden reduction other than information 
collection burden that we believe hospitals could experience that are 
associated with our proposals to align the validation processes for 
chart-abstracted measures and eCQMs. In addition, we do not anticipate 
any information collection burden associated with our proposal to 
formalize the process for conducting educational reviews for eCQM 
validation. As discussed in section VIII.A.11.b.(3). of the preamble to 
this proposed rule, this process would allow any validated hospital to 
request an educational review of their eCQM validation results with 
CMS.
    We previously estimated the information collection burden 
associated with eCQM validation to be 80 minutes per record, or 
approximately 11 hours per hospital per year (80 minutes per record x 8 
records x 1 quarter/60 = 10.67 hours) (81 FR 57261). We estimated a 
total annual burden of approximately 2,200 hours across 200 IPPS 
hospitals selected for eCQM validation each year (11 hours x 200 IPPS 
hospitals). Using the updated wage estimate as described previously, we 
estimate this to represent a total annual cost of $85,360 (2,200 hours 
x $38.80) across 200 hospitals.
    The previous estimate of 80 minutes per record was based on our 
limited experience working with voluntary hospital participants during 
the eCQM validation pilot conducted in 2015 (79 FR 50269 through 
50272). For the validation pilot, participating hospitals attended a 
30-minute pre-briefing session and had to install CMS-approved software 
that allowed our Clinical Data Abstraction Center (CDAC) contractor to 
remotely view isolated records in real-time under hospital supervision 
in order to compare all abstracted data with QRDA Category I file data 
and summarize the results of the real-time session (79 FR 50270). Since 
this 2015 pilot, the eCQM validation process that we have implemented 
under the Hospital IQR Program has been significantly streamlined so 
that we no longer need hospitals to allow remote access to the CDAC 
contractor to view records in real-time under each hospital's 
supervision nor for them to engage in discussions with our contractor 
during the process. Instead, hospitals selected for eCQM validation are 
required to submit timely and complete copies of medical records on 
eCQMs selected for validation to CMS by submitting records in PDF file 
format within 30 calendar days following the medical records request 
date listed on the CDAC request form via the QualityNet secure file 
transmission process (81 FR 57179).
    Based on this updated process, as well as hospitals having gained 
several years of experience using EHRs, we are revising our previous 
estimate from 80 minutes per record to 10 minutes per record. This is 
the amount of time we estimate is needed for hospitals to create PDF 
files and to electronically submit each medical record to us via the 
CMS-approved secure file transmission process. The estimate of 10 
minutes per record is similar to our estimate of 10 minutes per eCQM 
per quarter in submitting QRDA Category I files via the QualityNet 
secure portal (81 FR 57260). We note that as mentioned previously, 
hospitals will still be reimbursed at $3.00 per record (81 FR 57261).
    In addition, we anticipate that our proposal to progressively 
increase the number of quarters of eCQM data reported, from one self-
selected quarter of data to four quarters of data over a 3-year period, 
would similarly increase the total number of quarters of data from 
which cases would be selected for

[[Page 32882]]

eCQM validation over a 3-year period. We also anticipate that our 
proposal to combine the hospital selection process such that the 
Hospital IQR Program would validate a pool of up to 400 hospitals 
across measure types (up to 200 hospitals would be randomly selected 
and up to 200 hospitals would be selected using targeting criteria) 
would increase the number of hospitals selected for eCQM validation 
from up to 200 hospitals to up to 400 hospitals. Therefore, we estimate 
the following burden changes over a 3-year period using the revised 
estimate of 10 minutes (0.1667 hours) per record as discussed 
previously. For eCQM validation of CY 2021 data affecting the FY 2024 
payment determination, we estimate a total burden of 1,067 hours across 
400 IPPS hospitals selected for eCQM validation (0.1667 hours x 2 
quarters x 8 cases x 400 IPPS hospitals) and $41,400 (1,067 hours x 
38.80). This reflects a total burden decrease of 1,133 hours (2,200 
hours-1,067 hours) and $43,960 ($85,360-$41,400) compared to our 
previous burden estimate for eCQM validation affecting the FY 2024 
payment determination. For eCQM validation of CY 2022 data affecting 
the FY 2025 payment determination, we estimate a total burden of 1,600 
hours across 400 IPPS hospitals selected for eCQM validation (0.1667 
hours x 3 quarters x 8 cases x 400 IPPS hospitals) and $62,080 (1,600 
hours x $38.80). This reflects a total burden decrease of 600 hours 
(2,200 hours-1,600 hours) and $23,280 ($85,360-$62,080) compared to our 
previous burden estimate for eCQM validation affecting the FY 2025 
payment determination. For eCQM validation of CY 2023 data affecting 
the FY 2026 payment determination, and for subsequent years, we 
estimate a total burden of 2,133 hours across 400 IPPS hospitals 
selected for eCQM validation (0.1667 hours x 4 quarters x 8 cases x 400 
IPPS hospitals) and $82,760 (2,133 hours x $38.80). This reflects a 
total burden decrease of 67 hours (2,200 hours-2,133 hours) and $2,600 
($85,360-$82,760) compared to our previous burden estimate for eCQM 
validation affecting the FY 2026 payment determination and subsequent 
years.
e. Summary of Information Collection Burden Estimates for the Hospital 
IQR Program
    In summary, under OMB control number 0938-1022, we estimate a total 
information collection burden increase for 3,300 IPPS hospitals of 
6,533 hours (6,600 hours-67 hours) associated with our proposed 
policies and updated burden estimates described previously and a total 
cost increase related to this information collection of approximately 
$253,480 (6,533 hours x $38.80) (which also reflects use of an updated 
hourly wage rate as previously discussed), across a 4-year period from 
the CY 2021 reporting period/FY 2023 payment determination through the 
CY 2024 reporting period/FY 2026 payment determination, compared to our 
currently approved information collection burden estimates. The tables 
summarize the total burden changes for each respective FY payment 
determination compared to our currently approved information collection 
burden estimates (the table for the FY 2026 payment determination 
reflects the cumulative burden changes). We will submit the revised 
information collection estimates to OMB for approval under OMB control 
number 0938-1022.
BILLING CODE 4120-01-P

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BILLING CODE 4120-01-C
8. ICRs for the PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) 
Program
    As discussed in section VIII.B. of the preamble of this proposed 
rule, section 1866(k)(1) of the Act requires, for purposes of FY 2014 
and each subsequent fiscal year, that a hospital described in section 
1886(d)(1)(B)(v) of the Act (a PPS-exempt cancer hospital, or a PCH) 
submit data in accordance with section 1866(k)(2) of the Act with 
respect to such fiscal year. There is no financial impact to PCH 
Medicare payment if a PCH does not participate.
    As discussed in section VIII.B.3. of the preamble of this proposed 
rule, we are proposing to adopt refined versions of two existing 
measures: Catheter-associated Urinary Tract Infection (CAUTI) and 
Central Line-associated Bloodstream Infection (CLABSI), beginning with 
the FY 2023 program year. The refined versions of the measure 
incorporate an updated SIR calculation methodology developed by the 
Centers for Disease Control and Prevention (CDC) that calculates rates 
stratified by patient care locations within PCHs, without the use of 
predictive models or comparisons in the rate calculations. If our 
proposal is finalized as proposed, we do not estimate any net change in 
burden hours for the PCHQR Program for the FY 2023 program year because 
there would be no change in the data submission requirements for PCHs. 
We note that burden estimates for these CDC NHSN measures are submitted 
separately under OMB control number 0920-0666.
    The PCHQR Program measure set would continue to consist of 15 
measures for the FY 2023 program year. As previously stated, the most 
recent data from the Bureau of Labor Statistics reflects a median 
hourly wage of $19.40 (previously $18.83). Consequently, while our 
proposal will not yield a net change in burden hours, the change in 
labor wage will cause an increase in burden cost for the PCHQR Program. 
Therefore, using the previously finalized hourly burden estimate of 
75,779 burden hours across the 11 PCHs for data collection and 
submission of all 15 measures, we estimate a total annual labor cost of 
$2,940,225 (75,779 hours x $38.80 per hour) for all 11 PCHs for the FY 
2023 program year. The burden hours associated with these reporting 
requirements is currently approved under OMB control number 0938-1175. 
The updated burden cost, based on the increase in the labor wage, will 
be revised and submitted to OMB.
9. ICRs for the Promoting Interoperability Programs
    In section VIII.D. of the preamble of this proposed rule, we 
discuss several proposals for the Medicare and Medicaid Promoting 
Interoperability Programs. OMB has currently approved 623,562 total 
burden hours and approximately $61 million under OMB control number 
0938-1278, accounting for information collection burden experienced by 
approximately 3,300 eligible hospitals and CAHs (Medicare-only and 
dual-eligible) that attest to CMS under the Medicare Promoting 
Interoperability Program. The collection of information burden analysis 
in this proposed rule focuses on eligible hospitals and CAHs that 
attest to the objectives and measures, and report CQMs, under the 
Medicare Promoting Interoperability Program for the reporting period in 
CY 2021.
b. Summary of Policies for Eligible Hospitals and CAHs That Attest to 
CMS Under the Medicare Promoting Interoperability Program
    In section VIII.D.3.b. of the preamble of this rule, we are 
proposing the following changes for eligible hospitals and CAHs that 
attest to CMS under the Medicare Promoting Interoperability Program: 
(1) An EHR reporting period of a minimum of any continuous 90-day 
period in CY 2022 for new and returning participants (eligible 
hospitals and CAHs); (2) to maintain the Electronic Prescribing 
Objective's Query of PDMP measure as optional and worth 5 bonus points 
in CY 2021; (3) to modify the name of the Support Electronic Referral 
Loops by Receiving and Incorporating Health Information measure; (4) to 
progressively increase the number of quarters for which hospitals are 
required to report eCQM data, from the current requirement of one self-
selected calendar quarter of data, to four calendar quarters of data, 
over a 3-year period. Specifically, we propose to require: (a) 2 Self-
selected calendar quarters of data for the CY 2021 reporting period; 
(b) 3 self-selected calendar quarters of data for the CY 2022 reporting 
period; and (c) 4 self-selected calendar quarters of data beginning 
with the CY 2023 reporting period, where the proposed submission period 
for the Medicare Promoting Interoperability Program would be the 2 
months following the close of the CY 2023 (ending February 28, 2024); 
(5) to begin publicly reporting eCQM performance data beginning with 
the eCQM data reported by eligible hospitals and CAHs for the reporting 
period in CY 2021 on the Hospital Compare and/or data.medicare.gov 
websites or successor websites; (6) to correct errors and amend 
regulation text under Sec.  495.104(c)(5)(viii)(B) through (D) 
regarding transition factors under section 1886(n)(2)(E)(i) of the Act 
for the incentive payments for Puerto Rico eligible hospitals; and (7) 
to correct errors and amend regulation text under Sec.  
495.20(e)(5)(iii) and (l)(11)(ii)(C)(1) for regulatory citations for 
the ONC certification criteria. We are amending our regulation texts as 
necessary to incorporate these proposed changes.
c. Summary of Collection of Information Burden Estimates
(1) Summary of Estimates Used To Calculate the Collection of 
Information Burden
    In the Medicare and Medicaid Programs; Electronic Health Record 
Incentive Program--Stage 3 and Modifications to Meaningful Use in 2015 
Through 2017 final rule (80 FR 62917), we estimated it will take an 
individual provider or designee approximately 10 minutes to attest to 
each objective and associated measure that requires a numerator and 
denominator to be generated. The measures that require a ``yes/no'' 
response will take approximately one minute to complete. We estimated 
that the Security Risk Analysis measure will take approximately 6 hours 
for an individual provider or designee to complete (we note this 
measure is still part of the program, but is not subject to 
performance-based scoring). We continue to believe these are 
appropriate burden estimates for reporting and have used this 
methodology in our collection of information burden estimates for this 
proposed rule.
    Given the proposals, we estimate a total burden estimate of 6 hours 
31 minutes per respondent (6.5 hours) which remains unchanged from the 
FY 2020 IPPS/LTCH PPS final rule (84 FR 42044).

[[Page 32886]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.217

(2) Hourly Labor Costs
    In the Medicare and Medicaid Programs; Electronic Health Record 
Incentive Program--Stage 3 and Modifications to Meaningful Use in 2015 
Through 2017 final rule (80 FR 62917), we estimated a mean hourly rate 
of $63.46 for the staff involved in attesting to EHR technology, 
meaningful use objectives and associated measures, and electronically 
submitting the clinical quality measures. We had previously used the 
mean hourly rate of $68.22 for the necessary staff involved in 
attesting to the objectives and measures under 42 CFR 495.24(e) in the 
FY 2020 IPPS/LTCH PPS final rule (84 FR 42609), however, this rate has 
since been updated to $69.34 for the FY 2021 proposed rule based upon 
recently-released 2018 data from the Bureau of Labor Statistics 
(BLS).\516\
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    \516\ https://www.bls.gov/oes/current/oes231011.htm.
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    In summary, if our proposal is finalized as proposed, we do not 
estimate any net change in burden hours for the Medicare Promoting 
Interoperability Program for CY 2021, as there is no substantive change 
in measures or data submission requirements for eligible hospitals and 
CAHs in our proposals. However, we discovered an incorrect mathematical 
calculation in last year's final rule and are correcting it in the 
table that follows. The correction we are providing in following table 
is that 3,300 responses multiplied by 6.5 burden hours equals 21,450 
total annual burden hours (a decrease in 44 hours from what was 
mistakenly reported last year). While we reiterate that the proposals 
included in this rule do not contribute to additional or reduced burden 
hours, please note that the correction of this error will update 
subsequent burden calculations detailed below.
    As previously stated, recent data from the BLS reflects a median 
hourly staff wage of $69.34 (previously $68.22). Consequently, while 
our proposal will not yield a net change in burden hours, the change in 
labor wage will cause an increase in burden cost for the program. 
Therefore, using the updated estimate of total annual burden hours of 
21,450 burden hours across 3,300 responses to data collection and 
submissions for the program objectives' measures, we estimate a total 
annual labor cost of $1,487,343 (21,450 hours x $69.34 per hour) for 
the CY 2021 EHR reporting period. The burden hours associated with 
these reporting requirements is currently approved under OMB control 
number 0938-1278. The updated burden cost, based solely on the increase 
in labor wages, will be revised and submitted to OMB.
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[[Page 32887]]


    As no measures have been removed nor introduced since last year's 
final rule, but are mainly continuations of current policies, we do not 
consider the proposals included in this section to change the program. 
That being said, the numerical-correction of the total annual burden 
hours and an updated BLS hourly labor cost of reporting will impact the 
program's total cost. Thus, the Collection Burden's Total Cost for CY 
2021 of $1,487,343 is an increase of $21,022.32 from last year's final 
rule.
10. ICR for the Submission of Electronic Medical Records to Quality 
Improvement Organizations (QIOs)
    In section IX.A. of this proposed rule, we discuss our proposals 
relating to the submission of patient records to the QIOs in an 
electronic format by providers and practitioners in accordance with 
Sec.  476.78 and by institutions and practitioners in accordance with 
Sec.  480.111. These patient records must be submitted to the QIOs for 
purposes of one or more QIO functions. As a result, the collection and 
review of such records by the QIOs constitutes an audit, investigation 
or administrative action as specified in section 1154(a) of the Act. 
Therefore, we believe these collection requirements are not subject to 
the PRA as stipulated under 5 CFR 1320.4(a)(2).
11. ICR for Payer-Specific Negotiated Charges Data Collection
    Section IV.P. of the preamble of this proposed rule discusses the 
proposed data collection of market-based payment rate information by 
MS-DRG on the Medicare cost report for cost reporting periods ending on 
or after January 1, 2021. First, hospitals would report the median 
payer-specific negotiated charge by MS-DRG for payers that are MA 
organizations. Second, hospitals would report the median payer-specific 
negotiated charge by MS-DRG for all third-party payers, which include 
MA organizations. We propose to collect this market-based information 
on new form CMS-2552-10, Worksheet S-12.
    Consistent with the desire to reduce the Medicare program's 
reliance on the hospital chargemaster, as well as to inject market 
pricing into Medicare FFS reimbursement, thereby addressing the 
objectives under E.O.s 13813 and 13890, we believe reporting this 
market based information will be less burdensome for hospitals given 
that hospitals are required, beginning in CY 2021, to make public their 
payer-specific negotiated charges for the same service packages under 
the requirements we finalized in the Hospital Price Transparency final 
rule. The market-based rate information we are proposing to collect on 
the Medicare cost report would be the median of the payer-specific 
negotiated charges for every MS-DRG, that the hospital has negotiated 
with its MA organizations and all of its third party payers, which 
include MA organizations. We believe that because hospitals are already 
required to publically report the payer-specific negotiated charge 
information that they will use to calculate these medians, the 
additional calculation and reporting of the median payer-specific 
negotiated charge will be less burdensome for hospitals.
    Burden hours estimate the time (number of hours) required for each 
IPPS hospital to complete ongoing data gathering and recordkeeping 
tasks, search existing data resources, review instructions, and 
complete the Form CMS-2552-10, Worksheet S-12. The most recent data 
from the System for Tracking Audit and Reimbursement, an internal CMS 
data system maintained by the Office of Financial Management (OFM), 
reports that 3,189 hospitals, the current number of Medicare certified 
IPPS hospitals, file Form CMS-2552-10 annually.
    In section IV.P.2.c. of the preamble to this proposed rule, we 
proposed that subsection (d) hospitals in the 50 states and DC, as 
defined at section 1886(d)(1)(B) of the Act, and subsection (d) Puerto 
Rico hospitals, as defined under section 1886(d)(9)(A) of the Act, 
would be required to report the median payer-specific negotiated charge 
information. Hospitals that do not negotiate payment rates and only 
receive non-negotiated payments for service would be exempted from this 
definition. We recognize that Critical Access Hospitals (CAHs) may, in 
some instances, negotiate payment rates; however, because CAHs are not 
subsection (d) hospitals and are not paid on the basis of MS-DRGs, CAHs 
would be excluded from this proposed requirement. We also are proposing 
that hospitals in Maryland, which are currently paid under the Maryland 
Total Cost of Care Model, would be exempt from this data collection 
requirement during the performance period of the Model. Based on this 
proposal, we estimate that 3,189 hospitals would be required to comply 
with this market-based data collection proposal.
    Based on our understanding of the resources necessary to report 
this information, we estimate an average annual burden per hospital of 
15 hours (5 hours for recordkeeping and 10 hours for reporting) for the 
Worksheet S-12. The burden is minimized because the median payer-
specific negotiated charge data collected on the Worksheet S-12 is 
based on payer-specific data maintained by the hospital.
    We estimated the total annual burden hours as follows: 3,189 
hospitals times 15 hours per hospital equals 47,835 annual burden 
hours.
    The 5 hours for recordkeeping include hours for bookkeeping, 
accounting and auditing clerks; the 10 hours for reporting include 
accounting and audit professionals' activities. We believe the basic 
median calculation would be captured within the recordkeeping portion 
of this assessment.
    Based on the most recent Bureau of Labor Statistics (BLS) in its 
2019 Occupation Outlook Handbook, the mean hourly wage for Category 43-
3031 (bookkeeping, accounting and auditing clerks) is $20.65 (https://www.bls.gov/oes/current/oes433031.htm). We added 100 percent of the 
mean hourly wage to account for fringe and overhead benefits, which 
calculates to $41.30 ($20.65 + $20.65) and multiplied it by 5 hours, to 
determine the annual recordkeeping costs per hospital to be $206.50 
($41.30 x 5 hours).
    The mean hourly wage for Category 13-2011 (accounting and audit 
professionals) is $38.23 (www.bls.gov/oes/current/oes132011.htm). We 
added 100 percent of the mean hourly wage to account for fringe and 
overhead benefits, which calculates to $76.46 ($38.23 + $38.23) and 
multiplied it by 10 hours, to determine the annual reporting costs per 
hospital to be $764.60 ($76.46 x 10 hours). We have calculated the 
total annual cost per hospital of $971.10 by adding the recordkeeping 
costs of $206.50 plus the reporting costs of $764.60 (see Table K1). We 
estimated the total annual cost to be $3,096,838 ($971.10 times 3,189 
IPPS hospitals) (see Table K2).

[[Page 32888]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.219

    We believe that because hospitals are already required to 
publically report the payer-specific negotiated charge information that 
they will use to calculate these medians, the additional calculation 
and reporting of the median payer-specific negotiated charge will be 
less burdensome for hospitals than if hospitals did not already have 
this information compiled. The Hospital Price Transparency final rule 
required that hospitals establish, update, and make public via the 
internet standard charges in two different ways: (1) A single machine-
readable file with a list of standard charges (including gross charges, 
payer-specific negotiated charges, de-identified minimum negotiated 
charges, de-identified maximum negotiated charges, and discounted cash 
prices) for all items and services including service packages 
identified by MS-DRG; and (2) standard charges (including payer-
specific negotiated charges, discounted cash prices, de-identified 
minimum negotiated charges, de-identified maximum negotiated charges) 
in a consumer-friendly manner for as many of the 70 CMS-specified 
shoppable services that are provided by the hospital, and as many 
additional hospital-selected shoppable services as is necessary for a 
combined total of at least 300 shoppable services. We note that the 
proposed data collection requirement in this proposed rule would apply 
to a smaller subset of hospitals as compared to the public reporting 
requirements under the Hospital Price Transparency final rule.
    In total, the Hospital Price Transparency final rule estimated in 
the first year of public reporting, it would take a hospital an 
estimated 150 hours at a cost of $11,898.60 per hospital \517\ to 
implement and comply with the requirements, as specified at 45 CFR part 
180. The estimated 150 hours of burden for the first year includes 10 
total hours for a lawyer ($138.68/hour) and general operations manager 
($119.12/hour) to read and review the rule; 80 hours for a business 
operations specialist ($74.00/hour) to gather and compile the required 
information and post it in the form and manner specified in the 
Hospital Price Transparency final rule; 30 hours for a network and 
computer system administrator ($83.72/hour) to comply with the form and 
manner standards set forth in the Hospital Price Transparency final 
rule; 30 hours for a registered nurse ($72.60/hour) to capture the 
necessary clinical input to comply with reporting the CMS-specified and 
hospital-selected shoppable services. (150 hours = 5 hours + 5 hours + 
80 hours + 30 hours + 30 hours; totaling a cost of $11,898.60 ($693.40 
+ $595.60 + $5,920 + $2,511.60 + $2,178) per hospital.)
---------------------------------------------------------------------------

    \517\ The estimated hourly cost for each labor category used in 
this analysis were referencing the Bureau of Labor Statistics report 
on Occupational Employment and Wages, May 2018 (Bureau of Labor 
Statistics report on Occupational Employment and Wages, May 2018 
Available at: https://www.bls.gov/oes/2018/may/oes_nat.htm). We also 
have calculated the cost of overhead at 100 percent of the mean 
hourly wage, in line with the Hospital Inpatient and Hospital 
Outpatient Quality Reporting programs (81 FR 57260 and 82 FR 59477, 
respectively).
---------------------------------------------------------------------------

    In this proposed rule, we propose that hospitals calculate and 
report on the Medicare cost report two median payer-specific negotiated 
charges using the payer-specific negotiated charge data they are 
required to make public under the Hospital Price Transparency final 
rule. Therefore, the burden associated with establishing and updating 
the payer-specific negotiated charges has already been assumed. 
Specifically, given that the payer-specific negotiated charge is one of 
the five types of standard charges (gross charges, payer-specific 
negotiated charges, de-identified minimum negotiated charges, de-
identified maximum negotiated charges, and discounted cash prices) that 
the Hospital Price Transparency final rule requires that hospitals 
estimate, update and make public, we believe that a fraction of the 
estimated 80 hours of burden associated with gathering, compiling, and 
posting, that required information in the form and manner specified in 
the Hospital Price Transparency final rule, would support the reporting 
efforts in this proposed rule. We are interested in hearing from

[[Page 32889]]

commenters if burden estimates in this proposed rule accurately capture 
the time needed to take information already gathered for the Hospital 
Price Transparency final rule and report it to CMS in the manner 
requested.
    We refer readers to the Hospital Price Transparency final rule for 
the full burden assessment analysis for the requirements set forth 
within that final rule (84 FR 65524).
    We maintain that the estimated burden associated with completing 
the Worksheet S-12 would be 15 hours (5 hours for recordkeeping and 10 
hours for reporting), given the minimized burden since hospitals would 
already have collected the payer-specific negotiated charge data and 
would only then need to calculate the median payer-specific negotiated 
charge by MS-DRG for payers that are MA organizations and for all 
third-party payers.
    Further instructions for the reporting of this market-based data 
collection proposal on the Medicare cost report will be discussed in a 
forthcoming revision of the ICR request currently approved under OMB 
control number 0938-0050, expiration date March 31, 2022.
12. Summary of All Burden in This Proposed Rule
    The following chart reflects the total burden and associated costs 
for the provisions included in this proposed rule.
[GRAPHIC] [TIFF OMITTED] TP29MY20.220

C. Response to Comments

    Because of the large number of public comments we normally receive 
on Federal Register documents, we are not able to acknowledge or 
respond to them individually. We will consider all comments we receive 
by the date and time specified in the DATES section of this proposed 
rule, and, when we proceed with a subsequent document(s), we will 
respond to those comments in the preamble to that document.

D. Waiver of the 60-Day Delayed Effective Date for the Final Rule

    We are committed to ensuring that we fulfill our statutory 
obligation to update the IPPS and LTCH PPS as required by law and are 
working diligently in that regard. We ordinarily provide a 60-day delay 
in the effective date of final rules after the date they are issued in 
accord with the Congressional Review Act (CRA) (5 U.S.C. 801(a)(3)). 
However, section 808(2) of the CRA provides that, if an agency finds 
good cause that notice and public procedure are impracticable, 
unnecessary, or contrary to the public interest, the rule shall take 
effect at such time as the agency determines.
    The United States is responding to an outbreak of respiratory 
disease caused by a novel (new) coronavirus that has now been detected 
in more than 190 locations internationally, including in all 50 States 
and the District of Columbia. The virus has been named ``SARS-CoV-2'' 
and the disease it causes has been named ``coronavirus disease 2019'' 
(abbreviated ``COVID-19'').
    On January 30, 2020, the International Health Regulations Emergency 
Committee of the World Health Organization (WHO) declared the outbreak 
a ``Public Health Emergency of international concern'' (PHEIC). On 
January 31, 2020, Health and Human Services Secretary, Alex M. Azar II, 
declared a PHE for the United States to aid the nation's healthcare 
community in responding to COVID-19. On March 11, 2020, the WHO 
publicly characterized COVID-19 as a pandemic. On March 13, 2020 the 
President of the United States declared the COVID-19 outbreak a 
national emergency.
    Due to CMS prioritizing efforts in support of containing and 
combatting the COVID-19 PHE, and devoting significant resources to that 
end, the work needed on the IPPS and LTCH PPS payment rule will not be 
completed in accordance with our usual schedule for this rulemaking, 
which aims for a publication date of at least 60 days before the start 
of the fiscal year to which it applies. Up to an additional 30 days may 
be needed to complete the work needed on this payment rule. The IPPS 
and LTCH PPS payment rule is necessary to annually review and update 
the payment systems, and it is critical to ensure that the payment 
policies for these systems are effective on the first day of the fiscal 
year to which they are intended to apply. Therefore, due to CMS 
prioritizing efforts in support of containing and combatting the COVID-
19 PHE, and devoting significant resources to that end, we are hereby 
waiving the 60-day delay in the effective date of the IPPS and LTCH PPS 
final rule; it would be contrary to the public interest for CMS to do 
otherwise. However, we do expect

[[Page 32890]]

to provide a 30-day delay in the effective date of the final rule in 
accord with section 5 U.S.C. 553(d) of the Administrative Procedure 
Act, which ordinarily requires a 30-day delay in the effective date of 
a final rule from the date of its public availability in the Federal 
Register, and section 1871(e)(1)(B)(i) of the Act, which generally 
prohibits a substantive rule from taking effect before the end of the 
30-day period beginning on the date of its public availability.

List of Subjects

42 CFR Part 405

    Administrative practice and procedure, Health facilities, Health 
professions, Kidney diseases, Medical devices, Medicare, Reporting and 
recordkeeping requirements, Rural areas, X-rays.

42 CFR Part 412

    Administrative practice and procedure, Health facilities, Medicare, 
Puerto Rico, Reporting and recordkeeping requirements.

42 CFR Part 413

    Health facilities, Kidney diseases, Medicare, Puerto Rico, 
Reporting and recordkeeping requirements.

42 CFR Part 417

    Administrative practice and procedure, Grant programs--health, 
Health care, Health insurance, Health maintenance organizations (HMO), 
Loan programs--health, Medicare, Reporting and recordkeeping 
requirements.

42 CFR Part 476

    Grant programs--health, Health care, Health facilities, Health 
professions, Quality Improvement Organizations (QIOs), Reporting and 
recordkeeping requirements.

42 CFR Part 480

    Health care, Health professions, Health records, Penalties, 
Privacy, Quality Improvement Organizations (QIOs), Reporting and 
recordkeeping requirements.

42 CFR Part 484

    Health facilities, Health professions, Medicare, Reporting and 
recordkeeping requirements.

42 CFR Part 495

    Administrative practice and procedure, Health facilities, Health 
maintenance organizations (HMO), Health professions, Health records, 
Medicaid, Medicare, Penalties, Privacy, Reporting and recordkeeping 
requirements.

    For the reasons set forth in the preamble, the Centers for Medicare 
and Medicaid Services proposed to amend 42 CFR chapter IV as set forth 
below:

PART 405--FEDERAL HEALTH INSURANCE FOR THE AGED AND DISABLED

0
1. The authority citation for part 405 continues to read as follows:

    Authority:  42 U.S.C. 263a, 405(a), 1302, 1320b-12, 1395x, 
1395y(a), 1395ff, 1395hh, 1395kk, 1395rr, and 1395ww(k).

0
2. Section 405.1801 is amended--
0
a. In paragraph (a), in the definition of ``Date of receipt''--
0
i. By revising paragraphs (1)(ii) and (2) introductory text;
0
ii. In paragraph (2)(i) by removing the phrase ``; or'' and adding a 
period in its place; and
0
iii. By adding paragraph (2)(iii); and
0
b. By revising paragraph (d) introductory text.
    The revisions and addition read as follows:


Sec.  405.1801   Introduction.

    (a) * * *
    Date of receipt * * *
    (1) * * *
    (ii) For purposes of a contractor hearing, if no contractor hearing 
officer is appointed (or none is currently presiding), the date of 
receipt of materials sent to the contractor hearing officer (as 
permitted under paragraph (d) of this section) is presumed to be, as 
applicable, the date that the contractor stamps ``Received'' on the 
materials, or the date of electronic delivery.
* * * * *
    (2) A reviewing entity. For purposes of this definition, a 
reviewing entity is deemed to include the Office of the Attorney 
Advisor. The determination as to the date of receipt by the reviewing 
entity to which the document or other material was submitted (as 
permitted under paragraph (d) of this section) is final and binding as 
to all parties to the appeal. The date of receipt of documents by a 
reviewing entity is presumed to be, as applicable, one of the following 
dates:
* * * * *
    (iii) Of electronic delivery. In writing or written means a hard 
copy or electronic submission (subject to the restrictions in paragraph 
(d) of this section), as applicable throughout this subpart.
* * * * *
    (d) Method for submissions and calculating time periods and 
deadlines. Except for subpoena requests being sent to a nonparty under 
Sec.  405.1857(c), the reviewing entity may prescribe the method(s) by 
which a party must make a submission, including the requirement to use 
an electronic filing system for submission of documents. Such methods 
or instructions apply to any period of time or deadline prescribed or 
allowed under this subpart (for example, requests for appeal under 
Sec. Sec.  405.1811(b), 405.1835(b), and 405.1837(c) and (e)) or 
authorized by a reviewing entity. In computing any period of time or 
deadline prescribed or allowed under this subpart or authorized by a 
reviewing entity the following principles are applicable:
* * * * *


Sec.  405.1811   [Amended]

0
 3. Section 405.1811 is amended in paragraph (c)(1) by removing the 
phrase ``the date the contractor stamped'' and adding in its place is 
the phrase ``the date of electronic delivery, or the date the 
contractor stamped''.


Sec.  405.1813   [Amended]

0
4. Section 405.1813 is amended--
0
a. In paragraph (d) by removing the phrase ``must give prompt written 
notice to the provider, and mail a copy'' and adding in its place is 
the phrase ``must send prompt written notice to the provider, and send 
a copy''; and
0
b. In paragraph (e)(1) by removing the phrase ``promptly mails the 
decision'' and adding in its place is the phrase ``promptly sends the 
decision''.


Sec.  405.1814   [Amended]

0
 5. Section 405.1814 is amended in paragraph (c)(2) by removing the 
phrase ``must be mailed promptly'' and adding in its place is the 
phrase ``must be sent promptly''.


Sec.  405.1819   [Amended]

0
6. Section 405.1819 is amended by removing the phrase ``prior to the 
mailing of notice'' and adding in its place is the phrase ``prior to 
the sending of notice''.


Sec.  405.1821   [Amended]

0
7. Section 405.1821 is amended--
0
a. In paragraph (c)(1) by removing the phrase ``be mailed promptly'' 
and adding in its place is the phrase ``be sent promptly''; and
0
b. In paragraph (c)(3)(iii)(B) by removing the phrase ``Issue and 
mail'' and adding in its place is the phrase ``Issue and send''.


Sec.  405.1831   [Amended]

0
8. Section 405.1831 is amended in paragraph (d) by removing the phrase 
``must be mailed'' and adding in its place is the phrase ``must be 
sent''.

[[Page 32891]]

Sec.  405.1834   [Amended]

0
 9. Section 405.1834 is amended in paragraph (e)(3) by removing the 
phrase ``must be mailed'' and adding in its place is the phrase ``must 
be sent''.


Sec.  405.1835   [Amended]

0
10. Section 405.1835 is amended--
0
a. In paragraph (b) introductory text by removing ``in writing to the 
Board'', ``(b)(1) through (b)(4)'', and ``(b)(1), (b)(2), or (b)(3)'' 
and adding in their places ``in writing in the manner prescribed by the 
Board'', ``(b)(1) through (4)'', and ``(b)(1), (2), or (3)'', 
respectively.
0
b. In paragraph (d) introductory text by removing removing ``in writing 
to the Board'', ``(d)(1) through (d)(4)'', and ``(d)(1), (d)(2), or 
(d)(3)'' and adding in their places ``in writing in the manner 
prescribed by the Board'', ``(d)(1) through (4)'', and ``(d)(1), (2), 
or (3)'', respectively.


Sec.  405.1836   [Amended]

0
11. Section 405.1836 is amended --
0
a. In paragraph (d) by removing the phrase ``and mail a copy'' and 
adding in its place is the phrase ``and send a copy''; and
0
b. In paragraph (e)(1) by removing the phrase ``of this subpart'' 
wherever it appears and removing the phrase ``must be mailed'' and 
adding in its place is the phrase ``must be sent''.


Sec.  405.1840   [Amended]

0
12. Section 405.1840 is amended paragraph (c)(2) by removing the phrase 
``of this subpart'' wherever it appears and removing the phrase ``must 
be mailed'' and adding in its place is the phrase ``must be sent''.
0
13. Section 405.1843 is amended--
0
a. By redesignating paragraph (a) as paragraph (a)(1);
0
b. In newly redesignated paragraph (a)(1) by removing the phrase ``of 
this subpart'';
0
c. By adding paragraph (a)(2); and
0
d. In paragraph (d)(2) by removing the phrase ``promptly mail copies'' 
and adding in its place is the phrase ``promptly send copies''.
    The addition reads as follows:


Sec.  405.1843   Parties to proceedings in a Board appeal.

    (a) * * *
    (2) All parties to a Board appeal are to familiarize themselves 
with the instructions for handling a Provider Reimbursement Review 
Board (PRRB) appeal, including any and all requirements related to the 
electronic/online filing of documents.
* * * * *


Sec.  405.1845   [Amended]

0
14. Section 405.1845 is amended in paragraph (h)(2)(iii) by removing 
the phrase ``Mail the remand'' and adding in its place is the phrase 
``Send the remand''.


Sec.  405.1849   [Amended]

0
15. Section 405.1849 is amended by removing the phrase ``mail written 
notice thereof to the parties at their last known addresses,'' and 
adding in its place is the phrase ``send notice thereof to the parties' 
contact information on file,''.


Sec.  405.1851   [Amended]

0
16. Section 405.1851 is amended by removing the phrase ``mailing of 
notice'' and adding in its place is the phrase ``issuing of the 
notice''.


Sec.  405.1853   [Amended]

0
17. Section 405.1853 is amended in paragraph (e)(5)(vi)(A) by removing 
the phrase ``issue and mail'' and adding in its place is the phrase 
``issue and send''.
0
18. Section 405.1857 is amended--
0
a. By revising paragraph (c)(1) introductory text; and
0
b. In paragraph (c)(4)(iii)(A) by removing the phrase ``mail promptly 
to each party'' and adding in its place is the phrase ``send promptly 
to each party''.
    The revision reads as follows:


Sec.  405.1857   Subpoenas.

* * * * *
    (c) * * *
    (1) Subpoena requests. The requesting party must send any subpoena 
request submitted to the Board promptly to the party or nonparty 
subject to the subpoena, and to any other party to the Board appeal. If 
the subpoena request is being sent to a nonparty subject to the 
subpoena, then the subpoena request must be sent by certified mail. The 
request must--
* * * * *


Sec.  405.1868   [Amended]

0
19. Section 405.1868 is amended in paragraph (d)(1) by removing the 
phrase ``must be mailed'' and adding in its place is the phrase ``must 
be sent''.


Sec.  405.1871   [Amended]

0
20. Section 405.1871 is amended in paragraph (a)(5) by removing the 
phrase ``must be mailed'' and adding in its place is the phrase ``must 
be sent''.


Sec.  405.1875   [Amended]

0
 21. Section 405.1875 is amended--
0
a. In paragraph (c)(1)(iv) by removing the phrase ``must be mailed'' 
and adding in its place is the phrase ``must be sent''; and
0
b. In paragraph (e)(2) by removing the phrase ``mail a copy'' and 
adding in its place is the phrase ``send a copy''.


Sec.  405.1885   [Amended]

0
 22. Section 405.1885 is amended--
0
a. In paragraph (b)(1) by removing the phrase ``of this subpart'' and 
removing the term ``mailed'' and adding in its place the term ``sent'' 
each time it appears; and
0
b. In paragraph (b)(2)(i) by removing the phrase ``request to reopen is 
conclusively presumed to be the date of delivery by a nationally-
recognized next-day courier, or the date stamped ``Received'' by CMS, 
the contractor or the reviewing entity (where a nationally-recognized 
next-day courier is not employed),'' and adding in its place the phrase 
``request to reopen is determined by applying the date of receipt 
presumption criteria for reviewing entities defined in Sec.  
405.1801(a),''.

PART 412--PROSPECTIVE PAYMENT SYSTEMS FOR INPATIENT HOSPITAL 
SERVICES

0
23. The authority citation for part 412 continues to read as follows:

    Authority:  42 U.S.C. 1302 and 1395hh.

0
24. Section 412.1 is amended by revising paragraph (a)(1) to read as 
follows:


Sec.  412.1   Scope of part.

    (a) * * *
    (1) This part implements sections 1886(d) and (g) of the Act by 
establishing a prospective payment system for the operating costs of 
inpatient hospital services furnished to Medicare beneficiaries in cost 
reporting periods beginning on or after October 1, 1983 and a 
prospective payment system for the capital-related costs of inpatient 
hospital services furnished to Medicare beneficiaries in cost reporting 
periods beginning on or after October 1, 1991.
    (i) Under these prospective payment systems, payment for the 
operating and capital-related costs of inpatient hospital services 
furnished by hospitals subject to the systems (generally, short-term, 
acute-care hospitals) is made on the basis of prospectively determined 
rates and applied on a per discharge basis.
    (ii) Payment for other costs related to inpatient hospital services 
(organ acquisition costs incurred by hospitals with approved organ 
transplantation centers, the costs of qualified nonphysician 
anesthetist's services, as described in Sec.  412.113(c), direct costs 
of approved nursing and allied health educational programs, costs 
related to

[[Page 32892]]

hematopoietic stem cell acquisition for the purpose of an allogeneic 
hematopoietic stem cell transplant as described in Sec.  412.113(e)) is 
made on a reasonable cost basis.
    (iii) Payment for the direct costs of graduate medical education is 
made on a per resident amount basis in accordance with Sec. Sec.  
413.75 through 413.83 of this chapter.
    (iv) Additional payments are made for outlier cases, bad debts, 
indirect medical education costs, and for serving a disproportionate 
share of low-income patients.
    (v) Under either prospective payment system, a hospital may keep 
the difference between its prospective payment rate and its operating 
or capital-related costs incurred in furnishing inpatient services, and 
the hospital is at risk for inpatient operating or inpatient capital-
related costs that exceed its payment rate.
* * * * *
0
25. Section 412.2 is amended by adding paragraph (e)(6) to read as 
follows:


Sec.  412.2   Basis of payment.

* * * * *
    (e) * * *
    (6) For cost reporting periods beginning on or after October 1, 
2020, the costs of allogenic hematopoietic stem cell acquisition, as 
described in Sec.  412.113(e), for the purpose of an allogeneic 
hematopoietic stem cell transplant.
* * * * *
0
26. Section 412.64 is amended by adding paragraph (e)(5) to read as 
follows:


Sec.  412.64   Federal rates for inpatient operating costs for Federal 
fiscal year 2005 and subsequent fiscal years.

* * * * *
    (e) * * *
    (5) CMS makes an adjustment to the standardized amount to ensure 
that the reasonable cost based payments for allogeneic hematopoietic 
stem cell acquisition costs are made in a manner so that aggregate 
payments to hospitals are not affected.
* * * * *


Sec.  412.82   [Amended]

0
27. Section 412.82 is amended in paragraph (c) by removing the 
reference ``Sec.  412.86'' and adding in its place ``Sec.  412.83''.
0
28. Section 412.85 and an undesignated center heading preceeding the 
section are added to read as follows:

Payment Adjustment for Certain Clinical Trials Cases


Sec.  412.85   Payment adjustment for certain clinical trial cases.

    (a) General rule. For discharges occurring on or after October 1, 
2020, the amount of payment for a discharge described in paragraph (b) 
of this section is adjusted as described in paragraph (c) of this 
section.
    (b) Discharges subject to payment adjustment. Payment is adjusted 
in accordance with paragraph (c) of this section for discharges 
assigned to MS-DRG 018 that are part of a clinical trial as determined 
by CMS based on the reporting of a diagnosis code indicating the 
encounter is part of a clinical research program on the claim for the 
discharge.
    (c) Adjustment. The DRG weighting factor determined under Sec.  
412.60(b) is adjusted by a factor that reflects the average cost for 
cases to be assigned to MS-DRG 018 that are part of a clinical trial to 
the average cost for cases to be assigned to MS-DRG 018 that are not 
part of a clinical trial.


Sec.  412.86   [Redesignated as Sec.  412.83]

0
29. Section 412.86 is redesignated as Sec.  412.83.


Sec.  412.86   [Added and Reserved]

0
29a. New reserved Sec.  412.86 is added.
0
30. Section 412.87 is amended--
0
a. By revising paragraphs (c)(1), (d) introductory text, (d)(1), (e) 
introductory text, and (e)(2); and
0
b. By adding paragraph (e)(3).
    The revisions and addition read as follows:


Sec.  412.87   Additional payment for new medical services and 
technologies: General provisions.

* * * * *
    (c) * * *
    (1) A new medical device is part of the Food and Drug 
Administration's (FDA) Breakthrough Devices Program and has received 
marketing authorization for the indication covered by the Breakthrough 
Device designation.
* * * * *
    (d) Eligibility criteria for alternative pathway for certain 
antimicrobial products. (1)(i) A new medical product is designated by 
the FDA as a Qualified Infectious Disease Product and has received 
marketing authorization for the indication covered by the Qualified 
Infectious Disease Product designation; or
    (ii) For discharges occurring on or after October 1, 2021, a new 
medical product is approved under FDA's Limited Population Pathway for 
Antibacterial and Antifungal Drugs (LPAD) and used for the indication 
approved under the LPAD pathway.
* * * * *
    (e) Announcement of determinations and deadline for consideration 
of new medical service or technology applications, and conditional 
approval for certain antimicrobial products. * * *
    (2) Except as provided for in paragraph (e)(3) of this section, CMS 
only considers, for add-on payments for a particular fiscal year, an 
application for which the new medical service or technology has 
received FDA marketing authorization by July 1 prior to the particular 
fiscal year.
    (3) A technology for which an application is submitted under an 
alternative pathway for certain antimicrobial products under paragraph 
(d) of this section that does not receive FDA marketing authorization 
by the July 1 deadline specified in paragraph (e)(2) of this section 
may be conditionally approved for the new technology add-on payment for 
a particular fiscal year, effective for discharges beginning in the 
first quarter after FDA marketing authorization is granted, provided 
that FDA marketing authorization is granted before July 1 of the fiscal 
year for which the applicant applied for new technology add-on 
payments.
0
31. Section 412.88 is amended--
0
a. In paragraph (a)(2)(ii)(A) introductory text by removing the 
reference ``paragraph (a)(2)(ii)(2) of this section'' and adding in its 
place ``paragraph (a)(2)(ii)(B) of this section'';
0
b. By revising paragraphs (a)(2)(ii)(B) introductory text and (b)(2).
    The revisions read as follows:


Sec.  412.88   Additional payment for new medical service or 
technology.

    (a) * * *
    (2) * * *
    (ii) * * *
    (B) For a medical product designated by FDA as a Qualified 
Infectious Disease Product or, for discharges occurring on or after 
October 1, 2020, for a product approved under FDA's Limited Population 
Pathway for Antibacterial and Antifungal Drugs, if the costs of the 
discharge (determined by applying the operating cost-to-charge ratios 
as described in Sec.  412.84(h)) exceed the full DRG payment, an 
additional amount equal to the lesser of--
* * * * *
    (b) * * *
    (2) For discharges occurring on or after October 1, 2019. Unless a 
discharge case qualifies for outlier payment under Sec.  412.84, 
Medicare will not pay any additional amount beyond the DRG payment 
plus--

[[Page 32893]]

    (i) 65 percent of the estimated costs of the new medical service or 
technology;
    (ii) For a medical product designated by FDA as a Qualified 
Infectious Disease Product, 75 percent of the estimated costs of the 
new medical service or technology; or
    (iii) For discharges occurring on or after October 1, 2020, for a 
product approved under FDA's Limited Population Pathway for 
Antibacterial and Antifungal Drugs, 75 percent of the estimated costs 
of the new medical service or technology.
0
32. Section 412.92 is amended by revising paragraph (c)(3) to read as 
follows:


Sec.  412.92   Special treatment: Sole community hospitals.

* * * * *
    (c) * * *
    (3) The term service area means the area from which a hospital 
draws at least 75 percent of its inpatients during the most recent 12-
month cost reporting period ending before it applies for classification 
as a sole community hospital. If the most recent cost reporting period 
ending before the hospital applies for classification as a sole 
community hospital is for less than 12 months, the hospital's most 
recent 12-month or longer cost reporting period before the short period 
is used.
* * * * *
0
33. Section 412.96 is amended by adding paragraph (c)(2)(iii) to read 
as follows:


Sec.  412.96   Special treatment: Referral centers.

* * * * *
    (c) * * *
    (2) * * *
    (iii) If the hospital's cost reporting period that began during the 
same fiscal year as the cost reporting periods used to compute the 
regional median discharges under paragraph (i) of this section is for 
less than 12 months or longer than 12 months, the hospital's number of 
discharges for that cost reporting period will be annualized to 
estimate the total number of discharges for a 12-month cost reporting 
period.
* * * * *
0
34. Section 412.104 is amended by revising paragraph (a) to read as 
follows:


Sec.  412.104   Special treatment: Hospitals with high percentage of 
ESRD discharges.

    (a) Criteria for classification. CMS provides an additional payment 
to a hospital for inpatient services provided to ESRD beneficiaries who 
receive a dialysis treatment during a hospital stay, if the hospital 
has established that ESRD beneficiary discharges, excluding discharges 
classified into any of the following MS-DRGs, where the beneficiary 
received dialysis services during the inpatient stay, constitute 10 
percent or more of its total Medicare discharges:
    (1) MS-DRG 019 (Simultaneous Pancreas/Kidney Transplant with 
Hemodialysis).
    (2) MS-DRGs 650 and 651 (Kidney Transplant with Hemodialysis with 
MCC, without MCC, respectively).
    (3) MS-DRGs 682, 683, and 684 (Renal Failure with MCC, with CC, 
without CC/MCC, respectively).
* * * * *


Sec.  412.105   [Amended]

0
35. Section 412.105(f)(1)(ix)(A) is amended--
0
a. By removing the phrase ``to reflect residents added because'' and 
added in its place the phrase ``to reflect displaced residents added 
because'' each time it appears.
0
b. By removing the citations ``Sec. Sec.  413.79(h)(1) and (h)(2)'', 
``Sec. Sec.  413.79(h)(1) and (h)(3)(ii)'', and ``Sec. Sec.  
413.79(h)(1) and (h)(3)(i)'' and adding in their places the citations 
``Sec.  413.79(h)(1) and (2)'', ``Sec.  413.79(h)(1) and (h)(3)(ii)'', 
and ``Sec.  413.79(h)(1) and (h)(3)(i)'', respectively.
0
36. Section 412.106 is amended by removing the semicolon at the end of 
paragraph (g)(1)(iii)(C)(6) and adding a period in its place and adding 
paragraphs (g)(1)(iii)(C)(7) and (8) to read as follows:


Sec.  412.106   Special treatment: Hospitals that serve a 
disproportionate share of low-income patients.

* * * * *
    (g) * * *
    (1) * * *
    (iii) * * *
    (C) * * *
    (7) For fiscal year 2021, CMS will base its estimates of the amount 
of hospital uncompensated care on data on uncompensated care costs, 
defined as charity care costs plus non-Medicare and non-reimbursable 
Medicare bad debt costs from 2017 cost reports from the most recent 
Hospital Cost Report Information System (HCRIS) database extract, 
except that, for Puerto Rico hospitals and Indian Health Service or 
Tribal hospitals, CMS will base its estimates on utilization data for 
Medicaid and Medicare Supplemental Security Income (SSI) patients, as 
determined by CMS in accordance with paragraphs (b)(2)(i) and (b)(4) of 
this section, using data on Medicaid utilization from 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).
    (8) For each subsequent fiscal year, for all eligible hospitals, 
except Indian Health Service and Tribal hospitals, CMS will base its 
estimates of the amount of hospital uncompensated care on data on 
uncompensated care costs, defined as charity care costs plus non-
Medicare and non-reimbursable Medicare bad debt costs from cost reports 
from the most recent cost reporting year for which audits have been 
conducted.
* * * * *
0
37. Section 412.113 is amended by adding paragraph (e) to read as 
follows:


Sec.  412.113   Other payments.

* * * * *
    (e) Allogeneic hematopoietic stem cell acquisition. For cost 
reporting periods beginning on or after October 1, 2020, in the case of 
a subsection (d) hospital that furnishes an allogeneic hematopoietic 
stem cell transplant to an individual, payment to such hospital for 
hematopoietic stem cell acquisition costs is made on a reasonable cost 
basis.
    (1) An allogeneic hematopoietic stem cell transplant is the 
intravenous infusion of hematopoietic cells derived from bone marrow, 
peripheral blood stem cells, or cord blood, but not including embryonic 
stem cells, of a donor to an individual that are or may be used to 
restore hematopoietic function in such individual having an inherited 
or acquired deficiency or defect.
    (2) Allogeneic hematopoietic stem cell acquisition costs recognized 
under this paragraph (e) are costs of acquiring hematopoietic stem 
cells from a donor. These costs are as follows:
    (i) Registry fees from a national donor registry described in 42 
U.S.C. 274k, if applicable, for stem cells from an unrelated donor.
    (ii) Tissue typing of donor and recipient.
    (iii) Donor evaluation.
    (iv) Physician pre-admission/pre-procedure donor evaluation 
services.
    (v) Costs associated with the collection procedure (for example, 
general routine and special care services, procedure/operating room and 
other ancillary services, apheresis services).
    (vi) Post-operative/post-procedure evaluation of donor.
    (vii) Preparation and processing of stem cells derived from bone 
marrow, peripheral blood stem cells, or cord blood (but not including 
embryonic stem cells).

[[Page 32894]]

    (3) A subsection (d) hospital that furnishes allogeneic 
hematopoietic stem cell transplants is required to formulate a standard 
acquisition charge that approximates the hospital's average cost of 
acquiring hematopoietic stem cells for all of its allogeneic 
hematopoietic stem cell transplants. Actual charges are converted to 
reasonable cost using the corresponding ancillary cost-to-charge 
ratios.
    (4) The hospital's Medicare share of the allogeneic hematopoietic 
stem cell acquisition costs is based on the ratio of the number of its 
allogeneic hematopoietic stem cell transplants furnished to Medicare 
beneficiaries to the total number of its allogeneic hematopoietic stem 
cell transplants furnished to all patients, regardless of payer, which 
is applied to reasonable cost.
    (5) A subsection (d) hospital must maintain an itemized statement 
that identifies the services furnished in collecting hematopoietic stem 
cells, the charges, the person receiving the service (donor/recipient; 
if donor the provider must identify the prospective recipient), and the 
prospective recipient's health care insurance number.
0
38. Section 412.115 is amended by revising paragraph (c) to read as 
follows:


Sec.  412.115   Additional payments.

* * * * *
    (c) QIO reimbursement for cost of sending requested patient records 
to the QIO. An additional payment is made to a hospital in accordance 
with Sec.  476.78 of this chapter for the costs of sending requested 
patient records to the QIO in electronic format, by facsimile, or by 
photocopying and mailing.
0
 39. Section 412.152 is amended by revising the definitions of 
``Applicable period'' and ``Applicable period for dual eligibility'' to 
read as follows:


Sec.  412.152   Definitions for the Hospital Readmissions Reduction 
Program.

* * * * *
    Applicable period is, with respect to a fiscal year, the 3-year 
period (specified by the Secretary) from which data are collected in 
order to calculate excess readmission ratios and adjustments under the 
Hospital Readmissions Reduction Program.
    (1) The applicable period for FY 2022 is the 3-year period from 
July 1, 2017 through June 30, 2020; and
    (2) Beginning with the FY 2023 program year, the applicable period 
is the 3-year period advanced by 1-year from the prior year's period 
from which data are collected in order to calculate excess readmission 
ratios and adjustments under the Hospital Readmissions Reduction 
Program, unless otherwise specified by the Secretary. That is, for FY 
2023, the applicable period is the 3-year period from July 1, 2018 
through June 30, 2021.
    Applicable period for dual eligibility is the 3-year data period 
corresponding to the applicable period for the Hospital Readmissions 
Reduction Program, unless otherwise established by the Secretary.
* * * * *
0
40. Section 412.170 is amended by revising the definition of 
``Applicable period'' and adding the definitions of ``CDC NHSN HAI'' 
and ``CMS PSI 90'' in alphabetical order to read as follows:


Sec.  412.170   Definitions for the Hospital-Acquired Condition 
Reduction Program.

* * * * *
    Applicable period is, unless otherwise specified by the Secretary, 
with respect to a fiscal year, the 2-year period (specified by the 
Secretary) from which data are collected in order to calculate the 
total hospital-acquired condition score under the Hospital-Acquired 
Condition Reduction Program.
    (1) The applicable period for FY 2023--
    (i) For the CMS PSI 90 measure is the 24-month period from July 1, 
2019 through June 30, 2021; and
    (ii) For the CDC NHSN HAI measures is the 24-month period from 
January 1, 2020 through December 31, 2021.
    (2) Beginning with the FY 2023 program year, the applicable period 
is the 24-month period advanced by 1-year from the prior fiscal year's 
period from which data are collected in order to calculate the total 
hospital-acquired condition score under the Hospital-Acquired Condition 
Reduction Program, unless otherwise specified by the Secretary.
    CDC NHSN HAI stands for Centers for Disease Control and Prevention 
National Healthcare Safety Network healthcare-associated infection 
measures.
    CMS PSI 90 stands for Patient Safety and Adverse Events Composite 
for Selected Indicators (modified version of PSI 90).
* * * * *
0
41. Section 412.230 is amended by revising paragraph (d)(2)(ii)(A) to 
read as follows:


Sec.  412.230   Criteria for an individual hospital seeking 
redesignation to another rural area or an urban area.

* * * * *
    (d) * * *
    (2) * * *
    (ii) * * *
    (A) For hospital-specific data, the hospital must provide a 
weighted 3-year average of its average hourly wages using data from the 
CMS hospital wage survey used to construct the wage index in effect for 
prospective payment purposes.
    (1) For the limited purpose of qualifying for geographic 
reclassification based on wage data from cost reporting periods 
beginning prior to FY 2000, a hospital may request that its wage data 
be revised if the hospital is in an urban area that was subject to the 
rural floor for the period during which the wage data the hospital 
wishes to revise were used to calculate its wage index.
    (2) Once a hospital has accumulated at least 1 year of wage data in 
the applicable 3-year average hourly wage period used by the MGCRB, the 
hospital is eligible to apply for reclassification based on those data.
* * * * *
0
42. Section 412.278 is amended by revising paragraph (b)(1) to read as 
follows:


Sec.  412.278   Administrator's review.

* * * * *
    (b) * * *
    (1) The hospital's request for review must be in writing and sent 
to the Administrator, in care of the Office of the Attorney Advisor. 
The request must be received by the Administrator within 15 days after 
the date the MGCRB issues its decision. The hospital must also submit 
an electronic copy of its request for review to to CMS's Hospital and 
Ambulatory Policy Group.
* * * * *
0
43. Section 412.312 is amended by adding paragraph (f) to read as 
follows:


Sec.  412.312   Payment based on the Federal rate.

* * * * *
    (f) Payment adjustment for certain clinical trial cases. For 
discharges occurring on or after October 1, 2020, in determining the 
payment amount under this section for certain clinical trial cases as 
described in Sec.  412.85(b), the DRG weighting factor described in 
paragraph (b)(1) of this section is adjusted as described in Sec.  
412.85(c).
0
44. Section 412.523 is amended by adding paragraph (c)(3)(xvii) to read 
as follows:


Sec.  412.523   Methodology for calculating the Federal prospective 
payment rates.

* * * * *
    (c) * * *
    (3) * * *
    (xvii) For long-term care prospective payment system fiscal year 
2021 and subsequent fiscal years. The long-term care hospital 
prospective payment

[[Page 32895]]

system standard Federal payment rate for a long-term care hospital 
prospective payment system fiscal year is the standard Federal payment 
rate for the previous long-term care prospective payment system fiscal 
year updated by the percentage increase in the market basket index (as 
determined by CMS) less a multifactor productivity adjustment (as 
determined by CMS), and further adjusted, as appropriate, as described 
in paragraph (d) of this section.
* * * * *
0
45. Section 412.622 is amended by revising paragraph (b)(2)(i) to read 
as follows:


Sec.  412.622   Basis of payment.

* * * * *
    (b) * * *
    (2) * * *
    (i) Bad debts of Medicare beneficiaries, as provided in Sec.  
413.89 of this chapter; and
* * * * *

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
 46. The authority citation for part 413 continues to read as follows:

    Authority: 42 U.S.C. 1302, 1395d(d), 1395f(b), 1395g, 1395l(a), 
(i), and (n), 1395x(v), 1395hh, 1395rr, 1395tt, and 1395ww.

0
47. Section 413.20 is amended by revising paragraph (d)(3) to read as 
follows:


Sec.  413.20   Financial data and reports.

* * * * *
    (d) * * *
    (3)(i) The provider must furnish the contractor--
    (A) Upon request, copies of patient service charge schedules and 
changes thereto as they are put into effect; and
    (B) Its median payer-specific negotiated charge by MS-DRG for 
payers that are Medicare Advantage (MA) organizations, and its median 
payer-specific negotiated charge by MS-DRG for all third party payers, 
as applicable, and changes thereto as they are put into effect.
    (ii) The contractor evaluates the charge schedules as specified in 
paragraph (d)(3)(i) of this section to determine the extent to which 
they may be used for determining program payment.
* * * * *
0
48. Section 413.79 is amended by adding paragraph (h)(1)(iii) to read 
as follows:


Sec.  413.79   Direct GME payments: Determination of the weighted 
number of FTE residents.

* * * * *
    (h) * * *
    (1) * * *
    (iii) Displaced resident means a resident who--
    (A) Leaves a program after the hospital or program closure is 
publicly announced, but before the actual hospital or program closure;
    (B) Is assigned to and training at planned rotations at another 
hospital who will be unable to return to his/her rotation at the 
closing hospital or program;
    (C) Is matched into a GME program at the closing hospital or 
program but has not yet started training at the closing hospital or 
program;
    (D) Is physically training in the hospital on the day prior to or 
day of program or hospital closure; or
    (E) Is on approved leave at the time of the announcement of closure 
or actual closure, and therefore, cannot return to his/her rotation at 
the closing hospital or program.
* * * * *
0
49. Section 413.89 is amended by revising paragraphs (b), (c), (e)(2), 
and (f) to read as follows:


Sec.  413.89   Bad debts, charity, and courtesy allowances.

* * * * *
    (b) Definitions--(1) Bad debts. (i) For cost reporting periods 
beginning before October 1, 2020:
    (A) Bad debts are amounts considered to be uncollectible from 
accounts and notes receivable that were created or acquired in 
providing services.
    (B) ``Accounts receivable'' and ``notes receivable'' are 
designations for claims arising from the furnishing of services, and 
are collectible in money in the relatively near future.
    (ii) For cost reporting periods beginning on or after October 1, 
2020, bad debts are amounts considered to be uncollectible from patient 
accounts that were created or acquired in providing services and are 
categorized as implicit price concessions for cost reporting purposes 
and are recorded in the provider's accounting records as a component of 
net patient revenue.
    (2) Charity allowances. Charity allowances are reductions in 
charges made by the provider of services because of the indigence or 
medical indigence of the patient. Cost of free care (uncompensated 
services) furnished under a Hill-Burton obligation are considered as 
charity allowances.
    (3) Courtesy allowances. Courtesy allowances indicate a reduction 
in charges in the form of an allowance to physicians, clergy, members 
of religious orders, and others as approved by the governing body of 
the provider, for services received from the provider. Employee fringe 
benefits, such as hospitalization and personnel health programs, are 
not considered to be courtesy allowances.
    (c) Normal accounting treatment: Reduction in revenue. (1) 
Effective for cost reporting periods beginning before October 1, 2020, 
bad debts, charity, and courtesy allowances represent reductions in 
revenue. The failure to collect charges for services furnished does not 
add to the cost of providing the services. Such costs have already been 
incurred in the production of the services.
    (2) Effective for cost reporting periods beginning on or after 
October 1, 2020, bad debts, also known as ``implicit price 
concessions,'' charity, and courtesy allowances represent reductions in 
revenue. The failure to collect charges for services furnished does not 
add to the cost of providing the services. Such costs have already been 
incurred in the production of the services.
    (3) Effective for cost reporting periods beginning on or after 
October 1, 2020, Medicare bad debts must not be written off to a 
contractual allowance account but must be charged to an expense account 
for uncollectible accounts.
* * * * *
    (e) * * *
    (2) The provider must be able to establish that reasonable 
collection efforts were made.
    (i) Non-indigent beneficiary. A non-indigent beneficiary is a 
beneficiary who has not been determined to be categorically or 
medically needy by a State Medicaid Agency to receive medical 
assistance from Medicaid, nor have they been determined to be indigent 
by the provider for Medicare bad debt purposes. To be considered a 
reasonable collection effort for non-indigent beneficiaries all of the 
following are applicable:
    (A) A provider's collection effort or the effort of a collection 
agency acting on the provider's behalf, or both, to collect Medicare 
deductible or coinsurance amounts must consist of all of the following:

[[Page 32896]]

    (1) Be similar to the collection effort put forth to collect 
comparable amounts from non-Medicare patients.
    (2) For cost reporting periods beginning before October 1, 2020, 
involve the issuance of a bill to the beneficiary or the party 
responsible for the beneficiary's personal financial obligations on or 
shortly after discharge or death of the beneficiary.
    (3) For cost reporting periods beginning on or after October 1, 
2020, involve the issuance of a bill to the beneficiary or the party 
responsible for the beneficiary's personal financial obligations on or 
before 120 days after the latter of one of the following:
    (i) The date of the Medicare remittance advice.
    (ii) The date of the remittance advice from the beneficiary's 
secondary payer, if any.
    (4) Include other actions such as subsequent billings, collection 
letters and telephone calls or personal contacts with this party which 
constitute a genuine, rather than token, collection effort.
    (5)(i) Last at least 120 days after paragraph (e)(2)(i)(A)(2) or 
(3) of this section is met before being written off as uncollectible 
under paragraph (e)(3) of this section.
    (ii) Start a new 120-day collection period each time a partial 
payment is received within a 120-day collection period until the 
remaining unpaid amount is paid in full or remains unpaid after 120 
days.
    (6) Maintaining and, upon request, furnishing documentation to its 
contractor that includes all of the following:
    (i) The provider's bad debt collection policy which describes the 
collection process for Medicare and non-Medicare patients.
    (ii) The patient account history documents which show the dates of 
various collection actions such as the issuance of bills to the 
beneficiary, follow-up collection letters, reports of telephone calls 
and personal contact, etc.
    (iii) The beneficiary's file with copies of the bill(s) and follow-
up notices.
    (B) A provider that uses a collection agency to perform its 
collection effort must do all of the following:
    (1) Reduce the beneficiary's account receivable by the gross amount 
collected.
    (2) Include any fee charged by the collection agency as an 
administrative cost.
    (3) Before claiming the unpaid amounts as a Medicare bad debt, 
cease all collection efforts, including the collection agency efforts, 
and ensure that the collection accounts have been returned to the 
provider from the agency.
    (ii) Indigent non-dual eligible beneficiary. An indigent non-dual 
eligible beneficiary is a beneficiary who is determined to be indigent 
or medically indigent by the provider and is not eligible for Medicaid 
as categorically or medically needy.
    (A) To determine a beneficiary to be an indigent non-dual eligible 
beneficiary, the provider must do all of the following:
    (1) Not use a beneficiary's declaration of their inability to pay 
their medical bills or deductibles and coinsurance amounts as sole 
proof of indigence or medical indigence.
    (2) Take into account a beneficiary's total resources which 
include, but are not limited to, an analysis of all of the following:
    (i) Assets (only those convertible to cash and unnecessary for the 
beneficiary's daily living).
    (ii) Liabilities.
    (iii) Income.
    (iv) Expenses.
    (3) Consider any extenuating circumstances that would affect the 
determination of the beneficiary's indigence or medical indigence.
    (4) Determine that no source other than the beneficiary would be 
legally responsible for the beneficiary's medical bill, such as a legal 
guardian or State Medicaid program.
    (5) Maintain and, upon request, furnish its contractor its 
indigence policy describing the method by which indigence or medical 
indigence is determined and all the beneficiary specific documentation 
which supports the provider's determination of each beneficiary's 
indigence or medical indigence.
    (B) Once indigence is determined and the provider concludes that 
there has been no improvement in the beneficiary's financial status, 
the bad debt may be deemed uncollectible without applying a collection 
effort.
    (iii) Indigent dual-eligible beneficiaries (including qualified 
Medicare beneficiaries). Providers may deem Medicare beneficiaries 
indigent or medically indigent when such individuals have also been 
determined eligible for Medicaid under a State's Title XIX Medicaid 
program as either categorically needy individuals or medically needy 
individuals. To be considered a reasonable collection effort for dual-
eligible beneficiaries, a provider--
    (A) Must determine whether the State's Title XIX Medicaid Program 
(or a local welfare agency, if applicable) is responsible to pay all or 
a portion of the beneficiary's Medicare deductible or coinsurance 
amounts;
    (B) Must submit a bill to its Medicaid/Title XIX agency (or to its 
local welfare agency) to determine the State's cost sharing obligation 
to pay all or a portion of the applicable Medicare deductible and 
coinsurance;
    (C) Must submit the Medicaid remittance advice received from the 
State to its Medicare contractor;
    (D) Must reduce allowable Medicare bad debt by any amount that the 
State is obligated to pay, either by statute or under the terms of its 
approved Medicaid State plan, regardless of whether the State actually 
pays its obligated amount to the provider; and
    (E) May include the Medicare deductible or coinsurance amount, or 
any portion thereof that the State is not obligated to pay, and which 
remains unpaid by the beneficiary, as an allowable Medicare bad debt.
    (f) Reporting period for writing off bad debts and reporting of 
recoveries of bad debts reimbursed in prior periods. For cost reporting 
periods beginning before, on, or after October 1, 2020, the deductible 
and coinsurance amounts uncollected from beneficiaries are to be 
written off and recognized as allowable bad debts in the cost reporting 
period in which the accounts are deemed to be worthless.
    (1) Any payment on the account made by the beneficiary or a 
responsible party, after the write-off date but before the end of the 
cost reporting period, must be used to reduce the final bad debt for 
the account claimed in that cost report.
    (2) In some cases an amount written off as a bad debt and 
reimbursed by the program in a prior cost reporting period may be 
recovered in a subsequent period.
    (i) In situations described in this paragraph (f)(2), the recovered 
amount must be used to reduce the provider's reimbursable costs in the 
period in which the amount is recovered.
    (ii) The amount of reduction in the period of recovery (as 
specified in paragraph (f)(2)(i) of this section) must not exceed the 
actual amount reimbursed by the program for the related bad debt in the 
applicable prior cost reporting period.
* * * * *
0
50. Section 413.355 is revised to read as follows:


Sec.  413.355   Additional payment: QIO reimbursement for cost of 
sending records electronically or by photocopy and mailing.

    An additional payment is made to a skilled nursing facility in 
accordance

[[Page 32897]]

with Sec.  476.78 of this chapter for the costs of sending requested 
patient records to the QIO in electronic format, by facsimile, or by 
photocopying and mailing.

PART 417--HEALTH MAINTENANCE ORGANIZATIONS, COMPETITIVE MEDICAL 
PLANS, AND HEALTH CARE PREPAYMENT PLANS

0
51. The authority citation for part 417 is revised to read as follows:

    Authority:  42 U.S.C. 300e, 300e-5, 300e-91302 and 1395hh), and 
31 U.S.C. 9701.

0
52. Section 417.536 is amended by revising paragraph (g) to read as 
follows:


Sec.  417.536   Cost payment principles.

* * * * *
    (g) Charity and courtesy allowances. As specified in Sec.  413.89 
of this chapter, charity and courtesy allowances are deductions from 
revenue and may not be included as allowable costs.
* * * * *

PART 476--QUALITY IMPROVEMENT ORGANIZATION REVIEW

0
53. The authority citation for part 476 is revised to read as follows:

    Authority:  42 U.S.C. 1302 and 1395hh.

0
54. Section 476.78 is amended--
0
a. In paragraph (b)(2)(i) by removing the phrase ``photocopy and 
deliver to the QIO'' and adding in its place ``deliver to the QIO'';
0
b. By revising paragraphs (b)(2)(ii) and (c);
0
c. By redesignating paragraph (d) as paragraph (f);
0
d. By adding new paragraph (d) and paragraph (e); and
0
e. By revising newly redesignated paragraph (f).
    The revisions and additions read as follows:


Sec.  476.78   Responsibilities of providers and practitioners.

* * * * *
    (b) * * *
    (2) * * *
    (ii) Except if granted a waiver as described in paragraph (d) of 
this section, send secure transmission of an electronic version of each 
requested patient record to the QIO.
    (A) Providers and practitioners must deliver electronic versions of 
patient records within 14 calendar days of the request.
    (B) A QIO is authorized to require the receipt of the patient 
records earlier than the 14-day timeframe if the QIO makes a 
preliminary determination that the review involves a potential gross 
and flagrant or substantial violation as specified in part 1004 of this 
title and circumstances warrant earlier receipt of the patient records.
    (C) A practitioner's or provider's failure to comply with the 
request for patient records within the established timeframe may result 
in the QIO taking action in accordance with Sec.  476.90.
* * * * *
    (c) Submission of patient records in electronic format. Except as 
specified in paragraph (d) of this section, a provider or practitioner 
must deliver patient records requested by a QIO for the purpose of 
fulfilling one or more QIO functions, in an electronic format, using 
the mechanism specified by the QIO. In the absence of any mechanism 
specified by the requesting QIO, the requested patient records must be 
submitted using any CMS-approved mechanism.
    (d) Waiver from the requirement to submit patient records in an 
electronic format. (1) A provider or practitioner that lacks the 
capability to submit requested patient records to the requesting QIO in 
an electronic format may request a waiver from the requirements in 
paragraph (c) of this section.
    (i) For providers that are required to execute a written agreement 
with the QIO, a request for a waiver must be made during execution of 
the written agreement with the QIO.
    (ii) Providers that are required to execute a written agreement 
with the QIO must request a waiver by notifying the QIO that they lack 
the capability to submit patient records in electronic format, if their 
lack of capability arises after the written agreement is executed.
    (iii) Upon approval of the waiver, the waiver becomes part of the 
written agreement with the QIO.
    (iv) A provider with an approved waiver may submit patient records 
by facsimile or by photocopying and mailing to the QIO.
    (v) A provider with an approved waiver may be reimbursed by the QIO 
for patient records submitted by facsimile or by photocopying and 
mailing in accordance with paragraph (e)(2) of this section.
    (vi) A QIO may not reimburse for any patient record submitted to 
the QIO by facsimile or by photocopying and mailing if the provider 
does not have an approved waiver.
    (2) Providers and practitioners that are not required to execute a 
written agreement with the QIO may request a waiver to be exempted from 
submitting patient records in an electronic format.
    (i) Such providers and practitioners may request a waiver by 
notifying the QIO that they lack the capability to submit patient 
records in electronic format.
    (ii) Upon approval of the waiver, a provider or practitioner may 
submit patient records by facsimile or by photocopying and mailing to 
the QIO.
    (iii) Providers and practitioners with approved waivers may be 
reimbursed by the QIO for patient records submitted by facsimile or by 
photocopying and mailing in accordance with paragraph (e)(2) of this 
section.
    (iv) A QIO may not reimburse for any patient records submitted to 
the QIO by facsimile or by photocopying and mailing, if the provider or 
practitioner does not have an approved waiver.
    (e) Reimbursement for submitting patient records to the QIO. (1) 
For purposes of this paragraph (e), a patient record means all patient 
care data and other pertinent data or information relating to care or 
services provided to an individual patient in the possession of the 
provider or practitioner, as requested by a QIO for the purpose of 
performing one or more QIO functions.
    (2) A QIO may reimburse a provider or practitioner for requested 
patient records submitted in an electronic format, at the rate of $3.00 
per patient record.
    (3) For a provider or practitioner that has an approved waiver 
under paragraph (d) of this section, a QIO may reimburse the provider 
or practitioner for requested records submitted by--
    (i) Facsimile at the rate of $0.15 per page; or
    (ii) Photocopying and mailing at the rate of $0.15 per page, plus 
the cost of first class postage.
    (4) A QIO may only reimburse a provider or practitioner once for 
each patient record submitted, per request, even if a patient record is 
submitted using multiple formats, in fragments, or more than once in 
response to a single request by the QIO.
    (f) Appeals. Reimbursement for the costs of submitting requested 
patient records to the QIO in electronic format, by facsimile or by 
photocopying and mailing is an additional payment to providers under 
the prospective payment system, as specified in Sec. Sec.  412.115, 
413.355, and 484.265 of this chapter. Appeals concerning these costs 
are subject to the review process specified in part 405, subpart R, of 
this chapter.

PART 480--ACQUISITION, PROTECTION, AND DISCLOSURE OF QUALITY 
IMPROVEMENT ORGANIZATION INFORMATION

0
55. The authority citation for part 480 is revised to read as follows:


[[Page 32898]]


    Authority:  42 U.S.C. 1302 and 1395hh.

0
56. Section 480.111 is amended by revising paragraph (d) to read as 
follows:


Sec.  480.111   QIO access to records and information of institutions 
and practitioners.

* * * * *
    (d)(1) When submitting patient records to the QIO under this 
section, the institution or practitioner must do so consistent with the 
requirements in Sec.  476.78(c) and (d) of this chapter.
    (2) Reimbursement to an institution or practitioner for the cost of 
providing patient records is paid in accordance with Sec.  476.78(e) of 
this chapter.

PART 484--HOME HEALTH SERVICES

0
57. The authority citation for part 484 continues to read as follows:

    Authority:  42 U.S.C. 1302 and 1395hh unless otherwise noted.

0
58. Section 484.265 is revised to read as follows:


Sec.  484.265   Additional payment.

    An additional payment is made to a home health agency in accordance 
with Sec.  476.78 of this chapter for the costs of sending requested 
patient records to the QIO in electronic format, by facsimile, or by 
photocopying and mailing.

PART 495--STANDARDS FOR THE ELECTRONIC HEALTH RECORD TECHNOLOGY 
INCENTIVE PROGRAM

0
59. The authority citation for part 495 continues to read as follows:

    Authority:  42 U.S.C. 1302 and 1395hh.

0
60. Section 495.4 is amended in the definition of ``EHR reporting 
period for a payment adjustment year'' by adding paragraphs (2)(vi) and 
(3)(vi) to read as follows:


Sec.  495.4   Definitions.

* * * * *
    EHR reporting period for a payment adjustment year. * * *
    (2) * * *
    (vi) The following are applicable for 2022:
    (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 2022 and applies for the FY 2023 and 
2024 payment adjustment years. For the FY 2023 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, 2022.
    (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 2022 and applies for the FY 2024 
payment adjustment year.
    (3) * * *
    (vi) The following are applicable for 2022:
    (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 2022 and applies for the FY 2022 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 2022 and applies for the FY 2022 payment adjustment 
year.
* * * * *


Sec.  495.20   [Amended]

0
61. Section 495.20 is amended--
0
a. In paragraph (e)(5)(iii) by removing the reference ``45 CFR 
170.304(g)'' and adding in its place the reference ``45 CFR 
170.314(g)''; and
0
b. In paragraph (l)(11)(ii)(C)(1) by removing the reference ``45 CFR 
107.314(b)(2)'' and adding in its place the reference ``45 CFR 
170.314(b)(2)''.
0
62. Section 495.24 to be amended by revising paragraph (e)(5)(iii)(B) 
and the heading for paragraph (e)(6)(ii)(B) 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.

* * * * *
    (e) * * *
    (5) * * *
    (iii) * * *
    (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 5 bonus points in CYs 2019, 
2020, and 2021.
* * * * *
    (6) * * *
    (ii) * * *
    (B) Support electronic referral loops by receiving and reconciling 
health information measure. * * *
* * * * *
0
63. Section 495.104 is amended by revising paragraphs (c)(5)(viii)(B) 
through (D) to read as follows:


Sec.  495.104  Incentive payments to eligible hospitals.

* * * * *
    (c) * * *
    (5) * * *
    (viii) * * *
    (B) \3/4\ for FY 2019;
    (C) \1/2\ for FY 2020; and
    (D) \1/4\ for FY 2021.
* * * * *

    Dated: March 24, 2020.
Seema Verma,
Administrator, Centers for Medicare and Medicaid Services.
    Dated: April 9, 2020.
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, 2020, and Payment Rates for LTCHs Effective for 
Discharges Occurring On or After October 1, 2020

I. Summary and Background

    In this Addendum, we are setting forth a description of the 
methods and data we used to determine the proposed prospective 
payment rates for Medicare hospital inpatient operating costs and 
Medicare hospital inpatient capital-related costs for FY 2021 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 2021. We note that, because certain 
hospitals excluded from the IPPS are paid on a reasonable cost basis 
subject to a rate-of-increase ceiling (and not by the IPPS), these 
hospitals are not affected by the proposed figures for the 
standardized amounts, offsets, and budget neutrality factors. 
Therefore, in this proposed rule, we are setting forth the rate-of-
increase percentage for updating the target amounts for certain 
hospitals excluded from the IPPS that will be effective for cost 
reporting periods beginning on or after October 1, 2020.
    In addition, we are setting forth a description of the methods 
and data we used to determine the proposed LTCH PPS standard Federal 
payment rate that would be applicable to Medicare LTCHs for FY 2021.
    In general, except for SCHs and MDHs, for FY 2021, each 
hospital's payment per discharge under the IPPS is based on 100 
percent of the Federal national rate, also known as the national 
adjusted standardized amount. This amount reflects the national 
average hospital cost per case from a base year, updated for 
inflation.
    SCHs are paid based on whichever of the following rates yields 
the greatest aggregate payment: The Federal national rate 
(including, as discussed in section IV.G. of

[[Page 32899]]

the preamble of this proposed rule, uncompensated care payments 
under section 1886(r)(2) of the Act); the updated hospital-specific 
rate based on FY 1982 costs per discharge; the updated hospital-
specific rate based on FY 1987 costs per discharge; the updated 
hospital-specific rate based on FY 1996 costs per discharge; or the 
updated hospital-specific rate based on FY 2006 costs per discharge.
    Under section 1886(d)(5)(G) of the Act, MDHs historically were 
paid based on the Federal national rate or, if higher, the Federal 
national rate plus 50 percent of the difference between the Federal 
national rate and the updated hospital-specific rate based on FY 
1982 or FY 1987 costs per discharge, whichever was higher. However, 
section 5003(a)(1) of Public Law 109-171 extended and modified the 
MDH special payment provision that was previously set to expire on 
October 1, 2006, to include discharges occurring on or after October 
1, 2006, but before October 1, 2011. Under section 5003(b) of Public 
Law 109-171, if the change results in an increase to an MDH's target 
amount, we must rebase an MDH's hospital specific rates based on its 
FY 2002 cost report. Section 5003(c) of Public Law 109-171 further 
required that MDHs be paid based on the Federal national rate or, if 
higher, the Federal national rate plus 75 percent of the difference 
between the Federal national rate and the updated hospital specific 
rate. Further, based on the provisions of section 5003(d) of Public 
Law 109-171, MDHs are no longer subject to the 12-percent cap on 
their DSH payment adjustment factor. 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 proposed 
rule, in accordance with section 1886(d)(9)(E) of the Act as amended 
by section 601 of the Consolidated Appropriations Act, 2016 (Pub. L. 
114-113), for FY 2021, 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 later in this section does 
not include references to the Puerto Rico standardized amount or the 
Puerto Rico-specific wage index.
    As discussed in section II. of this Addendum, we are proposing 
to make changes in the determination of the prospective payment 
rates for Medicare inpatient operating costs for acute care 
hospitals for FY 2021. In section III. of this Addendum, we discuss 
our proposed policy changes for determining the prospective payment 
rates for Medicare inpatient capital-related costs for FY 2021. 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 2021. In section V. 
of this Addendum, we discuss proposed policy changes for determining 
the LTCH PPS standard Federal rate for LTCHs paid under the LTCH PPS 
for FY 2021. The tables to which we refer in the preamble of this 
proposed rule are listed in section VI. of this Addendum and are 
available via the internet on the CMS website.

II. Proposed Changes to Prospective Payment Rates for Hospital 
Inpatient Operating Costs for Acute Care Hospitals for FY 2021

    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. Later in this section, we 
discuss the factors we are proposing to use for determining the 
proposed prospective payment rates for FY 2021.
    In summary, the proposed standardized amounts set forth in 
Tables 1A, 1B, and 1C that are listed and published in section VI. 
of this Addendum (and available via the internet on the CMS website) 
reflect--
     Equalization of the standardized amounts for urban and 
other areas at the level computed for large urban hospitals during 
FY 2004 and onward, as provided for under section 
1886(d)(3)(A)(iv)(II) of the Act.
     The labor-related share that is applied to the 
standardized amounts to give the hospital the highest payment, as 
provided for under sections 1886(d)(3)(E) and 1886(d)(9)(C)(iv) of 
the Act. For FY 2021, depending on whether a hospital submits 
quality data under the rules established in accordance with section 
1886(b)(3)(B)(viii) of the Act (hereafter referred to as a hospital 
that submits quality data) and is a meaningful EHR user under 
section 1886(b)(3)(B)(ix) of the Act (hereafter referred to as a 
hospital that is a meaningful EHR user), there are four possible 
applicable percentage increases that can be applied to the national 
standardized amount. We refer readers to section IV.B. of the 
preamble of this proposed rule for a complete discussion on the 
proposed FY 2021 inpatient hospital update. The table that follows 
shows these four scenarios:
[GRAPHIC] [TIFF OMITTED] TP29MY20.221

    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 2021.

[[Page 32900]]

     An adjustment to the standardized amount to ensure 
budget neutrality for DRG recalibration and reclassification, as 
provided for under section 1886(d)(4)(C)(iii) of the Act.
     An adjustment to ensure the wage index and labor-
related share changes (depending on the fiscal year) are budget 
neutral, as provided for under section 1886(d)(3)(E)(i) of the Act 
(as discussed in the FY 2006 IPPS final rule (70 FR 47395) and the 
FY 2010 IPPS final rule (74 FR 44005). We note that section 
1886(d)(3)(E)(i) of the Act requires that when we compute such 
budget neutrality, we assume that the provisions of section 
1886(d)(3)(E)(ii) of the Act (requiring a 62-percent labor-related 
share in certain circumstances) had not been enacted.
     An adjustment to ensure the effects of geographic 
reclassification are budget neutral, as provided for under section 
1886(d)(8)(D) of the Act, by removing the FY 2020 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.
     Beginning with FY 2021, an adjustment to ensure the 
effects of the reasonable cost based payment for allogeneic 
hematopoietic stem cell acquisition costs under section 108 of the 
Further Consolidated Appropriations Act, 2020 (Pub. L. 116-94), are 
budget neutral as required under section 108 of Public Law 116-94.
     An adjustment to the standardized amount to implement 
in a budget neutral manner the increase in the wage index values for 
hospitals with a wage index value below the 25th percentile wage 
index value across all hospitals (as described in section III.N. of 
the preamble of this proposed rule).
     As discussed in this section and in section III.2.d of 
the preamble of this proposed rule, an adjustment to the 
standardized amount (using our exceptions and adjustments authority 
under section 1886(d)(5)(I)(i) of the Act) to implement in a budget 
neutral manner our proposed transition for hospitals negatively 
impacted due to proposed changes to the wage index (including the 
proposed implementation of the revised OMB market labor 
delineations). We refer the reader to section III.2.d. of the 
preamble of this proposed rule, for a detailed discussion.
     An adjustment to remove the FY 2020 outlier offset and 
apply an offset for FY 2021, as provided for in section 
1886(d)(3)(B) of the Act.
    For FY 2021, consistent with current law, we are proposing to 
apply the rural floor budget neutrality adjustment to hospital wage 
indexes. Also, consistent with section 3141 of the Affordable Care 
Act, instead of applying a State-level rural floor budget neutrality 
adjustment to the wage index, we are proposing to apply a uniform, 
national budget neutrality adjustment to the FY 2021 wage index for 
the rural floor.

A. Calculation of the Proposed Adjusted Standardized Amount

1. Standardization of Base-Year Costs or Target Amounts

    In general, the national standardized amount is based on per 
discharge averages of adjusted hospital costs from a base period 
(section 1886(d)(2)(A) of the Act), updated and otherwise adjusted 
in accordance with the provisions of section 1886(d) of the Act. The 
September 1, 1983 interim final rule (48 FR 39763) contained a 
detailed explanation of how base-year cost data (from cost reporting 
periods ending during FY 1981) were established for urban and rural 
hospitals in the initial development of standardized amounts for the 
IPPS.
    Sections 1886(d)(2)(B) and 1886(d)(2)(C) of the Act require us 
to update base-year per discharge costs for FY 1984 and then 
standardize the cost data in order to remove the effects of certain 
sources of cost variations among hospitals. These effects include 
case-mix, differences in area wage levels, cost-of-living 
adjustments for Alaska and Hawaii, IME costs, and costs to hospitals 
serving a disproportionate share of low-income patients.
    For FY 2021, we are proposing to continue to use the national 
labor-related and nonlabor-related shares (which are based on the 
2014-based hospital market basket) that were used in FY 2020. 
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 2021, as discussed in section III. of the 
preamble of this proposed rule, we are proposing to continue to use 
a labor-related share of 68.3 percent for the national standardized 
amounts for all IPPS hospitals (including hospitals in Puerto Rico) 
that have a wage index value that is greater than 1.0000. Consistent 
with section 1886(d)(3)(E) of the Act, we are proposing to apply the 
wage index to a labor-related share of 62 percent of the national 
standardized amount for all IPPS hospitals (including hospitals in 
Puerto Rico) whose wage index values are less than or equal to 
1.0000.
    The proposed standardized amounts for operating costs appear in 
Tables 1A, 1B, and 1C that are listed and published in section VI. 
of the Addendum to this proposed rule and are available via the 
internet on the CMS website.

2. Computing the National Average Standardized Amount

    Section 1886(d)(3)(A)(iv)(II) of the Act requires that, 
beginning with FY 2004 and thereafter, an equal standardized amount 
be computed for all hospitals at the level computed for large urban 
hospitals during FY 2003, updated by the applicable percentage 
update. Accordingly, we are proposing to calculate the FY 2021 
national average standardized amount irrespective of whether a 
hospital is located in an urban or rural location.

3. Updating the National Average Standardized Amount

    Section 1886(b)(3)(B) of the Act specifies the applicable 
percentage increase used to update the standardized amount for 
payment for inpatient hospital operating costs. We note that, in 
compliance with section 404 of the MMA, in this proposed rule, we 
are proposing to use the 2014-based IPPS operating and capital 
market baskets for FY 2021. As discussed in section IV.B. of the 
preamble of this proposed rule, in accordance with section 
1886(b)(3)(B) of the Act, as amended by section 3401(a) of the 
Affordable Care Act, we are proposing to reduce the FY 2021 
applicable percentage increase (which for this proposed rule is 
based on IGI's fourth quarter 2019 forecast of the 2014-based IPPS 
market basket) by the MFP adjustment (the 10-year moving average of 
MFP for the period ending FY 2021) of 0.4 percentage point, which 
for this proposed rule is also calculated based on IGI's fourth 
quarter 2019 forecast.
    Based on IGI's fourth quarter 2019 forecast of the hospital 
market basket increase (as discussed in Appendix B of this proposed 
rule), the forecast of the hospital market basket increase for FY 
2021 for this proposed rule is 3.0 percent. As discussed earlier, 
for FY 2021, depending on whether a hospital submits quality data 
under the rules established in accordance with section 
1886(b)(3)(B)(viii) of the Act and is a meaningful EHR user under 
section 1886(b)(3)(B)(ix) of the Act, there are four possible 
applicable percentage increases that can be applied to the 
standardized amount. We refer readers to section IV.B. of the 
preamble of this proposed rule for a complete discussion on the FY 
2021 inpatient hospital update to the standardized amount. We also 
refer readers to the previous table for the four possible applicable 
percentage increases that would be applied to update the national 
standardized amount. The proposed standardized amounts shown in 
Tables 1A through 1C that are published in section VI. of this 
Addendum and that are available via the internet on the CMS website 
reflect these differential amounts.
    Although the update factors for FY 2021 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 
2021 for both IPPS hospitals and hospitals and hospital units 
excluded from the IPPS. Section 1886(e)(5)(A) of the Act requires 
that we publish our recommendations in the Federal Register for 
public comment. Our recommendation on the update factors is set 
forth in Appendix B of this proposed rule.

[[Page 32901]]

4. Methodology for Calculation of the Average Standardized Amount

    The methodology we used to calculate the proposed FY 2021 
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: 
https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/som107c02.pdf); exclude CAHs at the time of this proposed 
rule; exclude hospitals in Maryland (because these hospitals are 
paid under an all payer model under section 1115A of the Act); and 
remove PPS-excluded cancer hospitals that have a ``V'' in the fifth 
position of their provider number or a ``E'' or ``F'' in the sixth 
position.
     As in the past, we are proposing to adjust the FY 2021 
standardized amount to remove the effects of the FY 2020 geographic 
reclassifications and outlier payments before applying the FY 2021 
updates. We then applied budget neutrality offsets for outliers and 
geographic reclassifications to the standardized amount based on 
proposed FY 2021 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.
     The participation of hospitals under the BPCI (Bundled 
Payments for Care Improvement) Advanced model started 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 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/.
    For FY 2021, consistent with how we treated hospitals that 
participated in the BPCI Advanced Model in the FY 2020 IPPS/LTCH PPS 
final rule (84 FR 42620), we are proposing to include all applicable 
data from subsection (d) hospitals participating in the BPCI 
Advanced model in our IPPS payment modeling and ratesetting 
calculations. We believe it is appropriate to include all applicable 
data from the subsection (d) hospitals participating in the BPCI 
Advanced model in our IPPS payment modeling and ratesetting 
calculations because these hospitals are still receiving IPPS 
payments under section 1886(d) of the Act. For the same reasons, we 
also are proposing to include all applicable data from subsection 
(d) hospitals participating in the Comprehensive Care for Joint 
Replacement (CJR) Model in our IPPS payment modeling and ratesetting 
calculations.
     Consistent with our methodology established in the FY 
2013 IPPS/LTCH PPS final rule (77 FR 53687 through 53688), we 
believe that it is appropriate to include adjustments for the 
Hospital Readmissions Reduction Program and the Hospital VBP Program 
(established under the Affordable Care Act) within our budget 
neutrality calculations.
    Both the hospital readmissions payment adjustment (reduction) 
and the hospital VBP payment adjustment (redistribution) are applied 
on a claim-by-claim basis by adjusting, as applicable, the base-
operating DRG payment amount for individual subsection (d) 
hospitals, which affects the overall sum of aggregate payments on 
each side of the comparison within the budget neutrality 
calculations.
    In order to properly determine aggregate payments on each side 
of the comparison, consistent with the approach we have taken in 
prior years, for FY 2021, we are proposing to apply a proposed proxy 
based on the prior fiscal year hospital readmissions payment 
adjustment (for FY 2021 this would be FY 2020 final adjustment 
factors from Table 15 of the FY 2020 IPPS/LTCH final rule) and a 
proposed proxy based on the prior fiscal year hospital VBP payment 
adjustment (for FY 2021 this would be FY 2020 final adjustment 
factors from Table 16B of the FY 2020 IPPS/LTCH final rule) on each 
side of the comparison, consistent with the methodology that we 
adopted in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53687 through 
53688). That is, we are proposing to apply a proxy readmissions 
payment adjustment factor and a proxy hospital VBP payment 
adjustment factor from the prior final rule on both sides of our 
comparison of aggregate payments when determining all budget 
neutrality factors described in section II.A.4. of this Addendum.
     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 any 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

[[Page 32902]]

aggregate payments when determining all budget neutrality factors 
described in section II.A.4. of this Addendum.
    To do this for FY 2021 (as we did for the last 7 fiscal years), 
we are proposing to include estimated empirically justified Medicare 
DSH payments that will be paid in accordance with section 1886(r)(1) 
of the Act and estimates of the additional uncompensated care 
payments made to hospitals receiving Medicare DSH payment 
adjustments as described by section 1886(r)(2) of the Act. That is, 
we are proposing to consider estimated empirically justified 
Medicare DSH payments at 25 percent of what would otherwise have 
been paid, and also the estimated additional uncompensated care 
payments for hospitals receiving Medicare DSH payment adjustments on 
both sides of our comparison of aggregate payments when determining 
all budget neutrality factors described in section II.A.4. of this 
Addendum.
     When calculating total payments for budget neutrality, 
to determine total payments for SCHs, we model total hospital-
specific rate payments and total Federal rate payments and then 
include whichever one of the total payments is greater. As discussed 
in section IV.G. of the preamble to this proposed rule and later in 
this section, we are proposing to continue to use the FY 2014 
finalized methodology under which we take into consideration 
uncompensated care payments in the comparison of payments under the 
Federal rate and the hospital-specific rate for SCHs. Therefore, we 
are proposing to include estimated uncompensated care payments in 
this comparison.
    Similarly, for MDHs, as discussed in section IV.G. of the 
preamble of this proposed rule, when computing payments under the 
Federal national rate plus 75 percent of the difference between the 
payments under the Federal national rate and the payments under the 
updated hospital-specific rate, we are proposing to continue to take 
into consideration uncompensated care payments in the computation of 
payments under the Federal rate and the hospital-specific rate for 
MDHs.
     We are proposing to include an adjustment to the 
standardized amount for those hospitals that are not meaningful EHR 
users in our modeling of aggregate payments for budget neutrality 
for FY 2021. Similar to FY 2020, we are including this adjustment 
based on data on the prior year's performance. Payments for 
hospitals will be estimated based on the proposed applicable 
standardized amount in Tables 1A and 1B for discharges occurring in 
FY 2021.
     In our determination of all proposed budget neutrality 
factors described in section II.A.4. of this Addendum, we use 
transfer-adjusted discharges. Specifically, we calculated the 
transfer-adjusted discharges using the statutory expansion of the 
postacute care transfer policy to include discharges to hospice care 
by a hospice program as discussed in section IV.A.2.b. of the 
preamble of this proposed rule.
    We finally note that the wage index value is calculated and 
assigned to a hospital based on the hospital's labor market area. 
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 the Office of Management 
and Budget (OMB). The current statistical areas used in FY 2020 are 
based on OMB standards published on February 28, 2013 (79 FR 49951) 
and Census 2010 data and Census Bureau population estimates for 2014 
and 2015 (OMB Bulletin No. 17-01). As stated in section II.D.2. of 
the preamble to this proposed rule, on April 10, 2018 OMB issued OMB 
Bulletin No. 18-03 which superseded the August 15, 2017 OMB Bulletin 
No. 17-01. On September 14, 2018, OMB issued OMB Bulletin No. 18-04 
which superseded the April 10, 2018 OMB Bulletin No. 18-03. These 
bulletins established revised delineations for Metropolitan 
Statistical Areas, Micropolitan Statistical Areas, and Combined 
Statistical Areas, and provided guidance on the use of the 
delineations of these statistical areas. A copy of OMB Bulletin No. 
18-04 may be obtained at https://www.whitehouse.gov/wp-content/uploads/2018/09/Bulletin-18-04.pdf. (We note, on March 6, 2020 OMB 
issued OMB Bulletin 20-01 (available on the web at https://www.whitehouse.gov/wp-content/uploads/2020/03/Bulletin-20-01.pdf), 
and as discussed in preamble, this bulletin was not issued in time 
for development of this proposed rule.)
    In section III.A.2. of the preamble to this proposed rule, we 
are proposing to implement the revised OMB delineations as described 
in the September 14, 2018 OMB Bulletin No. 18-04, effective October 
1, 2020 beginning with the FY 2021 IPPS wage index. Consistent with 
our proposed policy to adopt the revised OMB delineations, in order 
to properly determine aggregate payments on each side of the 
comparison for our budget neutrality calculations, we are using wage 
indexes based on the new OMB delineations in the determination of 
all of the budget neutrality factors discussed in this section. We 
also note that, consistent with past practice as finalized in the FY 
2005 IPPS final rule (69 FR 49034), we are not proposing to adopt 
the revised OMB delineations themselves in a budget neutral manner. 
We continue to believe that the proposed revision to the labor 
market areas in and of itself does not constitute an ``adjustment or 
update'' to the adjustment for area wage differences, as provided 
under section 1886(d)(3)(E) of the Act.

a. Proposed Recalibration of MS-DRG Relative Weights

    Section 1886(d)(4)(C)(iii) of the Act specifies that, beginning 
in FY 1991, the annual DRG reclassification and recalibration of the 
relative weights must be made in a manner that ensures that 
aggregate payments to hospitals are not affected. As discussed in 
section II.G. of the preamble of this proposed rule, we normalized 
the recalibrated MS-DRG relative weights by an adjustment factor so 
that the average case relative weight after recalibration is equal 
to the average case relative weight prior to recalibration. However, 
equating the average case relative weight after recalibration to the 
average case relative weight before recalibration does not 
necessarily achieve budget neutrality with respect to aggregate 
payments to hospitals because payments to hospitals are affected by 
factors other than average case relative weight. Therefore, as we 
have done in past years, we are proposing to make a budget 
neutrality adjustment to ensure that the requirement of section 
1886(d)(4)(C)(iii) of the Act is met.
    For FY 2021, 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 2019 discharge data to simulate payments and compared the 
following:
     Aggregate payments using the FY 2020 labor-related 
share percentages, the revised OMB labor market area delineations 
proposed for FY 2021, the FY 2020 relative weights, and the FY 2020 
pre-reclassified wage data, and applied the proposed FY 2021 
hospital readmissions payment adjustments and estimated FY 2021 
hospital VBP payment adjustments; and
     Aggregate payments using the FY 2020 labor-related 
share percentages, the revised OMB labor market area delineations 
proposed for FY 2021, the proposed FY 2021 relative weights, and the 
FY 2020 pre-reclassified wage data, and applied the proposed FY 2021 
hospital readmissions payment adjustments and estimated FY 2021 
hospital VBP payment adjustments applied previously. Because this 
payment simulation uses the FY 2021 relative weights, consistent 
with our proposal in section IV.I. of the preamble to this proposed 
rule, we applied the proposed adjustor for CAR T-cell therapy 
clinical trial cases in our simulation of these payments. (As 
discussed in section II.E.2.b. of the preamble of this proposed 
rule, we also proposed to calculate an adjustment to account for the 
CAR T-cell therapy cases identified as clinical trial cases in 
calculating the FY 2021 relative weights and for purposes of budget 
neutrality and outlier simulations.) We note that because the 
simulations of payments for all of the budget neutrality factors 
discussed in this section also use the FY 2021 relative weights, we 
also applied the proposed adjustor for CAR T-cell therapy clinical 
trial cases in all simulations of payments for the budget neutrality 
factors discussed later in this section. We refer the reader to 
section IV.I. of the preamble of this proposed rule for a complete 
discussion on the proposed adjustor for CAR T-cell therapy clinical 
trial cases and to section II.E.2.b. of the preamble of this 
proposed rule, for a complete discussion of the proposed adjustment 
to the FY 2021 relative weights to account for the CAR T-cell 
therapy cases identified as clinical trial cases.
    Based on this comparison, we computed a proposed budget 
neutrality adjustment factor and applied this factor to the 
standardized amount. As discussed in section IV. of this Addendum, 
we also are proposing to apply the MS-DRG reclassification and 
recalibration budget neutrality factor to the hospital-specific 
rates that are effective for cost reporting periods beginning on or 
after October 1, 2020. Please see the table later in this section 
setting forth each of the FY 2021 proposed budget neutrality 
factors.

[[Page 32903]]

b. Updated Wage Index--Proposed Budget Neutrality Adjustment

    Section 1886(d)(3)(E)(i) of the Act requires us to update the 
hospital wage index on an annual basis beginning October 1, 1993. 
This provision also requires us to make any updates or adjustments 
to the wage index in a manner that ensures that aggregate payments 
to hospitals are not affected by the change in the wage index. 
Section 1886(d)(3)(E)(i) of the Act requires that we implement the 
wage index adjustment in a budget neutral manner. However, section 
1886(d)(3)(E)(ii) of the Act sets the labor-related share at 62 
percent for hospitals with a wage index less than or equal to 
1.0000, and section 1886(d)(3)(E)(i) of the Act provides that the 
Secretary shall calculate the budget neutrality adjustment for the 
adjustments or updates made under that provision as if section 
1886(d)(3)(E)(ii) of the Act had not been enacted. In other words, 
this section of the statute requires that we implement the updates 
to the wage index in a budget neutral manner, but that our budget 
neutrality adjustment should not take into account the requirement 
that we set the labor-related share for hospitals with wage indexes 
less than or equal to 1.0000 at the more advantageous level of 62 
percent. Therefore, for purposes of this budget neutrality 
adjustment, section 1886(d)(3)(E)(i) of the Act prohibits us from 
taking into account the fact that hospitals with a wage index less 
than or equal to 1.0000 are paid using a labor-related share of 62 
percent. Consistent with current policy, for FY 2021, we are 
proposing to adjust 100 percent of the wage index factor for 
occupational mix. We describe the occupational mix adjustment in 
section III.E. of the preamble of this proposed rule.
    To compute a proposed budget neutrality adjustment factor for 
wage index and labor-related share percentage changes, we used FY 
2019 discharge data to simulate payments and compared the following:
     Aggregate payments using the revised OMB labor market 
area delineations proposed for FY 2021, the proposed FY 2021 
relative weights and the FY 2020 pre-reclassified wage indexes, 
applied the FY 2020 labor-related share of 68.3 percent to all 
hospitals (regardless of whether the hospital's wage index was above 
or below 1.0000), and applied the proposed FY 2021 hospital 
readmissions payment adjustment and the estimated FY 2021 hospital 
VBP payment adjustment; and
     Aggregate payments using the revised OMB labor market 
area delineations proposed for FY 2021, the proposed FY 2021 
relative weights and the proposed FY 2021 pre-reclassified wage 
indexes, applied the proposed labor-related share for FY 2021 of 
68.3 percent to all hospitals (regardless of whether the hospital's 
wage index was above or below 1.0000), and applied the same proposed 
FY 2021 hospital readmissions payment adjustments and estimated FY 
2021 hospital VBP payment adjustments applied previously.
    In addition, we applied the proposed MS-DRG reclassification and 
recalibration budget neutrality adjustment factor (derived in the 
first step) to the proposed payment rates that were used to simulate 
payments for this comparison of aggregate payments from FY 2020 to 
FY 2021. Based on this comparison, we computed a proposed budget 
neutrality adjustment factor and applied this factor to the 
standardized amount for changes to the wage index. Please see the 
table later in this section for a summary of the FY 2021 proposed 
budget neutrality factors.

c. Reclassified Hospitals--Proposed Budget Neutrality Adjustment

    Section 1886(d)(8)(B) of the Act provides that certain rural 
hospitals are deemed urban. In addition, section 1886(d)(10) of the 
Act provides for the reclassification of hospitals based on 
determinations by the MGCRB. Under section 1886(d)(10) of the Act, a 
hospital may be reclassified for purposes of the wage index.
    Under section 1886(d)(8)(D) of the Act, the Secretary is 
required to adjust the standardized amount to ensure that aggregate 
payments under the IPPS after implementation of the provisions of 
sections 1886(d)(8)(B) and (C) and 1886(d)(10) of the Act are equal 
to the aggregate prospective payments that would have been made 
absent these provisions. We note, with regard to the requirement 
under section 1886(d)(8)(C)(iii) of the Act, as finalized in the FY 
2020 IPPS/LTCH PPS final rule (84 FR 42333 through 42336), we 
excluded the wage data of urban hospitals that have reclassified as 
rural under section 1886(d)(8)(E) of the Act (as implemented in 
Sec.  412.103) from the calculation of ``the wage index for rural 
areas in the State in which the county is located.'' We refer the 
reader to the FY 2015 IPPS final rule (79 FR 50371 and 50372) for a 
complete discussion regarding the requirement of section 
1886(d)(8)(C)(iii) of the Act. We further 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 2021, we 
used FY 2019 discharge data to simulate payments and compared the 
following:
     Aggregate payments using the proposed FY 2021 labor-
related share percentages, the revised OMB labor market area 
delineations proposed for FY 2021, the proposed FY 2021 relative 
weights, and the proposed FY 2021 wage data prior to any 
reclassifications under sections 1886(d)(8)(B) and (C) and 
1886(d)(10) of the Act, and applied the proposed FY 2021 hospital 
readmissions payment adjustments and the estimated FY 2021 hospital 
VBP payment adjustments; and
     Aggregate payments using the proposed FY 2021 labor-
related share percentages, the revised OMB labor market area 
delineations proposed for FY 2021, the proposed FY 2021 relative 
weights, and the proposed FY 2021 wage data after such 
reclassifications, and applied the same proposed FY 2021 hospital 
readmissions payment adjustments and the estimated FY 2021 hospital 
VBP payment adjustments applied previously.
    We note that the reclassifications applied under the second 
simulation and comparison are those listed in Table 2 associated 
with this proposed rule, which is available via the internet on the 
CMS website. This table reflects reclassification crosswalks 
proposed for FY 2021, and apply the proposed policies explained in 
section III. of the preamble of this proposed rule. Based on this 
comparison, we computed a proposed budget neutrality adjustment 
factor and applied this factor to the standardized amount to ensure 
that the effects of these provisions are budget neutral, consistent 
with the statute. Please see the table later in this section for a 
summary of the FY 2021 proposed budget neutrality factors.
    The proposed FY 2021 budget neutrality adjustment factor was 
applied to the proposed standardized amount after removing the 
effects of the FY 2020 budget neutrality adjustment factor. We note 
that the proposed FY 2021 budget neutrality adjustment reflects FY 
2021 wage index reclassifications approved by the MGCRB or the 
Administrator at the time of development of this proposed rule.

d. Rural Floor--Proposed Budget Neutrality Adjustment

    Under Sec.  412.64(e)(4), we make an adjustment to the wage 
index to ensure that aggregate payments after implementation of the 
rural floor under section 4410 of the BBA (Pub. L. 105-33) is equal 
to the aggregate prospective payments that would have been made in 
the absence of this provision. Consistent with section 3141 of the 
Affordable Care Act and as discussed in section III.G. of the 
preamble of this proposed rule and codified at Sec.  
412.64(e)(4)(ii), the budget neutrality adjustment for the rural 
floor is a national adjustment to the wage index. We note, as 
finalized in the FY 2020 IPPS/LTCH final rule (84 FR 42332 through 
42336), for FY 2021 we are calculating the rural floor without 
including the wage data of urban hospitals that have reclassified as 
rural under section 1886(d)(8)(E) of the Act (as implemented in 
Sec.  412.103).
    Similar to our calculation in the FY 2015 IPPS/LTCH PPS final 
rule (79 FR 50369 through 50370), for FY 2021, we are proposing to 
calculate a national rural Puerto Rico wage index. Because there are 
no rural Puerto Rico hospitals with established wage data, our 
calculation of the proposed FY 2021 rural Puerto Rico wage index is 
based on the policy adopted in the FY 2008 IPPS final rule with 
comment period (72 FR 47323). That is, we use the unweighted average 
of the wage indexes from all CBSAs (urban areas) that are contiguous 
(share a border with) to the rural counties to compute the rural 
floor (72 FR 47323; 76 FR 51594). Under the OMB labor market area 
delineations, except for Arecibo, Puerto Rico (CBSA 11640), all 
other Puerto Rico urban areas are contiguous to a rural area. 
Therefore, based on our existing policy, the proposed FY 2021 rural 
Puerto Rico wage index is calculated based on the average of the 
proposed FY 2021 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

[[Page 32904]]

41900); and San Juan-Carolina-Caguas, PR (CBSA 41980).
    To calculate the proposed national rural floor budget neutrality 
adjustment factor, we used FY 2019 discharge data to simulate 
payments, the revised OMB labor market area delineations proposed 
for FY 2021 and the proposed post-reclassified national wage indexes 
and compared the following:
     National simulated payments without the proposed 
national rural floor; and
     National simulated payments with the proposed national 
rural floor.
    Based on this comparison, we determined a proposed national 
rural floor budget neutrality adjustment factor. The national 
adjustment was applied to the national wage indexes to produce 
proposed rural floor budget neutral wage indexes. Please see the 
table later in this section for a summary of the FY 2021 proposed 
budget neutrality factors.

e. Proposed Rural Community Hospital Demonstration Program Adjustment

    In section IV.O. of the preamble of this proposed rule, we 
discuss the Rural Community Hospital Demonstration program, which 
was originally authorized for a 5-year period by section 410A of the 
Medicare Prescription Drug, Improvement, and Modernization Act of 
2003 (MMA) (Pub. L. 108-173), and extended for another 5-year period 
by sections 3123 and 10313 of the Affordable Care Act (Pub. L. 111-
148). Subsequently, section 15003 of the 21st Century Cures Act 
(Pub. L. 114-255), enacted December 13, 2016, amended section 410A 
of Public Law 108-173 to require a 10-year extension period (in 
place of the 5-year extension required by the Affordable Care Act, 
as further discussed later in this section). 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 
readers to section IV.O. of the preamble of this proposed rule for 
complete details regarding the Rural Community Hospital 
Demonstration.
    With regard to budget neutrality, as mentioned earlier, we make 
an adjustment to the standardized amount to ensure the effects of 
the Rural Community Hospital Demonstration are budget neutral, as 
required under section 410A(c)(2) of Public Law 108-173. For FY 
2021, the total amount that we are proposing to apply to make an 
adjustment to the standardized amounts to ensure the effects of the 
Rural Community Hospital Demonstration program are budget neutral is 
$40,804,704. Accordingly, using the most recent data available to 
account for the estimated costs of the demonstration program, for FY 
2021, we computed a proposed factor for the Rural Community Hospital 
Demonstration budget neutrality adjustment that will be applied to 
the standardized amount. Please see the table later in this section 
for a summary of the FY 2021 proposed budget neutrality factors. We 
refer readers to section IV.O. of the preamble of this proposed rule 
on complete details regarding the calculation of the amount we are 
applying to make an adjustment to the standardized amounts.
    We note that, as discussed in section IV.O. of the preamble of 
this proposed rule, if updated or additional data become available 
prior to issuance of the FY 2021 IPPS/LTCH PPS final rule, we would 
use those data to the extent appropriate to determine the budget 
neutrality offset amount for FY 2021. We refer readers to section 
IV.O. of the preamble of this proposed rule on complete details 
regarding the availability of additional data prior to the FY 2021 
IPPS/LTCH PPS final rule.

f. Proposed Stem Cell Acquisition Reasonable Cost Based Payment Budget 
Neutrality Adjustment

    In section IV.H. of the preamble of this proposed rule, we 
discuss the reasonable cost based payment for allogeneic 
hematopoietic stem cell acquisition costs beginning in FY 2021. 
Section 108 of the Further Consolidated Appropriations Act, 2020 
requires that, for cost reporting periods beginning on or after 
October 1, 2020, in the case of a subsection (d) hospital that 
furnishes an allogeneic hematopoietic stem cell transplant, payment 
to such hospital for hematopoietic stem cell acquisition shall be 
made on a reasonable cost basis, and also requires that, beginning 
in FY 2021, the payments made based on reasonable cost for the 
acquisition costs of allogeneic hematopoietic stem cells be made in 
a budget neutral manner. That is, under section 1886(d)(4)(C)(iii) 
of the Act as amended by section 108 of the Further Consolidated 
Appropriations Act, 2020, beginning with FY 2021, the reasonable 
cost based payments for allogeneic hematopoietic stem cell 
acquisition costs are to be made in a manner that assures that the 
aggregate IPPS payments for discharges in the fiscal year are not 
greater or less than those that would have been made without such 
payments. With regard to budget neutrality, we are proposing to make 
an adjustment to the standardized amount to ensure the effects of 
the reasonable cost-based payments for allogeneic hematopoietic stem 
cell acquisition costs are budget neutral, as required under section 
1886(d)(4)(C)(iii) of the Act as amended by section 108 of Public 
Law 116-94. For FY 2021, based on the most recent data available for 
this proposed rule, the total amount that we are proposing to apply 
to make an adjustment to the standardized amounts to ensure that the 
reasonable cost based payments for allogeneic hematopoietic stem 
cell acquisition costs are budget neutral is $15,865,374. 
Accordingly, for FY 2021 we computed a proposed budget neutrality 
adjustment that we are proposing to apply to the standardized 
amounts for FY 2021. Please see the table later in this section 
setting forth each of the FY 2021 proposed budget neutrality 
factors. We refer readers to section IV.H. of the preamble of this 
proposed rule for further details regarding the calculation of the 
estimated amount of reasonable cost based payments for allogeneic 
hematopoietic stem cell acquisition costs that we are proposing to 
use to make an adjustment to the standardized amount for FY 2021.

g. Continuation of the Low Wage Index Hospital Policy--Proposed Budget 
Neutrality Adjustment

    As discussed in section III.N. of the preamble of this proposed 
rule, we are continuing the wage index policy finalized in the FY 
2020 IPPS/LTCH PPS final rule to address wage index disparities by 
increasing the wage index values for hospitals with a wage index 
value below the 25th percentile wage index value across all 
hospitals (the low wage index hospital policy). As discussed in the 
FY 2020 IPPS/LTCH final rule (84 FR 42332), consistent with our 
current methodology for implementing wage index budget neutrality 
under section 1886(d)(3)(E) of the Act, we are making a budget 
neutrality adjustment to the national standardized amount for all 
hospitals so that the increase in the wage index for hospitals with 
a wage index below the 25th percentile wage index, is implemented in 
a budget neutral manner.
    To calculate this proposed budget neutrality adjustment factor 
for FY 2021, we used FY 2019 discharge data to simulate payments and 
compared the following:
     Aggregate payments using the proposed FY 2021 labor-
related share percentages, the revised OMB labor market area 
delineations proposed for FY 2021, the proposed FY 2021 relative 
weights, and the proposed FY 2021 wage index for each hospital 
before adjusting the wage indexes under the low wage index hospital 
policy but without the 5 percent cap, and applied the proposed FY 
2021 hospital readmissions payment adjustments and the estimated FY 
2021 hospital VBP payment adjustments, and the operating outlier 
reconciliation adjusted outlier percentage discussed later in this 
section; and
     Aggregate payments using the FY 2021 labor-related 
share percentages, the revised OMB labor market area delineations 
proposed for FY 2021, the FY 2021 relative weights, and the FY 2021 
wage index for each hospital after adjusting the wage indexes under 
the low wage index hospital policy but without the 5 percent cap, 
and applied the same proposed FY 2021 hospital readmissions payment 
adjustments and the estimated FY 2021 hospital VBP payment 
adjustments applied previously, and the operating outlier 
reconciliation adjusted outlier percentage discussed later in this 
section.
    This proposed FY 2021 budget neutrality adjustment factor was 
applied to the standardized amount. Please see the table later in 
this section setting forth each of the FY 2021 proposed budget 
neutrality factors.

h. Proposed Transition Budget Neutrality Adjustment

    As noted above, in section III.A.2. of the preamble to this 
proposed rule, we are proposing to implement the revised OMB 
delineations as described in the September 14, 2018 OMB Bulletin No. 
18-04, effective October 1, 2020 beginning with the FY 2021 IPPS 
wage index. We stated that while the revised OMB delineations in the 
OMB bulletin (OMB Bulletin 18-04) are not based on new census data, 
there were some material changes in the OMB delineations. In 
accordance with our past practice of

[[Page 32905]]

implementing transition policies to help mitigate negative impacts 
on hospitals of certain wage index proposals, we believe that if we 
adopt the proposed revised OMB delineations, it would be appropriate 
to implement a transition policy since, as mentioned above, some of 
these revisions are material, and may negatively impact payments to 
hospitals. We stated that we believe applying a 5-percent cap on any 
decrease in a hospital's wage index from the hospital's final wage 
index from the prior fiscal year, as we did for FY 2020, would be an 
appropriate transition for FY 2021 for the revised OMB delineations. 
We refer the reader to section III.A.2. of the preamble to this 
proposed rule for a complete discussion on the rationale of this 
transition.
    For FY 2020, we are proposing to use our exceptions and 
adjustments authority under section 1886(d)(5)(I)(i) of the Act to 
apply a budget neutrality adjustment to the standardized amount so 
that our transition for hospitals negatively impacted is implemented 
in a budget neutral manner. We refer readers to section III.A.2. of 
the preamble of this proposed rule for a complete discussion 
regarding this proposed policy. To calculate a proposed transition 
budget neutrality adjustment factor for FY 2021, we used FY 2019 
discharge data to simulate payments and compared the following:
     Aggregate payments without the proposed 5-percent cap 
using the proposed FY 2021 labor-related share percentages, the 
revised OMB labor market area delineations proposed for FY 2021, the 
proposed FY 2021 relative weights, the proposed FY 2021 wage index 
for each hospital after adjusting the wage indexes under the low 
wage index hospital policy with the associated budget neutrality 
adjustment to the standardized amount, and applied the proposed FY 
2021 hospital readmissions payment adjustments and the estimated FY 
2021 hospital VBP payment adjustments, and the proposed operating 
outlier reconciliation adjusted outlier percentage; and
     Aggregate payments with the proposed 5-percent cap 
using the proposed FY 2021 labor-related share percentages, the 
revised OMB labor market area delineations proposed for FY 2021, the 
proposed FY 2021 relative weights, the proposed FY 2021 wage index 
for each hospital after adjusting the wage indexes under the low 
wage index hospital policy with the associated budget neutrality 
adjustment to the standardized amount, and applied the same proposed 
FY 2021 hospital readmissions payment adjustments and the estimated 
FY 2021 hospital VBP payment adjustments applied previously, and the 
proposed operating outlier reconciliation adjusted outlier 
percentage.
    This proposed FY 2021 budget neutrality adjustment factor was 
applied to the proposed standardized amount. Please see the table 
later in this section setting forth each of the FY 2021 proposed 
budget neutrality factors.
    We note, Table 2 associated with this proposed rule, which is 
available via the internet on the CMS website contains the wage 
index by provider before and after applying the low wage index 
hospital policy and the proposed transition.
[GRAPHIC] [TIFF OMITTED] TP29MY20.222

i. Proposed Adjustment for FY 2021 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 
2021, we are proposing to implement the required +0.5 percent 
adjustment to the standardized amount. This is a permanent 
adjustment to the payment rates.

j. Proposed Outlier Payments

    Section 1886(d)(5)(A) of the Act provides for payments in 
addition to the basic prospective payments for ``outlier'' cases 
involving extraordinarily high costs. To qualify for outlier 
payments, a case must have costs greater than the sum of the 
prospective payment rate for the MS-DRG, any IME and DSH payments, 
uncompensated care payments, any new technology add-on payments, and 
the ``outlier threshold'' or ``fixed-loss'' amount (a dollar amount 
by which the costs of a case must exceed payments in order to 
qualify for an outlier payment). We refer to the sum of the 
prospective payment rate for the MS-DRG, any IME and DSH payments, 
uncompensated care payments, any new technology add-on payments, and 
the outlier threshold as the outlier ``fixed-loss cost threshold.'' 
To determine whether the costs of a case exceed the fixed-loss cost 
threshold, a hospital's CCR is applied to the total covered charges 
for the case to convert the charges to estimated costs. Payments for 
eligible cases are then made based on a marginal cost factor, which 
is a percentage of the estimated costs above the fixed-loss cost 
threshold. The marginal cost factor for FY 2021 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 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://

[[Page 32906]]

www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/
AcuteInpatientPPS/outlier.htm.

(1) Proposed Methodology To Incorporate an Estimate of Outlier 
Reconciliation in the FY 2020 Outlier Fixed-Loss Cost Threshold

    The regulations in 42 CFR 412.84(i)(4) state that any outlier 
reconciliation at cost report settlement will be based on operating 
and capital cost-to-charge ratios (CCRs) calculated based on a ratio 
of costs to charges computed from the relevant cost report and 
charge data determined at the time the cost report coinciding with 
the discharge is settled. 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 cost reporting period. If we 
determine that a hospital's outlier payments should be reconciled, 
we reconcile both operating and capital outlier payments. We refer 
readers to section 20.1.2.5 of Chapter 3 of the Medicare Claims 
Processing Manual (available on the CMS website at: https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/clm104c03.pdf) for complete details regarding outlier 
reconciliation. The regulation at Sec.  412.84(m) further states 
that at the time of any outlier reconciliation under Sec.  
412.84(i)(4), outlier payments may be adjusted to account for the 
time value of any underpayments or overpayments. Section 20.1.2.6 of 
Chapter 3 of the Medicare Claims Processing Manual contains 
instructions on how to assess the time value of money for reconciled 
outlier amounts.
    If the operating CCR of a hospital subject to outlier 
reconciliation is lower at cost report settlement compared to the 
operating CCR used for payment, the hospital will owe CMS money 
because it received an outlier overpayment at the time of claim 
payment. Conversely, if the operating CCR increases at cost report 
settlement compared to the operating CCR used for payment, CMS will 
owe the hospital money because the hospital outlier payments were 
underpaid.
    In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42623 through 
42625), for FY 2021, we finalized a methodology to incorporate 
outlier reconciliation in the FY 2021 outlier fixed loss cost 
threshold. As discussed in the FY 2020 IPPS/LTCH PPS proposed rule 
(84 FR 19592), we stated that rather than trying to predict which 
claims and/or hospitals may be subject to outlier reconciliation, we 
believe a methodology that incorporates an estimate of outlier 
reconciliation dollars based on actual outlier reconciliation 
amounts reported in historical cost reports would be a more feasible 
approach and provide a better estimate and predictor of outlier 
reconciliation for the upcoming fiscal year. We also stated that we 
believe the methodology addresses stakeholder's concerns on the 
impact of outlier reconciliation on the modeling of the outlier 
threshold. For a detailed discussion of additional background 
regarding outlier reconciliation, we refer the reader to the FY 2020 
IPPS/LTCH PPS final rule.

(a) Incorporating a Proposed Projection of Outlier Payment 
Reconciliations for the FY 2021 Outlier Threshold Calculation

    Based on the methodology finalized in the FY 2020 IPPS/LTCH PPS 
final rule (84 FR 42623 through 42625), for FY 2021, we are 
proposing to continue to incorporate outlier reconciliation in the 
FY 2021 outlier fixed loss cost threshold.
    As discussed in the FY 2020 IPPS/LTCH PPS final rule, for FY 
2020, we used the historical outlier reconciliation amounts from the 
FY 2014 cost reports (cost reports with a begin date on or after 
October 1, 2013, and on or before September 30, 2014), which we 
believed would provide the most recent and complete available data 
to project the estimate of outlier reconciliation. We refer the 
reader to the FY 2020 IPPS/LTCH PPS final rule (84 FR 42623 through 
42625) for a complete discussion on the use of the FY 2014 cost 
report data for purposes of projecting outlier payment 
reconciliations for the FY 2020 outlier threshold calculation.
    In the FY 2020 IPPS/LTCH PPS final rule, we stated that the 
methodology for FY 2020 could advance by 1 year the cost reports 
used to determine the historical outlier reconciliation. In this 
proposed rule, to determine a projection of outlier payment 
reconciliations for the FY 2021 outlier threshold calculation, we 
are proposing to advance the methodology by 1 year and use FY 2015 
cost reports (cost reports with a begin date on or after October 1, 
2014, and on or before September 30, 2015).
    For FY 2021, we are proposing to use the same methodology from 
FY 2020 to incorporate a projection of operating outlier payment 
reconciliations for the FY 2021 outlier threshold calculation. The 
following steps are the same as those finalized in the FY 2020 final 
rule but with updated data for FY 2021:
    Step 1.--Use the Federal FY 2015 cost reports for hospitals paid 
under the IPPS from the most recent publicly available quarterly 
HCRIS extract available at the time of development of the proposed 
and final rules, and exclude sole community hospitals (SCHs) that 
were paid under their hospital-specific rate (that is, if Worksheet 
E, Part A, Line 48 is greater than Line 47). We note that when there 
are multiple columns available for the lines of the cost report 
described in the following steps and the provider was paid under the 
IPPS for that period(s) of the cost report, then we believe it is 
appropriate to use multiple columns to fully represent the relevant 
IPPS payment amounts, consistent with our methodology for the FY 
2020 final rule.
    Step 2.--Calculate the aggregate amount of historical total of 
operating outlier reconciliation dollars (Worksheet E, Part A, Line 
2.01) using the Federal FY 2015 cost reports from Step 1.
    Step 3.--Calculate the aggregate amount of total Federal 
operating payments using the Federal FY 2015 cost reports from Step 
1. The total Federal operating payments consist of the Federal 
payments (Worksheet E, Part A, Line 1.01 and Line 1.02, plus Line 
1.03 and Line 1.04), outlier payments (Worksheet E, Part A, Line 2 
and Line 2.02), and the outlier reconciliation payments (Worksheet 
E, Part A, Line 2.01). We note that a negative amount on Worksheet 
E, Part A, Line 2.01 for outlier reconciliation indicates an amount 
that was owed by the hospital, and a positive amount indicates this 
amount was paid to the hospital.
    Step 4.--Divide the amount from Step 2 by the amount from Step 3 
and multiply the resulting amount by 100 to produce the percentage 
of total operating outlier reconciliation dollars to total Federal 
operating payments for FY 2015. This percentage amount would be used 
to adjust the outlier target for FY 2021 as described in Step 5.
    Step 5.--Because the outlier reconciliation dollars are only 
available on the cost reports, and not in the Medicare claims data 
in the MedPAR file used to model the outlier threshold, we are 
proposing to target 5.1 percent minus the percentage determined in 
Step 4 in determining the outlier threshold. Using the FY 2015 cost 
reports based on the December 2019 HCRIS extract, because the 
aggregate outlier reconciliation dollars from Step 2 are negative, 
but the percentage determined in Step 4 rounds to 0, we are 
targeting 5.1 percent for outlier payments for FY 2021 under our 
proposed methodology.
    For this FY 2021 proposed rule, we used the December 2019 HCRIS 
extract of the cost report data to calculate the proposed percentage 
adjustment for outlier reconciliation. For the FY 2021 final rule, 
we are proposing to use the latest quarterly HCRIS extract that is 
publically available at the time of the development of that rule 
which, for FY 2021, would be the March 2020 extract. Similar to the 
FY 2020 final rule, we may also consider the use of more recent data 
that may become available for purpose of projecting the estimate of 
operating outlier reconciliation used in the calculation of the 
final FY 2021 outlier threshold.
    For this FY 2021 proposed rule, based on the December 2019 
HCRIS, 16 hospitals had an outlier reconciliation amount recorded on 
Worksheet E, Part A, Line 2.01 for total operating outlier 
reconciliation dollars of negative $2,516,904 (Step 2). The total 
Federal operating payments based on the December 2019 HCRIS was 
$90,313,815,275 (Step 3). The ratio (Step 4) is a negative 0.002787 
percent, which, when rounded to the second digit, is 0.00 percent. 
Therefore, for FY 2021, we are proposing to incorporate a projection 
of outlier reconciliation dollars by targeting an outlier threshold 
at 5.10 percent [5.1 percent-(- .00 percent)]. When the percentage 
of operating outlier reconciliation dollars to total Federal 
operating payments rounds to a negative value (that is, when the 
aggregate amount of outlier reconciliation as a percent of total 
operating payments rounds to a negative percent), the effect is a 
decrease to the outlier threshold compared to an outlier threshold 
that is calculated without including this estimate of operating 
outlier reconciliation dollars. In section II.A.4.i.(2). of this 
Addendum, we provide the FY 2021 outlier threshold as calculated for 
this proposed rule both with and without including this proposed 
percentage estimate of operating outlier reconciliation. However, we 
note that

[[Page 32907]]

for this proposed rule, the outlier threshold is the same with and 
without the proposed percentage estimate, since the projection of 
outlier reconciliation rounds to zero.
    As explained in the FY 2020 IPPS/LTCH PPS final rule, we would 
continue to use a 5.1 percent target (or an outlier offset factor of 
0.949) in calculating the outlier offset to the standardized amount. 
In the past, the outlier offset was six decimals because we targeted 
and set the threshold at 5.1 percent by adjusting the standardized 
amount by the outlier offset until operating outlier payments 
divided by total operating Federal payments plus operating outlier 
payments equaled approximately 5.1 percent (this approximation 
resulted in an offset beyond three decimals). However, under our 
proposed methodology, we believe a three decimal offset of 0.949 
reflecting 5.1 percent is appropriate rather than the unrounded six 
decimal offset that we have calculated for prior fiscal years. 
Specifically, as discussed in section II.A.5. of this Addendum, we 
are proposing to determine an outlier adjustment by applying a 
factor to the standardized amount that accounts for the projected 
proportion of total estimated FY 2021 operating Federal payments 
paid as outliers. Our proposed modification to the outlier threshold 
methodology is designed to adjust the total estimated outlier 
payments for FY 2021 by incorporating the projection of negative 
outlier reconciliation. That is, under this proposal, total 
estimated outlier payments for FY 2021 would be the sum of the 
estimated FY 2021 outlier payments based on the claims data from the 
outlier model and the estimated FY 2021 total operating outlier 
reconciliation dollars. We believe the proposed methodology would 
more accurately estimate the outlier adjustment to the standardized 
amount by increasing the accuracy of the calculation of the total 
estimated FY 2021 operating Federal payments paid as outliers. In 
other words, the net effect of our outlier proposal to incorporate a 
projection for outlier reconciliation dollars into the threshold 
methodology would be that FY 2021 outlier payments (which include 
the estimated recoupment percentage for FY 2021 of 0.00 percent) 
would be 5.1 percent of total operating Federal payments plus total 
outlier payments. Therefore, the operating outlier offset to the 
standardized amount is 0.949 (1-0.051).
    We are inviting public comment on our proposed methodology for 
projecting an estimate of outlier reconciliation and incorporating 
that estimate into the modeling for the fixed-loss cost outlier 
threshold for FY 2021.

(b) Proposed Reduction to the FY 2021 Capital Standard Federal Rate by 
an Adjustment Factor To Account for the Projected Proportion of Capital 
IPPS Payments Paid as Outliers

    We establish an outlier threshold that is applicable to both 
hospital inpatient operating costs and hospital inpatient capital 
related costs (58 FR 46348). Similar to the calculation of the 
proposed adjustment to the standardized amount to account for the 
projected proportion of operating payments paid as outlier payments, 
as discussed in greater detail in section III.A.2. of this Addendum, 
we are proposing to reduce the FY 2021 capital standard Federal rate 
by an adjustment factor to account for the projected proportion of 
capital IPPS payments paid as outliers. The regulations in 42 CFR 
412.84(i)(4) state that any outlier reconciliation at cost report 
settlement will be based on operating and capital CCRs calculated 
based on a ratio of costs to charges computed from the relevant cost 
report and charge data determined at the time the cost report 
coinciding with the discharge is settled. As such, any 
reconciliation also applies to capital outlier payments.
    For FY 2021, we are proposing to use the same methodology from 
FY 2020 to adjust the FY 2021 capital standard Federal rate by an 
adjustment factor to account for the projected proportion of capital 
IPPS payments paid as outliers. Similar to FY 2020, as part of our 
proposal for FY 2021 to incorporate into the outlier model the total 
outlier reconciliation dollars from the most recent and most 
complete fiscal year cost report data, we also are proposing to 
adjust our estimate of FY 2021 capital outlier payments to 
incorporate a projection of capital outlier reconciliation payments 
when determining the adjustment factor to be applied to the capital 
standard Federal rate to account for the projected proportion of 
capital IPPS payments paid as outliers. To do so, we are proposing 
to use the following methodology, which generally parallels the 
proposed methodology to incorporate a projection of operating 
outlier reconciliation payments for the FY 2021 outlier threshold 
calculation.
    Step 1.--Use the Federal FY 2015 cost reports for hospitals paid 
under the IPPS from the most recent publicly available quarterly 
HCRIS extract available at the time of development of the proposed 
and final rules, and exclude SCHs that were paid under their 
hospital-specific rate (that is, if Worksheet E, Part A, Line 48 is 
greater than Line 47). We note that when there are multiple columns 
available for the lines of the cost report described in the 
following steps and the provider was paid under the IPPS for that 
period(s) of the cost report, then we believe it is appropriate to 
use multiple columns to fully represent the relevant IPPS payment 
amounts, consistent with our methodology for the FY 2020 final rule. 
We used the December 2019 HCRIS extract for this proposed rule and 
expect to use the March 2020 HCRIS extract for the FY 2021 final 
rule. Similar to the FY 2020 final rule, we may also consider the 
use of more recent data that may become available for purposes of 
projecting the estimate of capital outlier reconciliation used in 
the calculation of the final FY 2021 adjustment to the FY 2021 
capital standard Federal rate.
    Step 2.--Calculate the aggregate amount of the historical total 
of capital outlier reconciliation dollars (Worksheet E, Part A, Line 
93, Column 1) using the Federal FY 2015 cost reports from Step 1.
    Step 3.--Calculate the aggregate amount of total capital Federal 
payments using the Federal FY 2015 cost reports from Step 1. The 
total capital Federal payments consist of the capital DRG payments, 
including capital indirect medical education (IME) and capital 
disproportionate share hospital (DSH) payments (Worksheet E, Part A, 
Line 50, Column 1) and the capital outlier reconciliation payments 
(Worksheet E, Part A, Line 93, Column 1). We note that a negative 
amount on Worksheet E, Part A, Line 93 for capital outlier 
reconciliation indicates an amount that was owed by the hospital, 
and a positive amount indicates this amount was paid to the 
hospital.
    Step 4.--Divide the amount from Step 2 by the amount from Step 3 
and multiply the resulting amount by 100 to produce the percentage 
of total capital outlier reconciliation dollars to total capital 
Federal payments for FY 2015. This percentage amount would be used 
to adjust the estimate of capital outlier payments for FY 2021 as 
described in Step 5.
    Step 5.--Because the outlier reconciliation dollars are only 
available on the cost reports, and not in the specific Medicare 
claims data in the MedPAR file used to estimate outlier payments, we 
are proposing that the estimate of capital outlier payments for FY 
2021 would be determined by adding the percentage in Step 4 to the 
estimated percentage of capital outlier payments otherwise 
determined using the shared outlier threshold that is applicable to 
both hospital inpatient operating costs and hospital inpatient 
capital-related costs. (We note that this percentage is added for 
capital outlier payments but subtracted in the analogous step for 
operating outlier payments. We have a unified outlier payment 
methodology that uses a shared threshold to identify outlier cases 
for both operating and capital payments. The difference stems from 
the fact that operating outlier payments are determined by first 
setting a ``target'' percentage of operating outlier payments 
relative to aggregate operating payments which produces the outlier 
threshold. Once the shared threshold is set, it is used to estimate 
the percentage of capital outlier payments to total capital payments 
based on that threshold. Because the threshold is already set based 
on the operating target, rather than adjusting the threshold (or 
operating target), we adjust the percentage of capital outlier to 
total capital payments to account for the estimated effect of 
capital outlier reconciliation payments. This percentage is adjusted 
by adding the capital outlier reconciliation percentage from Step 4 
to the estimate of the percentage of capital outlier payments to 
total capital payments based on the shared threshold.) Because the 
aggregate capital outlier reconciliation dollars from Step 2 are 
negative, the estimate of capital outlier payments for FY 2021 under 
our proposed methodology would be lower than the percentage of 
capital outlier payments otherwise determined using the shared 
outlier threshold.
    Similarly, for this FY 2021 proposed rule, we used the December 
2019 HCRIS extract of the cost report data to calculate the proposed 
percentage adjustment for outlier reconciliation. For the FY 2021 
final rule, we are proposing to use the latest quarterly HCRIS 
extract that is publically available at the time of the development 
of that rule which, for FY 2021, would be the March

[[Page 32908]]

2020 extract. As previously noted, we may also consider the use of 
more recent data that may become available for purposes of 
projecting the estimate of capital outlier reconciliation used in 
the calculation of the final FY 2021 adjustment to the FY 2021 
capital standard Federal rate.
    For this FY 2021 proposed rule, the estimated percentage of FY 
2021 capital outlier payments otherwise determined using the shared 
outlier threshold is 5.42 percent (estimated capital outlier 
payments of $432,102,494 divided by (estimated capital outlier 
payments of $432,102,494 plus the estimated total capital Federal 
payment of $7,569,294,589)). Based on the December 2019 HCRIS, 16 
hospitals had an outlier reconciliation amount recorded on Worksheet 
E, Part A, Line 93 for total capital outlier reconciliation dollars 
of negative $956,065 (Step 2). The total Federal capital payments 
based on the December 2019 HCRIS was $8,114,838,772 (Step 3) which 
results in a ratio (Step 4) of -0.01 percent. Therefore, for FY 
2021, taking into account projected capital outlier reconciliation 
payments under our proposed methodology would decrease the estimated 
percentage of FY 2021 aggregate capital outlier payments by 0.01 
percent.
    As discussed in section III.A.2. of this Addendum, we are 
proposing to incorporate the capital outlier reconciliation dollars 
from Step 5 when applying the outlier adjustment factor in 
determining the capital Federal rate based on the estimated 
percentage of capital outlier payments to total capital Federal rate 
payments for FY 2021.
    We are inviting public comment on our proposed methodology for 
projecting an estimate of capital outlier reconciliation and 
incorporating that estimate into the modeling of the estimate of FY 
2021 capital outlier payments for purposes of determining the 
capital outlier adjustment factor.

(2) Proposed FY 2021 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 proposed FY 2021 
outlier threshold, we simulated payments by applying proposed FY 
2021 payment rates and policies using cases from the FY 2019 MedPAR 
file. We note that because this payment simulation uses the proposed 
FY 2021 relative weights, consistent with our proposal in section 
IV.I. of the preamble to this proposed rule, we applied the proposed 
adjustor for CAR-T cell therapy clinical trial cases in our 
simulation of these payments. As discussed in section II.E.2.b. of 
the preamble of this proposed rule, we also proposed to calculate an 
adjustment to account for the CAR T-cell therapy cases identified as 
clinical trial cases in calculating the FY 2021 relative weights and 
for purposes of budget neutrality and outlier simulations. 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 later in this section) 
to project the threshold for the upcoming fiscal year. In addition, 
charges for a claim payment are from the bill while charges to 
project the threshold are from the MedPAR data with an inflation 
factor applied to the charges (as described earlier).
    In order to determine the proposed FY 2021 outlier threshold, we 
inflated the charges on the MedPAR claims by 2 years, from FY 2019 
to FY 2021. Consistent with the FY 2020 IPPS/LTCH PPS final rule (84 
FR 42626 and 42627), we are proposing to use the following 
methodology to calculate the charge inflation factor for FY 2021:
     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.
     Include providers that are in both periods of charge 
data that are used to calculate the 1-year average annual rate of-
change in charges per case. We note this is consistent with the 
methodology used since FY 2014.
     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.
    Our general methodology to inflate the charges computes the 1-
year average annual rate-of-change in charges per case which is then 
applied twice to inflate the charges on the MedPAR claims by 2 years 
(for example, FY 2019 to FY 2021).
    In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42627), we 
modified our charge inflation methodology. We stated that we believe 
balancing our preference to use the latest available data from the 
MedPAR files and stakeholders' concerns about being able to use 
publicly available MedPAR files to review the charge inflation 
factor can be achieved by modifying our methodology to use the 
publicly available Federal fiscal year period (that is, for FY 2020, 
we used the charge data from Federal fiscal years 2017 and 2018), 
rather than the most recent data available to CMS which, under our 
prior methodology, was based on calendar year data. We refer the 
reader to the FY 2020 IPPS/LTCH PPS final rule for a complete 
discussion regarding this change. For the same reasons discussed in 
that rulemaking, for FY 2021, we are proposing to use the same 
methodology as FY 2020 and advance by 1 year the MedPAR data used to 
determine the charge inflation factor. That is, for FY 2021, we are 
proposing to use the MedPAR files for the two most recent available 
federal fiscal year time periods to calculate the charge inflation 
factor, as we did for FY 2020. Specifically, for this proposed rule 
we used the December 2018 MedPAR file of FY 2018 (October 1, 2017 to 
September 30, 2018) charge data (released for the FY 2020 IPPS/LTCH 
PPS proposed rule) and the December 2019 MedPAR file of FY 2019 
(October 1, 2018 to September 30, 2019) charge data (released for 
this FY 2021 IPPS/LTCH PPS proposed rule) to compute the proposed 
charge inflation factor. We are proposing that for the FY 2021 final 
rule, we would use more recently updated data, that is the MedPAR 
files from March 2019 for the FY 2018 time period and March 2020 for 
the FY 2019 time period. Under this proposed methodology, to compute 
the 1-year average annual rate-of-change in charges per case for FY 
2021, we compared the average covered charge per case of $61,533.34 
($582,022,123,240/9,458,647 cases) from October 1, 2017, through 
September 30, 2018 to the average covered charge per case of 
$65,442.49 ($601,183,502,371/9,186,440 cases) from October 1, 2018 
through September 30, 2019. This rate-of-change was 6.4 percent 
(1.06353) or 13.1 percent (1.131096) over 2 years. The billed 
charges are obtained from the claim from the MedPAR file and 
inflated by the inflation factor specified previously.
    As we have done in the past, in this FY 2021 IPPS/LTCH PPS 
proposed rule, we are proposing to establish the proposed FY 2021 
outlier threshold using hospital CCRs from the December 2019 update 
to the Provider-Specific File (PSF)--the most recent available data 
at the time of the development of this proposed rule. We are 
proposing to apply the following edits to providers' CCRs in the 
PSF. We believe these edits are appropriate in order to accurately 
model the outlier threshold. We first search for Indian Health 
Service providers and those providers assigned the statewide average 
CCR from the current fiscal year. We then replace these CCRs with 
the statewide average CCR for the upcoming fiscal year. We also 
assign the statewide average CCR (for the upcoming fiscal year) to 
those providers that have no value in the CCR field in the PSF or 
whose CCRs exceed the ceilings described later in

[[Page 32909]]

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 later in this section to hospitals 
assigned the statewide average CCR. For FY 2021, we also are 
proposing to continue to apply an adjustment factor to the CCRs to 
account for cost and charge inflation (as explained later in this 
section). We also are proposing that, if more recent data become 
available, we would use that data to calculate the final FY 2021 
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 are proposing to 
adjust the CCRs from the December 2019 update of the PSF by 
comparing the percentage change in the national average case-
weighted operating CCR and capital CCR from the December 2018 update 
of the PSF to the national average case-weighted operating CCR and 
capital CCR from the December 2019 update of the PSF. We note that 
we used total transfer-adjusted cases from FY 2019 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 1 year to the next without any effect from a change in case 
count on different sides of the comparison.
    Using this proposed methodology, for this proposed rule, we 
calculated a proposed December 2018 operating national average case-
weighted CCR of 0.255979 and a proposed December 2019 operating 
national average case-weighted CCR of 0.249649. We then calculated 
the percentage change between the two national operating case-
weighted CCRs by subtracting the December 2018 operating national 
average case-weighted CCR from the December 2019 operating national 
average case-weighted CCR and then dividing the result by the 
December 2018 national operating average case-weighted CCR. This 
resulted in a proposed national operating CCR adjustment factor of 
0.975271.
    We used this same proposed methodology to adjust the capital 
CCRs. Specifically, we calculated a December 2018 capital national 
average case-weighted CCR of 0.021043 and a December 2019 capital 
national average case-weighted CCR of 0.020255. We then calculated 
the percentage change between the two national capital case-weighted 
CCRs by subtracting the December 2018 capital national average case-
weighted CCR from the December 2019 capital national average case-
weighted CCR and then dividing the result by the December 2018 
capital national average case-weighted CCR. This resulted in a 
proposed national capital CCR adjustment factor of 0.962553.
    For purposes of estimating the proposed outlier threshold for FY 
2021, we used a wage index that reflects the policies discussed in 
this proposed rule. This includes the proposed frontier State floor 
adjustments in accordance with section 10324(a) of the Affordable 
Care Act, the proposed out-migration adjustment as added by section 
505 of Public Law 108-173, as well as incorporating the FY 2021 wage 
index adjustment for hospitals with a wage index value below the 
25th percentile, where the increase in the wage index value for 
these hospitals would be equal to half the difference between the 
otherwise applicable final wage index value for a year for that 
hospital and the 25th percentile wage index value for that year 
across all hospitals. We also incorporated our proposal of the 5-
percent cap on any decrease in a hospital's wage index from the 
hospital's final wage index in FY 2020. If we did not take the 
aforementioned into account, our estimate of total FY 2021 payments 
would be too low, and, as a result, our proposed outlier threshold 
would be too high, such that estimated outlier payments would be 
less than our projected 5.1 percent of total payments (which 
includes outlier reconciliation).
    As described in sections IV.K. and IV.L., respectively, of the 
preamble of this proposed rule, sections 1886(q) and 1886(o) of the 
Act establish the Hospital Readmissions Reduction Program and the 
Hospital VBP Program, respectively. We do not believe that it is 
appropriate to include the proposed hospital VBP payment adjustments 
and the hospital readmissions payment adjustments in the proposed 
outlier threshold calculation or the proposed outlier offset to the 
standardized amount. Specifically, consistent with our definition of 
the base operating DRG payment amount for the Hospital Readmissions 
Reduction Program under Sec.  412.152 and the Hospital VBP Program 
under Sec.  412.160, outlier payments under section 1886(d)(5)(A) of 
the Act are not affected by these payment adjustments. Therefore, 
outlier payments would continue to be calculated based on the 
unadjusted base DRG payment amount (as opposed to using the base-
operating DRG payment amount adjusted by the hospital readmissions 
payment adjustment and the hospital VBP payment adjustment). 
Consequently, we are proposing to exclude the proposed hospital VBP 
payment adjustments and the estimated hospital readmissions payment 
adjustments from the calculation of the proposed outlier fixed-loss 
cost threshold.
    We note that, to the extent section 1886(r) of the Act modifies 
the DSH payment methodology under section 1886(d)(5)(F) of the Act, 
the uncompensated care payment under section 1886(r)(2) of the Act, 
like the empirically justified Medicare DSH payment under section 
1886(r)(1) of the Act, may be considered an amount payable under 
section 1886(d)(5)(F) of the Act such that it would be reasonable to 
include the payment in the outlier determination under section 
1886(d)(5)(A) of the Act. As we have done since the implementation 
of uncompensated care payments in FY 2014, for FY 2021, we also are 
proposing to allocate an estimated per-discharge uncompensated care 
payment amount to all cases for the hospitals eligible to receive 
the uncompensated care payment amount in the calculation of the 
outlier fixed-loss cost threshold methodology. We continue to 
believe that allocating an eligible hospital's estimated 
uncompensated care payment to all cases equally in the calculation 
of the outlier fixed-loss cost threshold would best approximate the 
amount we would pay in uncompensated care payments during the year 
because, when we make claim payments to a hospital eligible for such 
payments, we would be making estimated per-discharge uncompensated 
care payments to all cases equally. Furthermore, we continue to 
believe that using the estimated per-claim uncompensated care 
payment amount to determine outlier estimates provides 
predictability as to the amount of uncompensated care payments 
included in the calculation of outlier payments. Therefore, 
consistent with the methodology used since FY 2014 to calculate the 
outlier fixed-loss cost threshold, for FY 2021, we are proposing to 
include estimated FY 2021 uncompensated care payments in the 
computation of the proposed outlier fixed-loss cost threshold. 
Specifically, we are proposing to use the estimated per-discharge 
uncompensated care payments to hospitals eligible for the 
uncompensated care payment for all cases in the calculation of the 
proposed outlier fixed-loss cost threshold methodology.
    Using this methodology, we used the formula described in section 
I.C.1 of this Addendum to simulate and calculate the Federal payment 
rate and outlier payments for all claims. In addition, as described 
in the earlier section to this Addendum, we are proposing to 
incorporate an estimate of FY 2021 outlier reconciliation in the 
methodology for determining the outlier threshold. As noted 
previously, for this FY 2021 proposed rule, the ratio of outlier 
reconciliation dollars to total Federal Payments (Step 4) is a 
negative 0.002787 percent, which, when rounded to the second digit, 
is 0.00 percent. Therefore, for FY 2021, we are proposing to 
incorporate a projection of outlier reconciliation dollars by 
targeting an outlier threshold at 5.10 percent [5.1 percent-(-.00 
percent)]. Under this proposed approach, we determined a threshold 
of $30,006 and calculated total outlier payments of $4,935,261,570 
and total operating Federal payments of $91,833,641,321. We then 
divided total outlier payments by total operating Federal payments 
plus total outlier payments and determined that this threshold 
matched with the 5.10 percent target, which reflects our proposal to 
incorporate an estimate of outlier reconciliation in the 
determination of the outlier threshold (as discussed in more detail 
in the previous section of this Addendum). Since the target remains 
at 5.10 percent, we note that the threshold calculated without 
applying our proposed methodology for incorporating an estimate of 
outlier reconciliation in the determination of the outlier threshold 
is the same as identified previously at $30,006. We are proposing an 
outlier fixed-loss cost threshold for FY 2021 equal to the

[[Page 32910]]

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 $30,006.

(2) Other Proposed Changes Concerning Outliers

    As stated in the FY 1994 IPPS final rule (58 FR 46348), we 
establish an outlier threshold that is applicable to both hospital 
inpatient operating costs and hospital inpatient capital-related 
costs. When we modeled the combined operating and capital outlier 
payments, we found that using a common threshold resulted in a 
higher percentage of outlier payments for capital-related costs than 
for operating costs. We project that the threshold for FY 2021 
(which reflects our methodology to incorporate an estimate of 
operating outlier reconciliation) will result in outlier payments 
that will equal 5.1 percent of operating DRG payments and we 
estimate that capital outlier payments will equal 5.38 percent of 
capital payments based on the Federal rate (which reflects our 
methodology discussed previously to incorporate an estimate of 
capital outlier reconciliation).
    In accordance with section 1886(d)(3)(B) of the Act and as 
discussed previously, we are proposing to reduce the FY 2021 
standardized amount by the percentage of 5.1 percent to account for 
the projected proportion of payments paid as outliers.
    The proposed outlier adjustment factors that would be applied to 
the operating standardized amount and capital Federal rate based on 
the proposed FY 2021 outlier threshold are as follows:
[GRAPHIC] [TIFF OMITTED] TP29MY20.223

    We are proposing to apply the outlier adjustment factors to the 
proposed FY 2021 payment rates after removing the effects of the FY 
2020 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 1.156 or capital CCRs greater than 0.140, or hospitals 
for which the MAC is unable to calculate a CCR (as described under 
Sec.  412.84(i)(3) of our regulations), statewide average CCRs are 
used to determine whether a hospital qualifies for outlier payments. 
Table 8A listed in section VI. of this Addendum (and available only 
via the internet on the CMS website) contains the proposed statewide 
average operating CCRs for urban hospitals and for rural hospitals 
for which the MAC is unable to compute a hospital-specific CCR 
within the range previously specified. These statewide average 
ratios would be effective for discharges occurring on or after 
October 1, 2020 and would replace the statewide average ratios from 
the prior fiscal year. Table 8B listed in section VI. of this 
Addendum (and available via the internet on the CMS website) 
contains the comparable proposed statewide average capital CCRs. As 
previously stated, the proposed CCRs in Tables 8A and 8B would be 
used during FY 2021 when hospital-specific CCRs based on the latest 
settled cost report either are not available or are outside the 
range noted previously. Table 8C listed in section VI. of this 
Addendum (and available via the internet on the CMS website) 
contains the proposed statewide average total CCRs used under the 
LTCH PPS as discussed in section V. of this Addendum.
    We finally note that section 20.1.2 of chapter three of the 
Medicare Claims Processing Manual (on the internet at https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/clm104c03.pdf) covers 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 the manual. 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 the manual are followed. In 
addition, the manual outlines the outlier reconciliation process for 
hospitals and Medicare contractors. We refer hospitals to the manual 
instructions for complete details on outlier reconciliation.

(3) FY 2019 Outlier Payments

    Our current estimate, using available FY 2019 claims data, is 
that actual outlier payments for FY 2019 were approximately 5.38 
percent of actual total MS-DRG payments. Therefore, the data 
indicate that, for FY 2019, the percentage of actual outlier 
payments relative to actual total payments is higher than we 
projected for FY 2019. 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 2019 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 
2020 will not be available until after September 30, 2020, we are 
unable to provide an estimate of actual outlier payments for FY 2020 
based on FY 2019 claims data in this proposed rule. We will provide 
an estimate of actual FY 2020 outlier payments in the FY 2022 IPPS/
LTCH PPS proposed rule.

5. Proposed FY 2021 Standardized Amount

    The adjusted standardized amount is divided into labor-related 
and nonlabor-related portions. Tables 1A and 1B listed and published 
in section VI. of this Addendum (and available via the internet on 
the CMS website) contain the national standardized amounts that we 
are proposing to apply to all hospitals, except hospitals located in 
Puerto Rico, for FY 2021. The proposed standardized amount for 
hospitals in Puerto Rico is shown in Table 1C listed and published 
in section VI. of this Addendum (and available via the internet on 
the CMS website). The proposed amounts shown in Tables 1A and 1B 
differ only in that the labor-related share applied to the

[[Page 32911]]

standardized amounts in Table 1A is 68.3 percent, and the labor-
related share applied to the standardized amounts in Table 1B is 62 
percent. In accordance with sections 1886(d)(3)(E) and 
1886(d)(9)(C)(iv) of the Act, we are proposing to apply a labor-
related share of 62 percent, unless application of that percentage 
would result in lower payments to a hospital than would otherwise be 
made. In effect, the statutory provision means that we will apply a 
labor-related share of 62 percent for all hospitals whose wage 
indexes are less than or equal to 1.0000.
    In addition, Tables 1A and 1B include the proposed standardized 
amounts reflecting the proposed applicable percentage increases for 
FY 2021.
    The proposed labor-related and nonlabor-related portions of the 
national average standardized amounts for Puerto Rico hospitals for 
FY 2021 are set forth in Table 1C listed and published in section 
VI. of this Addendum (and available via the internet on the CMS 
website). Similarly, 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 2020 
national standardized amounts to the proposed FY 2021 national 
standardized amounts. The second through fifth columns display the 
changes from the FY 2019 standardized amounts for each applicable 
proposed FY 2021 standardized amount. The first row of the table 
shows the updated (through FY 2020) average standardized amount 
after restoring the FY 2020 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 2020 
adjustment factors are not removed from this table. Additionally, 
for FY 2021 we have applied the proposed budget neutrality factor 
for the proposed policy for lowest quartile wage index hospitals and 
proposed transition, described previously.
BILLING CODE 4120-01-P

[[Page 32912]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.224


[[Page 32913]]


BILLING CODE 4120-01-C

B. Proposed Adjustments for Area Wage Levels and Cost-of-Living

    Tables 1A through 1C, as published in section VI. of this 
Addendum (and available via the internet on the CMS website), 
contain the proposed labor-related and nonlabor-related shares that 
we are proposing to use to calculate the prospective payment rates 
for hospitals located in the 50 States, the District of Columbia, 
and Puerto Rico for FY 2021. This section addresses two types of 
adjustments to the standardized amounts that are made in determining 
the proposed prospective payment rates as described in this 
Addendum.

1. Proposed Adjustment for Area Wage Levels

    Sections 1886(d)(3)(E) and 1886(d)(9)(C)(iv) of the Act require 
that we make an adjustment to the labor-related portion of the 
national prospective payment rate to account for area differences in 
hospital wage levels. This adjustment is made by multiplying the 
labor-related portion of the adjusted standardized amounts by the 
appropriate wage index for the area in which the hospital is 
located. For FY 2021, as discussed in section IV.B.3. of the 
preamble of this proposed rule, we are proposing to apply a labor-
related share of 68.3 percent for the national standardized amounts 
for all IPPS hospitals (including hospitals in Puerto Rico) that 
have a wage index value that is greater than 1.0000. Consistent with 
section 1886(d)(3)(E) of the Act, we are proposing to apply the wage 
index to a labor-related share of 62 percent of the national 
standardized amount for all IPPS hospitals (including hospitals in 
Puerto Rico) whose wage index values are less than or equal to 
1.0000. In section III. of the preamble of this proposed rule, we 
discuss the data and methodology for the proposed FY 2021 wage 
index.

2. Proposed Adjustment for Cost-of-Living in Alaska and Hawaii

    Section 1886(d)(5)(H) of the Act provides discretionary 
authority to the Secretary to make adjustments as the Secretary 
deems appropriate to take into account the unique circumstances of 
hospitals located in Alaska and Hawaii. Higher labor-related costs 
for these two States are taken into account in the adjustment for 
area wages described previously. To account for higher nonlabor-
related costs for these two States, we multiply the nonlabor-related 
portion of the standardized amount for hospitals in Alaska and 
Hawaii by an adjustment factor.
    In the FY 2013 IPPS/LTCH PPS final rule, we established a 
methodology to update the COLA factors for Alaska and Hawaii that 
were published by the U.S. Office of Personnel Management (OPM) 
every 4 years (at the same time as the update to the labor-related 
share of the IPPS market basket), beginning in FY 2014. We refer 
readers to the FY 2013 IPPS/LTCH PPS proposed and final rules for 
additional background and a detailed description of this methodology 
(77 FR 28145 through 28146 and 77 FR 53700 through 53701, 
respectively).
    For FY 2018, in the FY 2018 IPPS/LTCH PPS final rule (82 FR 
38530 through 38531), we updated the COLA factors published by OPM 
for 2009 (as these are the last COLA factors OPM published prior to 
transitioning from COLAs to locality pay) using the methodology that 
we finalized in the FY 2013 IPPS/LTCH PPS final rule.
    Based on the policy finalized in the FY 2013 IPPS/LTCH PPS final 
rule, we are proposing to continue to use the same COLA factors in 
FY 2021 that were used in FY 2019 to adjust the nonlabor-related 
portion of the standardized amount for hospitals located in Alaska 
and Hawaii. The following table lists the proposed COLA factors for 
FY 2021.
[GRAPHIC] [TIFF OMITTED] TP29MY20.225

    Based on the policy finalized in the FY 2013 IPPS/LTCH PPS final 
rule, the next update to the COLA factors for Alaska and Hawaii 
would occur at the same time as the update to the labor-related 
share of the IPPS market basket (no later than FY 2022).

C. Calculation of the Proposed Prospective Payment Rates

1. General Formula for Calculation of the Prospective Payment Rates for 
FY 2021

    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 2021 equals the Federal rate (which 
includes uncompensated care payments).
    Under current law, the MDH program has been extended for 
discharges occurring through September 30, 2022.
    SCHs are paid based on whichever of the following rates yields 
the greatest aggregate payment: the Federal national rate (which, as 
discussed in section V.G. of the preamble of this proposed rule, 
includes uncompensated care payments); the updated hospital-specific 
rate based on FY 1982 costs per discharge; the updated hospital-
specific rate based on FY 1987 costs per discharge; the updated 
hospital-specific rate based on FY 1996 costs per discharge; or the 
updated hospital-specific rate based on FY 2006 costs per discharge 
to determine the rate that yields the greatest aggregate payment.
    The prospective payment rate for SCHs for FY 2021 equals the 
higher of the applicable Federal rate, or the hospital-specific rate 
as described later in this section. The prospective payment rate for 
MDHs for FY 2021 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 in this section. 
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.

2. Operating and Capital Federal Payment Rate and Outlier Payment 
Calculation

    Note: The formula specified in this section 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

[[Page 32914]]

CCRs for actual claim payment are from the PSF while CMS uses an 
adjusted CCR (as described previously) 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 (from 
Table 5) for each claim based on the ICD-10-CM diagnosis and ICD-10-
PCS procedure 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 previously.
    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 previous formula, we take uncompensated care 
payments and new technology add-on payments into consideration when 
calculating outlier payments.

3. 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 previously, the MDH program has been extended under 
current law for discharges occurring 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 2021

    Section 1886(b)(3)(B)(iv) of the Act provides that the 
applicable percentage increase applicable to the hospital-specific 
rates for SCHs and MDHs equals the applicable percentage increase 
set forth in section 1886(b)(3)(B)(i) of the Act (that is, the same 
update factor as for all other hospitals subject to the IPPS). 
Because the Act sets the update factor for SCHs and MDHs equal to 
the update factor for all other IPPS hospitals, the update to the 
hospital-specific rates for SCHs and MDHs is subject to the 
amendments to section 1886(b)(3)(B) of the Act made by sections 
3401(a) and 10319(a) of the Affordable Care Act. Accordingly, the 
proposed applicable percentage increases to the hospital-specific 
rates applicable to SCHs and MDHs are the following:
[GRAPHIC] [TIFF OMITTED] TP29MY20.226

    For a complete discussion of the applicable percentage increase 
applied to the hospital-specific rates for SCHs and MDHs, we refer 
readers to section IV.B. of the preamble of this proposed rule.

[[Page 32915]]

    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 proposed MS-DRG reclassification and recalibration 
budget neutrality factor, as discussed in section III. of this 
Addendum and listed in the table in section II. of this Addendum. 
The resulting rate is used in determining the payment rate that an 
SCH or MDH would receive for its discharges beginning on or after 
October 1, 2020. We note that, in this proposed rule, for FY 2021, 
we are not proposing to make a documentation and coding adjustment 
to the hospital-specific rate. We refer readers to section II.D. of 
the preamble of this proposed rule for a complete discussion 
regarding our proposed policies and previously finalized policies 
(including our historical adjustments to the payment rates) relating 
to the effect of changes in documentation and coding that do not 
reflect real changes in case mix.

III. Proposed Changes to Payment Rates for Acute Care Hospital 
Inpatient Capital-Related Costs for FY 2021

    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. In this section of this Addendum, we 
discuss the factors that we are proposing to use to determine the 
capital Federal rate for FY 2021, which would be effective for 
discharges occurring on or after October 1, 2020.
    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 Proposed Federal Hospital Inpatient 
Capital-Related Prospective Payment Rate Update for FY 2021

    In the discussion that follows, we explain the factors that we 
are proposing to use to determine the capital Federal rate for FY 
2021. In particular, we explain why the proposed FY 2021 capital 
Federal rate would increase approximately 1.30 percent, compared to 
the FY 2020 capital Federal rate. As discussed in the impact 
analysis in Appendix A to this proposed rule, we estimate that 
capital payments per discharge would increase approximately 0.6 
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

    Under Sec.  412.308(c)(1), the capital standard Federal rate is 
updated on the basis of an analytical framework that takes into 
account changes in a capital input price index (CIPI) and several 
other policy adjustment factors. Specifically, we adjust the 
projected CIPI rate of change, as appropriate, each year for case-
mix index-related changes, for intensity, and for errors in previous 
CIPI forecasts. The proposed update factor for FY 2021 under that 
framework is 1.5 percent based on a projected 1.5 percent increase 
in the 2014-based CIPI, a proposed 0.0 percentage point adjustment 
for intensity, a proposed 0.0 percentage point adjustment for case-
mix, a proposed 0.0 percentage point adjustment for the DRG 
reclassification and recalibration, and a proposed 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 
2021 CIPI projection in that same section of this Addendum. In this 
section of this Addendum, we describe the proposed policy 
adjustments that we are proposing to apply in the update framework 
for FY 2021.
    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''); or
     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 2021, we are projecting a 0.5 percent total increase in 
the case-mix index. We estimated that the real case-mix increase 
would equal 0.5 percent for FY 2021. The net adjustment for change 
in case-mix is the difference between the projected real increase in 
case mix and the projected total increase in case mix. Therefore, 
the proposed net adjustment for case-mix change in FY 2021 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 2019 DRG reclassification and recalibration as 
part of our update for FY 2021. We assume, for purposes of this 
adjustment, that the estimate of FY 2019 DRG reclassification and 
recalibration would result in no change in the case-mix when 
compared with the case-mix index that would have resulted if we had 
not made the reclassification and recalibration changes to the DRGs. 
Therefore, we are proposing to make a 0.0 percentage point 
adjustment for reclassification and recalibration in the update 
framework for FY 2021.
    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 32916]]

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 2019 update, for which there are historical 
data. That is, current historical data indicated that the forecasted 
FY 2019 CIPI (1.4 percent) used in calculating the FY 2019 update 
factor was the same percentage increase as the actual realized price 
increase (1.4 percent). As this does not exceed the 0.25 percentage 
point threshold, we are not proposing an adjustment for forecast 
error in the update for FY 2021.
    Under the capital IPPS update framework, we also make an 
adjustment for changes in intensity. Historically, we calculate 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 reflects 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. Thus, 
the capital update framework provides an add-on to the input price 
index rate of increase of one-half of the estimated annual increase 
in intensity, to allow for increases within DRG severity and the 
adoption of quality-enhancing technology.
    In this proposed rule, we are proposing to continue to use a 
Medicare-specific intensity measure that is based on a 5-year 
adjusted average of cost per discharge for FY 2021 (we refer readers 
to the FY 2011 IPPS/LTCH PPS final rule (75 FR 0436) for a full 
description of our Medicare-specific intensity measure). 
Specifically, for FY 2021, we are proposing to use an intensity 
measure that is based on an average of cost-per-discharge data from 
the 5-year period beginning with FY 2014 and extending through FY 
2018. Based on these data, we estimated that case-mix constant 
intensity declined during FYs 2014 through 2018. 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 would decline 
during that 5-year period, we believe it is appropriate to continue 
to apply a zero-intensity adjustment for FY 2021. Therefore, we are 
proposing to make a 0.0 percentage point adjustment for intensity in 
the update for FY 2021.
    Earlier, we described the basis of the components we used to 
develop the proposed 1.5 percent capital update factor under the 
capital update framework for FY 2021, as shown in the following 
table.
[GRAPHIC] [TIFF OMITTED] TP29MY20.227

2. Outlier Payment Adjustment Factor

    Section 412.312(c) establishes a unified outlier payment 
methodology for inpatient operating and inpatient capital-related 
costs. A shared threshold 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 threshold 
is set so that operating outlier payments are projected to be 5.1 
percent of total operating IPPS DRG payments. For FY 2021, we are 
proposing to incorporate the estimated outlier reconciliation 
payment amounts into the outlier threshold model, as we did for FY 
2020. (For more details on our proposal to incorporate outlier 
reconciliation payment amounts into the outlier threshold model, 
please see section II.A. of this Addendum to this proposed rule.)
    For FY 2020, we estimated that outlier payments for capital-
related PPS payments would equal 5.37 percent of inpatient capital-
related payments based on the capital Federal rate in FY 2020. Based 
on the threshold discussed in section II.A. of this Addendum, we 
estimate that prior to taking into account projected capital outlier 
reconciliation payments, outlier payments for capital-related costs 
would equal 5.40 percent for inpatient capital-related payments 
based on the proposed capital Federal rate in FY 2021. However, 
using the methodology outlined in section II.A. of this Addendum, we 
estimate that taking into account projected capital outlier 
reconciliation payments would decrease FY 2021 aggregate estimated 
capital outlier payments by 0.01 percent. Therefore, accounting for 
estimated capital outlier reconciliation, the estimated outlier 
payments for capital-related PPS payments would equal 5.39 percent 
(5.40 percent-0.01 percent) of inpatient capital-related payments 
based on the capital Federal rate in FY 2021. Accordingly, we are 
proposing to apply an outlier adjustment factor of 0.9461 in 
determining the capital Federal rate for FY 2021. Thus, we estimate 
that the percentage of capital outlier payments to total capital 
Federal rate payments for FY 2021 would be higher than the 
percentage for FY 2020.
    The outlier reduction factors are not built permanently into the 
capital rates; that is, they are not applied cumulatively in 
determining the capital Federal rate. The proposed FY 2021 outlier 
adjustment of 0.9461 is a -0.02 percent change from the FY 2020 
outlier adjustment of 0.9463. Therefore, the proposed net change in 
the outlier adjustment to the capital Federal rate for FY 2021 is 
0.9998 (0.9461/0.9463;

[[Page 32917]]

calculation performed on unrounded numbers) so that the proposed 
outlier adjustment would decrease the FY 2021 capital Federal rate 
by approximately 0.02 percent compared to the FY 2020 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.
    As discussed in section III.G.3. of the preamble of this 
proposed rule, in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42325 
through 42339), we finalized a policy to help reduce wage index 
disparities between high and low wage index hospitals by increasing 
the wage index values for certain hospitals with low wage index 
values. As also discussed in section III.G.3. of the preamble of 
this proposed rule, this policy will continue in FY 2021. In 
addition, in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42332 
through 42336), we removed urban to rural reclassifications from the 
calculation of the rural floor to prevent inappropriate payment 
increases under the rural floor due to rural reclassifications, such 
that, beginning in FY 2020, the rural floor is calculated without 
including the wage data of hospitals that have reclassified as rural 
under section 1886(d)(8)(E) of the Act (as implemented in the 
regulations at Sec.  412.103). Therefore, as mentioned in section 
III.G.1. of the preamble of this proposed rule, the rural floor for 
this FY 2021 proposed rule is calculated without the wage data of 
hospitals that have reclassified as rural under Sec.  412.103. 
Lastly, for FY 2020, we placed a 5-percent cap on any decrease in a 
hospital's wage index from the hospital's final wage index in FY 
2019 (84 FR 42336 through 42338). In light of the proposed OMB 
updates described in section III.A.2. of the preamble of this 
proposed rule, for FY 2021 we are proposing to again cap any 
decreases in the wage index at 5 percent so that a hospital's final 
wage index for FY 2021 will not be less than 95 percent of its final 
wage index for FY 2020.
    As we discussed in the in the FY 2020 IPPS/LTCH PPS final rule 
(84 FR 42638 through 42639), we augmented our historical methodology 
for computing the budget neutrality factor for changes in the GAFs 
in light of the effect of those wage index changes on the GAFs. 
Specifically, we established a 2-step methodology, under which we 
first calculate a factor to ensure budget neutrality for changes to 
the GAFs due to the update to the wage data, wage index 
reclassifications and redesignations, including our policy to remove 
the wage data of urban hospitals that have reclassified as rural 
under Sec.  412.103 from the calculation of ``the wage index for 
rural areas in the State in which the county is located'' in 
applying the provisions of section 1886(d)(8)(C)(iii) of the Act, 
and the rural floor, including our policy to calculate the rural 
floor without including the wage data of urban hospitals that have 
reclassified as rural under Sec.  412.103, consistent with our 
historical GAF budget neutrality factor methodology. In the second 
step, we calculate a factor to ensure budget neutrality for changes 
to the GAFs due to our policy to increase the wage index for 
hospitals with a wage index value below the 25th percentile wage 
index and our proposed policy to place a 5-percent cap on any 
decrease in a hospital's wage index from the hospital's final wage 
index in the prior fiscal year. In this section, we refer to these 
two policies as the lowest quartile hospital wage index adjustment 
and the proposed 5-percent cap on wage index decreases.
    In light of the proposed changes to the wage index and other 
wage index policies for FY 2021 discussed previously, which directly 
affect the GAF, we are proposing to continue to compute a budget 
neutrality factor for changes in the GAFs in two steps. We discuss 
our proposed 2-step calculation of the GAF budget neutrality factors 
for FY 2021 as follows.
    To determine the GAF budget neutrality factors for FY 2021, we 
first compared estimated aggregate capital Federal rate payments 
based on the FY 2020 MS-DRG classifications and relative weights and 
the FY 2020 GAFs to estimated aggregate capital Federal rate 
payments based on the FY 2020 MS-DRG classifications and relative 
weights and the proposed FY 2021 GAFs without incorporating the 
effects on the GAFs of the lowest quartile hospital wage index 
adjustment and the proposed 5-percent cap on wage index decreases. 
To achieve budget neutrality for these changes in the GAFs, we 
calculated an incremental GAF budget neutrality adjustment factor of 
1.0025 for FY 2021. Next, we compared estimated aggregate capital 
Federal rate payments based on the proposed FY 2021 GAFs with and 
without incorporating the effects on the GAFs of the lowest quartile 
hospital wage index adjustment and the proposed 5-percent cap on 
wage index decreases. For this calculation, estimated aggregate 
capital Federal rate payments were calculated using the proposed FY 
2021 MS-DRG classifications and relative weights, and the proposed 
FY 2021 GAFs (both with and without incorporating the effects on the 
GAF of the lowest quartile hospital wage index adjustment and the 
proposed 5-percent cap on wage index decreases). (We note, for this 
calculation the proposed GAFs included the out-migration and 
Frontier state adjustments.) To achieve budget neutrality for the 
effects of the lowest quartile hospital wage index adjustment and 
the proposed 5-percent cap on wage index decreases on the FY 2021 
GAFs, we calculated an incremental GAF budget neutrality adjustment 
factor of 0.99626. Therefore, to achieve budget neutrality for the 
proposed changes in the GAFs, based on the proposed calculations 
described previously, we are proposing to apply an incremental 
budget neutrality adjustment factor of 0.9987 (1.0025 x 0.9963) for 
FY 2021 to the previous cumulative FY 2020 adjustment factor.
    We also compared estimated aggregate capital Federal rate 
payments based on the FY 2020 MS-DRG classifications and relative 
weights and the proposed FY 2021 GAFs to estimated aggregate capital 
Federal rate payments based on the cumulative effects of the 
proposed FY 2021 MS-DRG classifications and relative weights and the 
proposed FY 2021 GAFs without the effects of the lowest quartile 
hospital wage index adjustment and the proposed 5-percent cap on 
wage index decreases. The proposed incremental adjustment factor for 
proposed DRG classifications and changes in relative weights is 
0.9995. The proposed incremental adjustment factors for proposed MS-
DRG classifications and changes in relative weights (0.9995) and for 
proposed changes in the GAFs through FY 2021 (0.9987) is 0.9983 
(0.9995 x 0.9987). We note that all the values are calculated with 
unrounded numbers.
    The GAF/DRG budget neutrality adjustment factors are built 
permanently into the capital rates; that is, they are applied 
cumulatively in determining the capital Federal rate. This follows 
the requirement under Sec.  412.308(c)(4)(ii) that estimated 
aggregate payments each year be no more or less than they would have 
been in the absence of the annual DRG reclassification and 
recalibration and changes in the GAFs.
    The methodology used to determine the recalibration and 
geographic adjustment factor (GAF/DRG) budget neutrality adjustment 
is similar to the methodology used in establishing budget neutrality 
adjustments under the IPPS for operating costs. One difference is 
that, under the operating IPPS, the budget neutrality adjustments 
for the effect of geographic reclassifications are determined 
separately from the effects of other changes in the hospital wage 
index and the MS-DRG relative weights. Under the capital IPPS, there 
is a single GAF/DRG budget neutrality adjustment factor for changes 
in the GAF (including geographic reclassification and the lowest 
quartile hospital wage index adjustment and the proposed 5-percent 
cap on wage index decreases described previously) and the MS-DRG 
relative weights. In addition, there is no adjustment for the 
effects that geographic reclassification or the lowest quartile 
hospital wage index adjustment and the proposed 5-percent cap on 
wage index decreases described previously have on the other payment 
parameters, such as the payments for DSH or IME.
    The proposed incremental GAF/DRG adjustment factor of 0.9983 
(the product of the proposed incremental GAF budget neutrality 
adjustment factor of 0.9987 and the proposed incremental DRG budget 
neutrality adjustment factor of 0.9995) accounts for the proposed 
MS-DRG reclassifications and recalibration and for proposed changes 
in the GAFs. As noted previously, it also incorporates the effects 
on the GAFs of FY 2021 geographic reclassification decisions made by 
the MGCRB compared to FY 2020 decisions and the lowest quartile 
hospital wage index adjustment, and the proposed 5-percent cap on 
wage index decreases described earlier. However, it does not account 
for changes in payments due to changes in the DSH and IME adjustment 
factors.

[[Page 32918]]

4. Proposed Capital Federal Rate for FY 2021

    For FY 2020, we established a capital Federal rate of $462.33 
(84 FR 42640, as corrected in 84 FR 53613). We are proposing to 
establish an update of 1.5 percent in determining the FY 2021 
capital Federal rate for all hospitals. As a result of this proposed 
update and the proposed budget neutrality factors discussed earlier, 
we are proposing to establish a national capital Federal rate of 
$468.36 for FY 2021. The proposed national capital Federal rate for 
FY 2021 was calculated as follows:
     The proposed FY 2021 update factor is 1.015; that is, 
the proposed update is 1.5 percent.
     The proposed FY 2021 budget neutrality adjustment 
factor that is applied to the capital Federal rate for proposed 
changes in the MS-DRG classifications and relative weights and 
proposed changes in the GAFs is 0.9983.
     The proposed FY 2021 outlier adjustment factor is 
0.9461.
    We are providing the following chart that shows how each of the 
proposed factors and adjustments for FY 2021 affects the computation 
of the proposed FY 2021 national capital Federal rate in comparison 
to the FY 2020 national capital Federal rate. The proposed FY 2021 
update factor has the effect of increasing the capital Federal rate 
by 1.5 percent compared to the FY 2020 capital Federal rate. The 
proposed GAF/DRG budget neutrality adjustment factor has the effect 
of decreasing the capital Federal rate by 0.17 percent. The proposed 
FY 2021 outlier adjustment factor has the effect of decreasing the 
capital Federal rate by 0.02 percent compared to the FY 2020 capital 
Federal rate. The combined effect of all the proposed changes would 
increase the national capital Federal rate by approximately 1.30 
percent, compared to the FY 2020 national capital Federal rate.
[GRAPHIC] [TIFF OMITTED] TP29MY20.228

B. Calculation of the Proposed Inpatient Capital-Related 
Prospective Payments for FY 2021

    For purposes of calculating payments for each discharge during 
FY 2021, 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 threshold established for each fiscal year. 
Section 412.312(c) provides for a shared threshold to identify 
outlier cases for both inpatient operating and inpatient capital-
related payments. The proposed outlier threshold for FY 2021 is in 
section II.A. of this Addendum. For FY 2021, 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.j. of this Addendum) is greater than the 
prospective payment rate for the MS-DRG plus the proposed fixed-loss 
amount of $30,006.
    Currently, as provided under Sec.  412.304(c)(2), we pay a new 
hospital 85 percent of its reasonable costs during the first 2 years 
of operation, unless it elects to receive payment based on 100 
percent of the capital Federal rate. Effective with the third year 
of operation, we pay the hospital based on 100 percent of the 
capital Federal rate (that is, the same methodology used to pay all 
other hospitals subject to the capital PPS).

C. Capital Input Price Index

1. Background

    Like the operating input price index, the capital input price 
index (CIPI) is a fixed-weight price index that measures the price 
changes associated with capital costs during a given year. The CIPI 
differs from the operating input price index in one important 
aspect--the CIPI reflects the vintage nature of capital, which is 
the acquisition and use of capital over time. Capital expenses in 
any given year are determined by the stock of capital in that year 
(that is, capital that remains on hand from all current and prior 
capital acquisitions). An index measuring capital price changes 
needs to reflect this vintage nature of capital. Therefore, the CIPI 
was developed to capture the vintage nature of capital by using a 
weighted-average of past capital purchase prices up to and including 
the current year.
    We periodically update the base year for the operating and 
capital input price indexes to reflect the changing composition of 
inputs for operating and capital expenses. For this FY 2021 IPPS/
LTCH PPS proposed rule, we are proposing to use 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 2021

    Based on IHS Global Inc.'s fourth quarter 2019 forecast, for 
this proposed rule, we are forecasting the 2014-based CIPI to 
increase 1.5 percent in FY 2021. This reflects a projected 1.8 
percent increase in vintage-weighted depreciation prices (building 
and fixed equipment, and movable equipment), and a projected 3.5 
percent increase in other capital expense prices in FY 2021, 
partially offset by a projected 1.4 percent decline in vintage-
weighted interest expense prices in FY 2021. The weighted average of 
these three factors produces the forecasted 1.5 percent increase for 
the 2014-based CIPI in FY 2021. We are also proposing that if more 
recent data becomes available after the publication of this proposed 
rule and before the publication of the final rule (for example, a 
more recent estimate of the increase in the 2014-based CIPI), we 
would use such data, if appropriate, to determine the FY 2021 
increase in the 2014-based CIPI for the final rule.

[[Page 32919]]

IV. Proposed Changes to Payment Rates for Excluded Hospitals: Rate-of-
Increase Percentages for FY 2021

    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.)
    For this FY 2021 IPPS/LTCH PPS proposed rule, based on IGI's 
fourth quarter 2019 forecast, we estimated that the 2014-based IPPS 
operating market basket update for FY 2021 would be 3.0 percent 
(that is, the estimate of the market basket rate-of-increase). Based 
on this estimate, the FY 2021 rate-of-increase percentage that would 
be applied to the FY 2020 target amounts in order to calculate the 
FY 2021 target amounts for children's hospitals, cancer hospitals, 
RNCHIs, 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 would be 3.0 percent, in 
accordance with the applicable regulations at 42 CFR 413.40. 
However, we are proposing 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 2021.
    IRFs and rehabilitation distinct part units, IPFs and 
psychiatric distinct part units, and LTCHs are excluded from the 
IPPS and paid under their respective PPSs. The IRF PPS, the IPF PPS, 
and the LTCH PPS are updated annually. We refer readers to section 
VII. of the preamble of this proposed rule and section V. of the 
Addendum to this proposed rule for the updated changes to the 
Federal payment rates for LTCHs under the LTCH PPS for FY 2021. The 
annual updates for the IRF PPS and the IPF PPS are issued by the 
agency in separate Federal Register documents.

V. Proposed Changes to the Payment Rates for the LTCH PPS for FY 2021

A. Proposed LTCH PPS Standard Federal Payment Rate for FY 2021

1. Overview

    In section VII. of the preamble of this proposed rule, we 
discuss our annual updates to the payment rates, factors, and 
specific policies under the LTCH PPS for FY 2021.
    Under Sec.  412.523(c)(3) of the regulations, for LTCH PPS FYs 
2012 through 2020, 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) (citing sections 1886(b)(3)(B)(xi)(II), and 1886(m)(4) of 
the Act as set forth in the regulations at Sec.  412.523(c)(3)(viii) 
through (xv)). (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) and references therein.)
    Section 1886(m)(3)(A) of the Act specifies that, for rate year 
2012 and each subsequent rate year, any annual update to the 
standard Federal payment rate shall be reduced 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.C.2 of the preamble of 
this proposed 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.C.2. of the preamble 
of this proposed rule, the annual update to the LTCH PPS occurs on 
October 1 and we have adopted the term ``fiscal year'' (FY) rather 
than ``rate year'' (RY) under the LTCH PPS beginning October 1, 
2010. Therefore, for purposes of clarity, when discussing the annual 
update for the LTCH PPS, including the provisions of the Affordable 
Care Act, we use the term ``fiscal year'' rather than ``rate year'' 
for 2011 and subsequent years.) For LTCHs that fail to submit the 
required quality reporting data in accordance with the LTCH QRP, the 
annual update is reduced by 2.0 percentage points as required by 
section 1886(m)(5) of the Act.

2. Development of the Proposed FY 2021 LTCH PPS Standard Federal 
Payment Rate

    Consistent with our historical practice, for FY 2021, we are 
proposing to apply the annual update to the LTCH PPS standard 
Federal payment rate from the previous year. Furthermore, in 
determining the proposed LTCH PPS standard Federal payment rate for 
FY 2021, we also are proposing to make certain regulatory 
adjustments, consistent with past practices. Specifically, in 
determining the proposed FY 2021 LTCH PPS standard Federal payment 
rate, we are proposing to apply a budget neutrality adjustment 
factor for the changes related to the area wage level adjustment 
(that is, changes to the wage data, labor-related share, and 
geographic labor-market area designations, and the proposed 5-
percent cap on any decrease in a LTCH's wage index transition 
policy) as discussed in section V.B.6 of this Addendum to this 
proposed rule. In addition, we are proposing to apply the permanent 
budget neutrality adjustment factor (applied to LTCH PPS standard 
Federal payment rate cases only) for the cost of the elimination of 
the 25-percent threshold policy for FY 2021 (discussed in section 
VII.D. of the preamble of this proposed rule).
    In this proposed rule, we are proposing to establish an annual 
update to the LTCH PPS standard Federal payment rate of 2.5 percent. 
Accordingly, as reflected in proposed Sec.  412.523(c)(3)(xvii), we 
are proposing to apply a factor of 1.025 to the FY 2020 LTCH PPS 
standard Federal payment rate of $42,677.64 to determine the 
proposed FY 2021 LTCH PPS standard Federal payment rate. Also, as 
reflected in proposed Sec.  412.523(c)(3)(xvii), applied in 
conjunction with the provisions of Sec.  412.523(c)(4), we are 
proposing to establish an annual update to the LTCH PPS standard 
Federal payment rate of 0.5 percent (that is, an update factor of 
1.005) for FY 2021 for LTCHs that fail to submit the required 
quality reporting data for FY 2021 as required under the LTCH QRP. 
Additionally, we are applying a permanent budget neutrality 
adjustment factor of 0.991249 to the LTCH PPS standard Federal 
payment rate for the cost of the elimination of the 25-percent 
threshold policy for FY 2021 and subsequent years after removing the 
temporary budget neutrality adjustment factor of 0.990737 that was 
applied to the LTCH PPS standard Federal payment rate for the cost 
of the elimination of the 25-percent threshold policy for FY 2020. 
Consistent with Sec.  412.523(d)(4), we are proposing to apply an 
area wage level budget neutrality factor to the FY 2021 LTCH PPS 
standard Federal payment rate of 1.0018755, based on the best 
available data at this time, to ensure that any proposed changes to 
the general updates to the area wage level adjustment (that is, the 
annual update of the wage index, including any changes to the 
geographic labor-market area designations and labor-related share) 
would not result in any change (increase or decrease) in estimated 
aggregate LTCH PPS standard Federal payment rate payments. 
Accordingly, we are proposing to establish an LTCH PPS standard 
Federal payment rate of $43,849.28 (calculated as $42,677.64 x 
1.000517 x 1.025 x 1.0018755) for FY 2021 (calculations performed on 
rounded numbers). For LTCHs that fail to submit quality reporting 
data for FY 2021, in accordance with the requirements of the LTCH 
QRP under section 1866(m)(5) of the Act, we are proposing to 
establish an LTCH PPS standard Federal payment rate of $42,993.68 
(calculated as $42,677.64 x 1.000517 x 1.005 x 1.0018755) 
(calculations performed on rounded numbers) for FY 2021.

B. Proposed Adjustment for Area Wage Levels Under the LTCH PPS for 
FY 2021

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

[[Page 32920]]

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.
    The proposed FY 2021 LTCH PPS standard Federal payment rate wage 
index values that would be applicable for LTCH PPS standard Federal 
payment rate discharges occurring on or after October 1, 2020, 
through September 30, 2021, are presented in Table 12A (for urban 
areas) and Table 12B (for rural areas), which are listed in section 
VI. of the Addendum to this proposed rule and available via the 
internet on the CMS website.

2. Proposed Geographic Classifications (Labor Market Areas) for the 
LTCH PPS Standard Federal Payment Rate

    In adjusting for the differences in area wage levels under the 
LTCH PPS, the labor-related portion of an LTCH's Federal prospective 
payment is adjusted by using an appropriate area wage index based on 
the geographic classification (labor market area) in which the LTCH 
is located. Specifically, the application of the LTCH PPS area wage 
level adjustment under existing Sec.  412.525(c) is made based on 
the location of the LTCH--either in an ``urban area,'' or a ``rural 
area,'' as defined in Sec.  412.503. Under Sec.  412.503, an ``urban 
area'' is defined as a Metropolitan Statistical Area (MSA) (which 
includes a Metropolitan division, where applicable), as defined by 
the Executive OMB and a ``rural area'' is defined as any area 
outside of an urban area (75 FR 37246).
    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. In general, 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. 
(As noted elsewhere in this proposed rule, we have adopted minor 
revisions and updates in the years between the decennial censuses.) 
We adopted these labor market area delineations because they were at 
that time 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 believed that these OMB 
delineations would ensure that the LTCH PPS area wage level 
adjustment most appropriately accounted for and reflected 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. OMB Bulletin No. 17-01, issued August 15, 2017, 
established the delineations for the Nation's statistical areas, and 
the corresponding changes to the CBSA-based labor market areas were 
adopted in the FY 2019 IPPS/LTCH PPS final rule (83 FR 41731). 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. In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42642), we 
adopted our current policy, that is, the continued use of the CBSA-
based labor market area delineations as established in OMB Bulletin 
17-01 and adopted in the FY 2019 IPPS/LTCH PPS final rule.
    On April 10, 2018, OMB issued OMB Bulletin No. 18-03, which 
superseded the August 15, 2017 OMB Bulletin No. 17-01. On September 
14, 2018, OMB issued OMB Bulletin No. 18-04, which superseded the 
April 10, 2018 OMB Bulletin No. 18-03. These bulletins established 
revised delineations for Metropolitan Statistical Areas, 
Micropolitan Statistical Areas, and Combined Statistical Areas, and 
provided guidance on the use of the delineations of these 
statistical areas based on the standards published on June 28, 2010 
(75 FR 37246), and Census Bureau data. A copy of the September 14, 
2018 OMB Bulletin No. 18-04, may be obtained at https://www.whitehouse.gov/wp-content/uploads/2018/09/Bulletin-18-04.pdf. 
(We note, on March 6, 2020 OMB issued OMB Bulletin 20-01 (available 
on the web at https://www.whitehouse.gov/wp-content/uploads/2020/03/Bulletin-20-01.pdf), and as discussed later in this section of this 
rule was not issued in time for development of this proposed rule.) 
While OMB Bulletin No. 18-04 is not based on new census data, it 
includes some material changes to the OMB statistical area 
delineations, including some new CBSAs, urban counties that would 
become rural, rural counties that would become urban, and existing 
CBSAs that would be split apart. In this proposed rule, under the 
authority of section 123 of the BBRA, as amended by section 307(b) 
of the BIPA, we are proposing to adopt the revised delineations 
announced in OMB Bulletin No. 18-04 effective for FY 2021 under the 
LTCH PPS. As noted previously, the March 6, 2020 OMB Bulletin 20-01 
was not issued in time for development of this proposed rule. The 
minor updates included in OMB Bulletin 20-01 do not alter the urban 
or rural status of any county, and would not impact our proposed 
updates to the CBSA-based labor market area delineations discussed 
in this section of the rule. This proposal to adopt the revised 
delineations announced in OMB Bulletin No. 18-04 is consistent with 
the changes proposed under the IPPS for FY 2021 as discussed in 
section III.A.2. of the preamble of this proposed rule. A summary of 
these proposed changes is presented in the discussion that follows 
in this section. For complete details on the proposed changes we 
refer readers to section III.A.2. of the preamble of this proposed 
rule.

a. Urban Counties That Would Become Rural Under the Revised OMB 
Delineations

    Analysis of the revised OMB labor market area delineations shows 
that a total of 34 counties (and county equivalents) currently 
considered part of an urban CBSA would be considered to be located 
in a rural area beginning in FY 2021 under our proposal to adopt the 
revisions to the OMB delineations based on OMB Bulletin No. 18-04. 
The chart in section III.A.2.ii. of the preamble of this proposed 
rule lists the 34 urban counties that would be rural under these 
revisions to the OMB delineations.

b. Rural Counties That Would Become Urban Under the Revised OMB 
Delineations

    Analysis of the revised labor market area delineations shows 
that a total of 47 counties (and county equivalents) located in 
rural areas that would be located in urban areas beginning in FY 
2021 under our proposal to adopt the revisions to the OMB 
delineations based on OMB Bulletin No. 18-04. The chart in section 
III.A.2.iii. of the preamble of this proposed rule lists the 47 
rural counties that would be urban under these revised OMB 
delineations.

c. Urban Counties That Would Move to a Different Urban CBSA Under the 
Revised OMB Delineations

    In addition to rural counties becoming urban and urban counties 
becoming rural, some urban counties would shift from one urban CBSA 
to another urban CBSA under our proposal to adopt the revised 
delineations announced in OMB Bulletin No. 18-04. In other cases, 
adopting the revised delineations announced in OMB Bulletin No. 18-
04 would involve a change only in CBSA name and/or number, while the 
CBSA continues to encompass the same constituent counties. For 
example, CBSA 19380 (Dayton, OH) would experience both a change to 
its number and its name, and become CBSA 19430 (Dayton-Kettering, 
OH), while all of its three constituent counties would remain the 
same. In other cases, only the name of the CBSA would be modified, 
and none of the currently assigned counties would be reassigned to a 
different urban CBSA. The chart in section III.A.2.iii. of the 
preamble of this proposed rule lists the CBSAs where we are 
proposing to change the name and/or CBSA number only.
    There are also counties that would shift between existing and 
new CBSAs, changing the constituent makeup of the CBSAs, under our 
proposal to adopt the revisions to the OMB delineations based on OMB 
Bulletin No. 18-04. For example, some CBSAs would be split into 
multiple new CBSAs, or a CBSA would lose one or more counties to 
other urban CBSAs. The chart in section III.A.2.iv. of the preamble 
of this proposed rule lists the urban counties that would move from 
one urban CBSA to a new or modified CBSA

[[Page 32921]]

under our proposal to adopt these revisions to the OMB delineations. 
We believe these revisions to the CBSA-based labor market area 
delineations as established in OMB Bulletin 18-04 would ensure that 
the LTCH PPS area wage level adjustment most appropriately accounts 
for and reflects the relative hospital wage levels in the geographic 
area of the hospital as compared to the national average hospital 
wage level based on the best available data that reflect the local 
economies and area wage levels of the hospitals that are currently 
located in these geographic areas (81 FR 57298). Therefore, we are 
proposing to adopt the revisions announced in OMB Bulletin No. 18-04 
to the CBSA-based labor market area delineations under the LTCH PPS, 
effective October 1, 2020. Accordingly, the proposed FY 2021 LTCH 
PPS wage index values in Tables 12A and 12B listed in section VI. of 
the Addendum to this proposed rule (which are available via the 
internet on the CMS website) reflect the proposed revisions to the 
CBSA-based labor market area delineations previously described. We 
note that, as discussed in section III.A.2. of the preamble of this 
proposed rule, these revisions to the CBSA-based delineations also 
are being proposed under the IPPS.
    As indicated previously, overall, we believe that our proposal 
to adopt the revised delineations announced in OMB Bulletin No. 18-
04 would result in LTCH PPS wage index values being more 
representative of the actual costs of labor in a given area. 
However, we also recognize that some LTCHs would experience 
decreases in their area wage index values as a result of our 
proposal. We also realize that many LTCHs would have higher area 
wage index values under our proposal. To mitigate the impact upon 
LTCHs, we have in the past provided for transition periods when 
adopting changes that have significant payment implications, 
particularly large negative impacts. While we believe that using the 
new OMB delineations would create a more accurate payment adjustment 
for differences in area wage levels, we also recognize that adopting 
such changes may cause some short-term instability in LTCH PPS 
payments. As discussed in section V.B.5. of the Addendum to this 
proposed rule, we are proposing a transition policy to help mitigate 
any significant negative impacts that LTCHs may experience due to 
our proposal to adopt the revised OMB delineations under the LTCH 
PPS. Consistent with past practice, we are proposing that this 
proposed transition would be implemented in a budget neutral manner, 
as discussed in section V.B.6. of the Addendum to this proposed 
rule.

3. Proposed Labor-Related Share for the LTCH PPS Standard Federal 
Payment Rate

    Under the payment adjustment for the differences in area wage 
levels under Sec.  412.525(c), the labor-related share of an LTCH's 
standard Federal payment rate payment is adjusted by the applicable 
wage index for the labor market area in which the LTCH is located. 
The LTCH PPS labor-related share currently represents the sum of the 
labor-related portion of operating costs and a labor-related portion 
of capital costs using the applicable LTCH 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 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 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). Then, effective for FY 2017, we rebased 
and revised the 2009-based LTCH market basket to reflect a 2013 base 
year and determined the labor-related share annually as the sum of 
the relative importance of each labor-related cost category in the 
2013-based LTCH market basket using the most recent available data. 
(For more details, we refer readers to the FY 2017 IPPS/LTCH PPS 
final rule (81 FR 57085 through 57096).)
    As noted previously in section V.A. in this Addendum to this 
proposed rule, effective for FY 2021, we are proposing to rebase and 
revise the 2013-based LTCH market basket to reflect a 2017 base 
year. In conjunction with that proposal, as discussed in section 
VII.D.6. of the preamble of this proposed rule, we are also 
proposing that the LTCH PPS labor-related share for FY 2021 would be 
the sum of the FY 2021 relative importance of each labor-related 
cost category in the proposed 2017-based LTCH market basket using 
the most recent available data. Table E9 in section VII.D.6. of the 
preamble of this proposed rule shows the proposed FY 2021 labor-
related share using the proposed 2017-based LTCH market basket and 
the FY 2020 labor-related share using the 2013-based LTCH market 
basket. The proposed labor-related share for FY 2021 is the sum of 
the relative importance 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 proposed 2017-based LTCH market basket. 
The relative importance reflects the different rates of price change 
for these cost categories between the base year (2017) and FY 2021. 
Based on IHS Global Inc.'s 4th quarter 2019 forecast of the proposed 
2017-based LTCH market basket, the sum of the FY 2021 relative 
importance for Wages and Salaries, Employee Benefits, Professional 
Fees: Labor-related, Administrative and Facilities Support Services, 
Installation Maintenance & Repair Services, and All Other: Labor-
related Services is 63.6 percent. We propose that the portion of 
Capital-Related costs that is influenced by the local labor market 
is 46 percent, which is the same percentage applied to the 2013-
based LTCH market basket. Since the FY 2021 relative importance for 
Capital-Related is 9.5 percent based on IHS Global Inc.'s 4th 
quarter 2019 forecast of the proposed 2017-based LTCH market basket, 
we took 46 percent of 9.5 percent to determine the proposed labor-
related share of Capital-Related for FY 2021 of 4.4 percent. 
Therefore, we are proposing a total labor-related share for FY 2021 
of 68.0 percent (the sum of 63.6 percent for the operating cost and 
4.4 percent for the labor-related share of Capital-Related). The 
total difference between the proposed FY 2021 labor-related share 
using the proposed 2017-based LTCH market basket and the FY 2020 
labor-related share using the 2013-based LTCH market basket is 1.7 
percentage points (68.0 percent and 66.3 percent, respectively). As 
discussed in greater detail in section VII.D.6. of the preamble of 
this proposed rule, this difference is attributable to the revision 
to the base year cost weights, the revision to the starting point of 
the calculation of relative importance (base year) from 2013 to 
2017, and the use of an updated IHS Global Inc. forecast and 
reflecting an additional year of inflation. Consistent with our 
historical practice, we also propose that if more recent data became 
available, we would use that data, if appropriate, to determine the 
final FY 2021 labor-related share in the final rule.

4. Proposed Wage Index for FY 2021 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 2020 IPPS/LTCH PPS final rule (84 FR 42643), we 
calculated the FY 2020 LTCH PPS area wage index values using the 
same data used for the FY 2020 acute care hospital IPPS (that is, 
data from cost reporting periods beginning during FY 2016), 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 2020 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, to determine the 
applicable area wage index values for the FY 2021 LTCH PPS standard 
Federal payment rate, under the broad authority of section 123 of 
the BBRA, as amended by section 307(b) of the BIPA, we are proposing 
to continue to

[[Page 32922]]

employ our historical practice of using the same data we are 
proposing to use to compute the proposed FY 2021 acute care hospital 
inpatient wage index, as discussed in section III. of the preamble 
of this proposed rule, that is wage data collected from cost reports 
submitted by IPPS hospitals for cost reporting periods beginning 
during FY 2017, because these data are the most recent complete data 
available.
    In addition, we are proposing to compute the FY 2021 LTCH PPS 
standard Federal payment rate area wage index values consistent with 
the ``urban'' and ``rural'' geographic classifications (that is, the 
proposed 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 are also 
proposing to continue to apportion the 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 2021, we are 
proposing to continue to use our existing policy for determining 
area wage index values for areas where there are no IPPS wage data. 
Under our existing methodology, the LTCH PPS wage index value for 
urban CBSAs with no IPPS wage data would be determined by using an 
average of all of the urban areas within the State, and the LTCH PPS 
wage index value for rural areas with no IPPS wage data would be 
determined by using the unweighted average of the wage indices from 
all of the CBSAs that are contiguous to the rural counties of the 
State.
    Based on the FY 2017 IPPS wage data that we are proposing to use 
to determine the proposed FY 2021 LTCH PPS standard Federal payment 
rate area wage index values in this final rule, there are no IPPS 
wage data for the urban area of Hinesville, GA (CBSA 25980). 
Consistent with our existing methodology, we calculated the proposed 
FY 2021 wage index value for CBSA 25980 as the average of the wage 
index values for all of the other urban areas within the State of 
Georgia (that is, CBSAs 10500, 12020, 12060, 12260, 15260, 16860, 
17980, 19140, 23580, 31420, 40660, 42340, 46660 and 47580), as shown 
in Table 12A, which is listed in section VI. of the Addendum to this 
proposed rule and available via the internet on the CMS website.
    Based on the FY 2017 IPPS wage data that we are proposing to use 
to determine the proposed FY 2021 LTCH PPS standard Federal payment 
rate area wage index values in this proposed rule, there are no 
rural areas without IPPS hospital wage data. Therefore, it is not 
necessary to use our established methodology to calculate a proposed 
LTCH PPS standard Federal payment rate wage index value for rural 
areas with no IPPS wage data for FY 2021. 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.

5. Proposed Transition Wage Index for LTCHs Negatively Impacted

    As discussed in section V.B.2. of the Addendum to this proposed 
rule, overall, we believe that our proposal to adopt the revised OMB 
delineations announced in Bulletin No. 18-04 for FY 2021 would 
result in LTCH PPS wage index values being more representative of 
the actual costs of labor in a given area. However, we also 
recognize that some LTCHs would experience decreases in their area 
wage index values as a result of our proposal. We also realize that 
some LTCHs would have higher area wage index values under our 
proposal.
    To mitigate the potential impacts of proposed policies on LTCHs, 
we have in the past provided for transition periods when adopting 
changes that have significant payment implications, particularly 
large negative impacts. For example, we have proposed and finalized 
budget neutral transition policies to help mitigate negative impacts 
on LTCHs following the adoption of the new CBSA delineations based 
on the 2010 decennial census data in the FY 2015 IPPS/LTCH PPS final 
rule (79 FR 50185). Specifically, we implemented a 1-year 50/50 
blended wage index for any LTCHs that experienced a decrease in wage 
index values due to our adoption of the revised delineations. This 
required calculating and comparing two wage indexes for each LTCH 
since that blended wage index was computed as the sum of 50 percent 
of the FY 2015 LTCH PPS wage index values under the FY 2014 CBSA 
delineations and 50 percent of the FY 2015 LTCH PPS wage index 
values under the FY 2015 new OMB delineations. While we believed 
that using the new OMB delineations would ultimately create a more 
accurate payment adjustment for differences in area wage levels, we 
also recognized that adopting such changes may cause some short-term 
instability in LTCH PPS payments. Similar instability may result 
from the proposed wage policies herein, in particular for LTCHs that 
would be negatively impacted by the proposed adoption of the updates 
to the OMB delineations. For example, LTCH's currently located in 
CBSA 35614 (New York-Jersey City-White Plains, NY-NJ) that would be 
located in new CBSA 35154 (New Brunswick-Lakewood, NJ) under the 
proposed changes to the CBSA-based labor market area delineations 
would experience a nearly 17 percent decrease in the wage index as a 
result of the proposed change.
    Consistent with our past practice of implementing transition 
policies to help mitigate negative impacts on hospitals following 
the adoption of the new CBSA delineations, we believe that if we 
adopt the revised delineations announced in OMB Bulletin 18-04, it 
would be appropriate to implement a transition policy since, as 
mentioned previously, some of these revisions are material, and may 
negatively impact payments to LTCHs. Similar to the policy proposed 
under the IPPS for the proposed adoption of the revised delineations 
announced in OMB Bulletin 18-04 discussed in section III.A.2. of the 
preamble to this proposed rule, we believe applying a 5-percent cap 
on any decrease in an LTCH's wage index from the LTCH's final wage 
index from the prior fiscal year would be an appropriate transition 
for FY 2021 for the revised OMB delineations as it provides 
transparency and predictability in payment levels from FY 2020 to 
the upcoming FY 2021. The proposed FY 2021 5-percent cap on wage 
index decreases would be applied to all LTCHs that have any decrease 
in their wage indexes, regardless of the circumstance causing the 
decline. Given the significant portion of Medicare LTCH PPS payments 
that are adjusted by the wage index and how relatively few LTCHs 
generally see wage index declines in excess of 5 percent, LTCHs may 
have difficulty adapting to changes in the wage index of this 
magnitude all at once. For these reasons, under the authority of 
section 123 of the BBRA, as amended by section 307(b) of the BIPA, 
we are proposing to apply a 5-percent cap on any decrease in a 
LTCH's wage index from the LTCH's wage index from the prior fiscal 
year such that that an LTCH's final wage index for FY 2021 would not 
be less than 95 percent of its final wage index for FY 2020. This 
transition would allow the effects of our proposed adoption of the 
revised CBSA delineations to be phased in over 2 years, where the 
estimated reduction in an LTCH's wage index would be capped at 5 
percent in FY 2021 (that is, no cap would be applied to the 
reduction in the wage index for the second year (FY 2022)). Because 
we believe that using the new OMB delineations would ultimately 
create a more accurate payment adjustment for differences in area 
wage levels we are not proposing to include a cap on the overall 
increase in an LTCH's wage index value.
    Furthermore, consistent with the requirement at Sec.  
412.525(c)(2) that changes to area wage level adjustments are made 
in a budget neutral manner, we are proposing that this proposed 5 
percent cap on the decrease on an LTCH's wage index would not result 
in any change in estimated aggregate LTCH PPS payments by including 
the application of this policy in the determination of the proposed 
area wage level budget neutrality factor that is applied to the 
standard Federal payment rate, which is discussed in section V.B.6. 
of the Addendum to this proposed rule.

6. Proposed Budget Neutrality Adjustments 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 is 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

[[Page 32923]]

in any change (increase or decrease) in estimated aggregate LTCH PPS 
payments. Accordingly, under Sec.  412.523(d)(4), we have applied 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).)
    For FY 2021, in accordance with Sec.  412.523(d)(4), we are 
proposing to apply an area wage level 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, consistent with the methodology we established in 
the FY 2012 IPPS/LTCH PPS final rule (76 FR 51773). As discussed 
previously, we are proposing that the proposed 5 percent cap on the 
decrease on an LTCH's wage index would be implemented in a budget 
neutral manner by including the application of that proposed policy 
in the area wage level a budget neutrality factor that is applied to 
the standard Federal payment rate.
    Specifically, we are proposing to determine an area wage level 
adjustment budget neutrality factor that would be applied to the 
LTCH PPS standard Federal payment rate under Sec.  412.523(d)(4) for 
FY 2021 using the following methodology:
    Step 1--Simulate estimated aggregate LTCH PPS standard Federal 
payment rate payments using the FY 2020 wage index values, the FY 
2020 labor-related share of 66.3 percent, and the FY 2020 labor 
market area designations.
    Step 2--Simulate estimated aggregate LTCH PPS standard Federal 
payment rate payments using the proposed FY 2021 wage index values 
based on updated hospital wage data, including the proposed 5 
percent cap on the decrease on an LTCH's wage index, the proposed FY 
2021 labor-related share of 68.0 percent, and the proposed FY 2021 
labor market area designations. (As noted previously, the proposed 
changes to the wage index values based on updated hospital wage data 
are discussed in section V.B.4.a. of this Addendum to this proposed 
rule; the proposed transitional 5 percent cap on the decrease on an 
LTCH's wage index is discussed in section V.B.5. of this Addendum to 
this proposed rule, the proposed labor-related share is discussed in 
section V.B.3. of this Addendum to this proposed rule, and proposed 
changes to the geographic labor-market area designations are 
discussed in section V.B.2. of this Addendum to this proposed rule.)
    Step 3--Calculate 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 
2020 area wage level adjustments (calculated in Step 1) by the 
estimated total LTCH PPS standard Federal payment rate payments 
using the proposed FY 2021 general updates to the area wage level 
adjustment (calculated in Step 2) to determine the proposed budget 
neutrality factor for general updates to the area wage level 
adjustment for FY 2021 LTCH PPS standard Federal payment rate 
payments.
    Step 4--Apply the proposed FY 2021 general updates to the area 
wage level adjustment budget neutrality factor from Step 3 to 
determine the proposed FY 2021 LTCH PPS standard Federal payment 
rate after the application of the proposed FY 2021 annual update.
    We note that, because the area wage level adjustment under Sec.  
412.525(c) is an adjustment to the LTCH PPS standard Federal payment 
rate, consistent with historical practice, we only used data from 
claims that qualified for payment at the LTCH PPS standard Federal 
payment rate under the dual rate LTCH PPS to calculate the proposed 
FY 2021 LTCH PPS standard Federal payment rate area wage level 
adjustment budget neutrality factor. In addition, we note that the 
estimated LTCH PPS standard Federal payment rate used in the 
calculations in Steps 1 through 4 include the permanent one-time 
budget neutrality adjustment factor for the estimated cost of 
eliminating the 25-percent threshold policy in FY 2021 and 
subsequent years (discussed in section VII.D. of the preamble of 
this proposed rule).
    For this proposed rule, using the steps in the methodology 
previously described, we determined a proposed FY 2021 LTCH PPS 
standard Federal payment rate area wage level adjustment budget 
neutrality factor of 1.0018755. Accordingly, in section V.A. of the 
Addendum to this proposed rule, to determine the proposed FY 2021 
LTCH PPS standard Federal payment rate, we applied the proposed area 
wage level adjustment budget neutrality factor of 1.0018755, in 
accordance with Sec.  412.523(d)(4).

C. Proposed LTCH PPS Cost-of-Living Adjustment (COLA) for LTCHs 
Located in Alaska and Hawaii

    Under Sec.  412.525(b), a cost-of-living adjustment (COLA) is 
provided for LTCHs located in Alaska and Hawaii to account for the 
higher costs incurred in those States. Specifically, we apply a COLA 
to payments to LTCHs located in Alaska and Hawaii by multiplying the 
nonlabor-related portion of the standard Federal payment rate by the 
applicable COLA factors established annually by CMS. Higher labor-
related costs for LTCHs located in Alaska and Hawaii are taken into 
account in the adjustment for area wage levels previously described. 
The methodology used to determine the COLA factors for Alaska and 
Hawaii is based on a comparison of the growth in the Consumer Price 
Indexes (CPIs) for Anchorage, Alaska, and Honolulu, Hawaii, relative 
to the growth in the CPI for the average U.S. city as published by 
the Bureau of Labor Statistics (BLS). It also includes a 25-percent 
cap on the CPI-updated COLA factors. Under our current policy, we 
update the COLA factors using the methodology as previously 
described every 4 years (at the same time as the update to the 
labor-related share of the IPPS market basket), and we last updated 
the COLA factors for Alaska and Hawaii published by OPM for 2009 in 
FY 2018 (82 FR 38539 through 38540).
    We continue to believe that determining updated COLA factors 
using this methodology would appropriately adjust the nonlabor-
related portion of the LTCH PPS standard Federal payment rate for 
LTCHs located in Alaska and Hawaii. Therefore, in this proposed 
rule, for FY 2021, under the broad authority conferred upon the 
Secretary by section 123 of the BBRA, as amended by section 307(b) 
of the BIPA, to determine appropriate payment adjustments under the 
LTCH PPS, we are proposing to continue to use the COLA factors based 
on the 2009 OPM COLA factors updated through 2016 by the comparison 
of the growth in the CPIs for Anchorage, Alaska, and Honolulu, 
Hawaii, relative to the growth in the CPI for the average U.S. city 
as established in the FY 2018 IPPS/LTCH PPS final rule. (For 
additional details on our current methodology for updating the COLA 
factors for Alaska and Hawaii and for a discussion on the FY 2018 
COLA factors, we refer readers to the FY 2018 IPPS/LTCH PPS final 
rule (82 FR 38539 through 38540).)

[[Page 32924]]

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D. Proposed Adjustment for LTCH PPS High Cost Outlier (HCO) Cases

1. HCO Background

    From the beginning of the LTCH PPS, we have included an 
adjustment to account for cases in which there are extraordinarily 
high costs relative to the costs of most discharges. Under this 
policy, additional payments are made based on the degree to which 
the estimated cost of a case (which is calculated by multiplying the 
Medicare allowable covered charge by the hospital's overall hospital 
CCR) exceeds a fixed-loss amount. This policy results in greater 
payment accuracy under the LTCH PPS and the Medicare program, and 
the LTCH sharing the financial risk for the treatment of 
extraordinarily high-cost cases.
    We retained the basic tenets of our HCO policy in FY 2016 when 
we implemented the dual rate LTCH PPS payment structure under 
section 1206 of Public Law 113-67. LTCH discharges that meet the 
criteria for exclusion from the site neutral payment rate (that is, 
LTCH PPS standard Federal payment rate cases) are paid at the LTCH 
PPS standard Federal payment rate, which includes, as applicable, 
HCO payments under Sec.  412.523(e). LTCH discharges that do not 
meet the criteria for exclusion are paid at the site neutral payment 
rate, which includes, as applicable, HCO payments under Sec.  
412.522(c)(2)(i). In the FY 2016 IPPS/LTCH PPS final rule, we 
established separate fixed-loss amounts and targets for the two 
different LTCH PPS payment rates. Under this bifurcated policy, the 
historic 8-percent HCO target was retained for LTCH PPS standard 
Federal payment rate cases, with the fixed-loss amount calculated 
using only data from LTCH cases that would have been paid at the 
LTCH PPS standard Federal payment rate if that rate had been in 
effect at the time of those discharges. For site neutral payment 
rate cases, we adopted the operating IPPS HCO target (currently 5.1 
percent) and set the fixed-loss amount for site neutral payment rate 
cases at the value of the IPPS fixed-loss amount. Under the HCO 
policy for both payment rates, an LTCH receives 80 percent of the 
difference between the estimated cost of the case and the applicable 
HCO threshold, which is the sum of the LTCH PPS payment for the case 
and the applicable fixed-loss amount for such case.
    In order to maintain budget neutrality, consistent with the 
budget neutrality requirement at Sec.  412.522(d)(1) 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 4-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 previously, 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. Proposed LTCH Total CCR Ceiling

    Consistent with our historical practice, we are proposing to use 
the most recent data available to determine the LTCH total CCR 
ceiling for FY 2021 in this proposed rule. Specifically, in this 
proposed rule, we are proposing to use our established methodology 
for determining the LTCH total CCR ceiling based on IPPS total CCR 
data from the December 2019 update of the Provider Specific File 
(PSF), which is the most recent data available, we are proposing to 
establish an LTCH total CCR ceiling of 1.251 under the LTCH PPS for 
FY 2021 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. Consistent with our historical practice, 
we are proposing to use more recent data to determine the LTCH total 
CCR ceiling for FY 2021 proposed rule if it becomes

[[Page 32925]]

available. (For additional information on our methodology for 
determining the LTCH total CCR ceiling, we refer readers to the FY 
2007 IPPS final rule (71 FR 48118 through 48119).)

c. Proposed LTCH Statewide Average CCRs

    Our general methodology for determining the statewide average 
CCRs used under the LTCH PPS is similar to our established 
methodology for determining the LTCH total CCR ceiling because it is 
based on ``total'' IPPS CCR data. (For additional information on our 
methodology for determining statewide average CCRs under the LTCH 
PPS, we refer readers to the FY 2007 IPPS final rule (71 FR 48119 
through 48120).) Under the LTCH PPS HCO policy for cases paid under 
either payment rate at Sec.  412.525(a)(4)(iv)(C)(2), the current 
SSO policy at Sec.  412.529(f)(4)(iii)(B), and the site neutral 
payment rate at Sec.  412.522(c)(1)(ii), the MAC may use a statewide 
average CCR, which is established annually by CMS, if it is unable 
to determine an accurate CCR for an LTCH in one of the following 
circumstances: (1) New LTCHs that have not yet submitted their first 
Medicare cost report (a new LTCH is defined as an entity that has 
not accepted assignment of an existing hospital's provider agreement 
in accordance with Sec.  489.18); (2) LTCHs whose calculated CCR is 
in excess of the LTCH total CCR ceiling; and (3) other LTCHs for 
whom data with which to calculate a CCR are not available (for 
example, missing or faulty data). (Other sources of data that the 
MAC may consider in determining an LTCH's CCR include data from a 
different cost reporting period for the LTCH, data from the cost 
reporting period preceding the period in which the hospital began to 
be paid as an LTCH (that is, the period of at least 6 months that it 
was paid as a short-term, acute care hospital), or data from other 
comparable LTCHs, such as LTCHs in the same chain or in the same 
region.)
    Consistent with our historical practice of using the best 
available data, in this proposed rule, we are proposing to use our 
established methodology for determining the LTCH statewide average 
CCRs, based on the most recent complete IPPS ``total CCR'' data from 
the December 2019 update of the PSF, as we proposed, we are 
proposing to establish LTCH PPS statewide average total CCRs for 
urban and rural hospitals that will be effective for discharges 
occurring on or after October 1, 2020, through September 30, 2021, 
in Table 8C listed in section VI. of the Addendum to this proposed 
rule (and available via the internet on the CMS website). Consistent 
with our historical practice, we are proposing to use more recent 
data to determine the LTCH PPS statewide average total CCRs for FY 
2021 proposed rule if it becomes available.
    Under the current LTCH PPS labor market areas, all areas in 
Delaware, the District of Columbia, New Jersey, and Rhode Island are 
classified as urban. Therefore, there are no rural statewide average 
total CCRs listed for those jurisdictions in Table 8C. This policy 
is consistent with the policy that we established when we revised 
our methodology for determining the applicable LTCH statewide 
average CCRs in the FY 2007 IPPS final rule (71 FR 48119 through 
48121) and is the same as the policy applied under the IPPS. In 
addition, although Connecticut and Nevada have 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 these areas as of December 2019. Therefore, consistent with our 
existing methodology, we are proposing to use the national average 
total CCR for rural IPPS hospitals for rural Connecticut and Nevada 
in Table 8C. Furthermore, consistent with our existing methodology, 
in determining the proposed urban and rural statewide average total 
CCRs for Maryland LTCHs paid under the LTCH PPS, we are proposing to 
continue to use, as a proxy, the national average total CCR for 
urban IPPS hospitals and the national average total CCR for rural 
IPPS hospitals, respectively. We are proposing to use this proxy 
because we believe that the CCR data in the PSF for Maryland 
hospitals may not be entirely accurate (as discussed in greater 
detail in the FY 2007 IPPS final rule (71 FR 48120)).

d. Reconciliation of HCO Payments

    Under the HCO policy for cases paid under either payment rate at 
Sec.  412.525(a)(4)(iv)(D), the payments for HCO cases are subject 
to reconciliation. Specifically, any such payments are reconciled at 
settlement based on the CCR that was calculated based on the cost 
report coinciding with the discharge. For additional information on 
the reconciliation policy, we refer readers to Sections 150.26 
through 150.28 of the Medicare Claims Processing Manual (Pub. 100-
4), as added by Change Request 7192 (Transmittal 2111; December 3, 
2010), and the RY 2009 LTCH PPS final rule (73 FR 26820 through 
26821).

3. Proposed High-Cost Outlier Payments for LTCH PPS Standard Federal 
Payment Rate Cases

a. Proposed Changes to High-Cost Outlier Payments for LTCH PPS Standard 
Federal Payment Rate Cases

    Under the regulations at Sec.  412.525(a)(2)(ii) and as required 
by section 1886(m)(7) of the Act, the fixed-loss amount for HCO 
payments is set each year so that the estimated aggregate HCO 
payments for LTCH PPS standard Federal payment rate cases are 
99.6875 percent of 8 percent (that is, 7.975 percent) of estimated 
aggregate LTCH PPS payments for LTCH PPS standard Federal payment 
rate cases. (For more details on the requirements for high-cost 
outlier payments in FY 2018 and subsequent years under section 
1886(m)(7) of the Act and additional information regarding high-cost 
outlier payments prior to FY 2018, we refer readers to the FY 2018 
IPPS/LTCH PPS final rule (82 FR 38542 through 38544).)

b. Proposed Fixed-Loss Amount for LTCH PPS Standard Federal Payment 
Rate Cases for FY 2021

    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 this proposed rule we are proposing to continue to use our 
current methodology to calculate an applicable fixed-loss amount for 
LTCH PPS standard Federal payment rate cases for FY 2021 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 the proposed rule).
    Specifically, based on the most recent complete LTCH data 
available at this time (that is, LTCH claims data from the December 
2019 update of the FY 2019 MedPAR file and CCRs from the December 
2019 update of the PSF), we are proposing to determine a proposed 
fixed-loss amount for LTCH PPS standard Federal payment rate cases 
for FY 2021 of $30,515 that would result in estimated outlier 
payments projected to be equal to 7.975 percent of estimated FY 2021 
payments for such cases. We are proposing to continue to make an 
additional HCO payment for the cost of an LTCH PPS standard Federal 
payment rate case that exceeds the HCO threshold amount that is 
equal to 80 percent of the difference between the estimated cost of 
the case and the outlier threshold (the sum of the proposed adjusted 
LTCH PPS standard Federal payment rate payment and the proposed 
fixed-loss amount for LTCH PPS standard Federal payment rate cases 
of $30,515).
    Consistent with our historical practice of using the best data 
available, when

[[Page 32926]]

determining the fixed-loss amount for LTCH PPS standard Federal 
payment rate cases for FY 2021 in the proposed rule, we are 
proposing to use the most recent available LTCH claims data and CCR 
data.

4. Proposed High-Cost Outlier Payments for Site Neutral Payment Rate 
Cases

    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 and FY 2020, we continued to rely on these considerations and 
actuarial projections because, due to the transitional blended 
payment policy for site neutral payment rate cases, FY 2018 and FY 
2019 claims for these cases were not subject to the full effect of 
the site neutral payment rate.
    For FYs 2016 through 2020, at that time our actuaries projected 
that the proportion of cases that would qualify as LTCH PPS standard 
Federal payment rate cases versus site neutral payment rate cases 
under the statutory provisions would remain consistent with what is 
reflected in the historical LTCH PPS claims data. Although our 
actuaries did not project an immediate change in the proportions 
found in the historical data, they did project cost and resource 
changes to account for the lower payment rates. Our actuaries also 
projected that the costs and resource use for cases paid at the site 
neutral payment rate would likely be lower, on average, than the 
costs and resource use for cases paid at the LTCH PPS standard 
Federal payment rate and would likely mirror the costs and resource 
use for IPPS cases assigned to the same MS-DRG, regardless of 
whether the proportion of site neutral payment rate cases in the 
future remains similar to what is found based on the historical 
data. As discussed in the FY 2016 IPPS/LTCH PPS final rule (80 FR 
49619), this actuarial assumption is based on our expectation that 
site neutral payment rate cases would generally be paid based on an 
IPPS comparable per diem amount under the statutory LTCH PPS payment 
changes that began in FY 2016, which, in the majority of cases, is 
much lower than the payment that would have been paid if these 
statutory changes were not enacted. In light of these projections 
and expectations, we discussed that we believed that the use of a 
single fixed-loss amount and HCO target for all LTCH PPS cases would 
be problematic. In addition, we discussed that we did not believe 
that it would be appropriate for comparable LTCH PPS site neutral 
payment rate cases to receive dramatically different HCO payments 
from those cases that would be paid under the IPPS (80 FR 49617 
through 49619 and 81 FR 57305 through 57307). For those reasons, we 
stated that we believed that the most appropriate fixed-loss amount 
for site neutral payment rate cases for FYs 2016 through 2020 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 2020. In particular, in FY 2020, we 
established the fixed-loss amount for site neutral payment rate 
cases as the FY 2019 IPPS fixed-loss amount of $26,552 (as corrected 
at 84 FR 49845).
    As noted earlier, because not all claims in the data used for 
this FY 2021 IPPS/LTCH PPS proposed rule were subject to the 
unblended site neutral payment rate, we continue to rely on the same 
considerations and actuarial projections used in FYs 2016 through 
2020 when developing a fixed-loss amount for site neutral payment 
rate cases for FY 2021. Our actuaries continue to project that site 
neutral payment rate cases in FY 2021 will continue to mirror an 
IPPS case paid under the same MS-DRG. That is, our actuaries 
continue to project that the costs and resource use for FY 2021 
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 was found based on the 
historical data. (Based on the most recent FY 2019 LTCH claims data 
used in the development of this FY 2021 IPPS/LTCH PPS proposed rule, 
approximately 75 percent of LTCH cases were paid the LTCH PPS 
standard Federal payment rate and approximately 25 percent of LTCH 
cases were paid the site neutral payment rate for discharges 
occurring in FY 2019.)
    For these reasons, we continue to believe that the most 
appropriate fixed-loss amount for site neutral payment rate cases 
for FY 2021 is the IPPS fixed-loss amount for FY 2021. Therefore, 
consistent with past practice, we are proposing that the applicable 
HCO threshold for site neutral payment rate cases is the sum of the 
site neutral payment rate for the case and the IPPS fixed-loss 
amount. That is, we proposed a fixed-loss amount for site neutral 
payment rate cases of $30,006. Accordingly, for FY 2021, we propose 
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 site neutral payment rate 
payment and the proposed fixed-loss amount for site neutral payment 
rate cases of $30,006).
    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 2021 would not result in any increase in 
estimated aggregate FY 2021 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 by 5.1 percent to account 
for the estimated additional HCO payments payable to those cases in 
FY 2021, in general, we propose to continue this policy.
    As discussed earlier, consistent with the IPPS HCO payment 
threshold, we estimate our fixed-loss threshold of $30,006 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 2021 
would not result in any increase in estimated aggregate FY 2021 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 2021. In order to achieve this, for 
FY 2021, we are proposing to apply a budget neutrality factor of 
0.949 (that is, the decimal equivalent of a 5.1 percent reduction, 
determined as 1.0-5.1/100 = 0.949) to the site neutral payment rate 
for those site neutral payment rate cases paid under Sec.  
412.522(c)(1)(i). We note that, consistent with our current policy, 
this proposed HCO budget neutrality adjustment would not be applied 
to the HCO portion of the site neutral payment rate amount (81 FR 
57309).

E. Proposed Update to the IPPS Comparable 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 site neutral payment rate at Sec.  
412.522. 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

[[Page 32927]]

of individuals who are uninsured and any additional statutory 
adjustment, 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 are 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 2021, as discussed in greater detail in section IV.G.3. 
of the preamble of this proposed rule, based on the most recent data 
available, our estimate of 75 percent of the amount that would 
otherwise have been paid as Medicare DSH payments (under the 
methodology outlined in section 1886(r)(2) of the Act) is adjusted 
to 67.86 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 proposed amount available to make 
uncompensated care payments to eligible IPPS hospitals in FY 2021. 
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 is adjusted to 50.90 percent (the product of 75 percent and 
67.86 percent) and the resulting amount is used to calculate the 
uncompensated care payments to eligible hospitals. As a result, for 
FY 2021, we project that the reduction in the amount of Medicare DSH 
payments pursuant to section 1886(r)(1) of the Act, along with the 
payments for uncompensated care under section 1886(r)(2) of the Act, 
will result in overall Medicare DSH payments of 75.90 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 + 50.90 percent = 75.90 percent).
    Therefore, for FY 2021, we are proposing to establish that the 
calculation of the ``IPPS comparable amount'' under Sec.  412.529 
would include an applicable operating Medicare DSH payment amount 
that is equal to 75.90 percent of the operating Medicare DSH payment 
amount that would have been paid based on the statutory Medicare DSH 
payment formula absent the amendments made by the Affordable Care 
Act. Furthermore, consistent with our historical practice, we are 
proposing that, if more recent data became available, we would use 
that data to determine this factor in the final rule.

F. Computing the Proposed Adjusted LTCH PPS Federal Prospective 
Payments for FY 2021

    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 2020 values are shown in 
Tables 12A through 12B listed in section VI. of the Addendum to this 
proposed rule and are available via the internet on the CMS 
website). The LTCH PPS standard Federal payment rate is also 
adjusted to account for the higher costs of LTCHs located in Alaska 
and Hawaii by the applicable COLA factors (the proposed FY 2021 
factors are shown in the chart in section V.C. of this Addendum) in 
accordance with Sec.  412.525(b). In this proposed rule, we are 
proposing to establish an LTCH PPS standard Federal payment rate for 
FY 2021 of $43,849.28, as discussed in section V.A. of the Addendum 
to this proposed rule. We illustrate the methodology to adjust the 
proposed LTCH PPS standard Federal payment rate for FY 2021 in the 
following example:
    Example: During FY 2021, 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 CBSA 16984, which has a proposed FY 2021 LTCH PPS wage 
index value of 1.0328 (obtained from Table 12A listed in section VI. 
of the Addendum to this proposed rule and available via the internet 
on the CMS website). The Medicare patient case is classified into 
MS-LTC-DRG 189 (Pulmonary Edema & Respiratory Failure), which has a 
proposed relative weight for FY 2021 of 0.9451 (obtained from Table 
11 listed in section VI. of the Addendum to this proposed rule and 
available via the internet on the CMS website). The LTCH submitted 
quality reporting data for FY 2021 in accordance with the LTCH QRP 
under section 1886(m)(5) of the Act.
    To calculate the LTCH's total adjusted proposed Federal 
prospective payment for this Medicare patient case in FY 2021, we 
computed the wage-adjusted Federal prospective payment amount by 
multiplying the unadjusted FY 2021 LTCH PPS standard Federal payment 
rate ($43,849.28) by the labor-related share (0.680 percent) and the 
wage index value (1.0328). This wage-adjusted amount was then added 
to the nonlabor-related portion of the unadjusted LTCH PPS standard 
Federal payment rate (0.320 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 (0.9451) to calculate the total adjusted LTCH PPS standard 
Federal prospective payment for FY 2021 ($42,366.27). The table 
illustrates the components of the calculations in this example.
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VI. Tables Referenced in This Proposed Rule Generally Available Through 
the Internet on the CMS Website

    This section lists the tables referred to throughout the 
preamble of this proposed 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 2020, for the FY 2021 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 in this 
section, 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. For 
additional discussion of the information included in the IPPS and 
LTCH PPS tables associated with the IPPS/LTCH PPS proposed and final 
rules, as well as prior changes to the information included in these 
tables, we refer readers to the FY 2019 IPPS/LTCH PPS final rule (83 
FR 41739 through 41740). 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. The hospital level-data for the FY 
2021 HAC Reduction Program will be made publicly available once it 
has undergone the review and corrections process.
    As with FY 2020 IPPS/LTCH PPS proposed and final rules, we are 
no longer including Table 15, which had typically included the 
fiscal year readmissions payment adjustment factors because 
hospitals have not yet had the opportunity to review and correct the 
data 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 2021, 
we will post Table 15 (which will be available via the internet on 
the CMS website) to display the final FY 2021 readmissions payment 
adjustment factors that will be applicable to discharges occurring 
on or after October 1, 2020. We expect Table 15 will be posted on 
the CMS website in the fall of 2020.
    Readers who experience any problems accessing any of the tables 
that are posted on the CMS websites identified in this section 
should contact Michael Treitel at (410) 786-4552. The following IPPS 
tables for this proposed 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 2021 IPPS 
Proposed Rule Home Page'' or ``Acute Inpatient-Files- for 
Download.''

Table 2.--Proposed Case-Mix Index and Wage Index Table by CCN--FY 
2021
Table 3.--Proposed Wage Index Table by CBSA--FY 2021
Table 4A.--Proposed List of Counties Eligible for the Out-Migration 
Adjustment under Section 1886(d)(13) of the Act--FY 2021
Table 4B.--Proposed Counties Redesignated under Section 
1886(d)(8)(B) of the Act (LUGAR COUNTIES)--FY 2021
Table 5.--Proposed List of Medicare Severity Diagnosis-Related 
Groups (MS-DRGs), Relative Weighting Factors, and Geometric and 
Arithmetic Mean Length of Stay--FY 2021
Table 6A.--New Diagnosis Codes--FY 2021
Table 6B.--New Procedure Codes--FY 2021
Table 6C.--Invalid Diagnosis Codes--FY 2021
Table 6E.--Revised Diagnosis Code Titles--FY 2021
Table 6G.1.--Proposed Secondary Diagnosis Order Additions to the CC 
Exclusions List--FY 2021
Table 6G.2.--Proposed Principal Diagnosis Order Additions to the CC 
Exclusions List--FY 2021
Table 6H.1.--Proposed Secondary Diagnosis Order Deletions to the CC 
Exclusions List--FY 2021
Table 6H.2.--Proposed Principal Diagnosis Order Deletions to the CC 
Exclusions List--FY 2021
Table 6I.1.--Proposed Additions to the MCC List--FY 2021
Table 6I.2.--Proposed Deletions to the MCC List--FY 2021
Table 6J.1.--Proposed Additions to the CC List--FY 2021
Table 6J.2.--Proposed Deletions to the CC List--FY 2021
Table 6P.--ICD-10-CM and ICD-10-PCS Codes for Proposed MS-DRG 
Changes--FY 2021 (Table 6P contains multiple tables, 6P.1a. through 
6P.4a., that include the ICD-10-CM and ICD-10-PCS code lists 
relating to proposed specific MS-DRG changes. These tables are 
referred to throughout section II.D. of the preamble of this 
proposed rule.)
Table 7A.--Proposed Medicare Prospective Payment System Selected 
Percentile Lengths of Stay: FY 2019 MedPAR Update--December 2019 
GROUPER Version 37 MS-DRGs
Table 7B.--Proposed Medicare Prospective Payment System Selected 
Percentile Lengths of Stay: FY 2019 MedPAR Update--December 2019 
GROUPER Version 38 MS-DRGs
Table 8A.--Proposed FY 2021 Statewide Average Operating Cost-to-
Charge Ratios (CCRs) for Acute Care Hospitals (Urban and Rural)
Table 8B.--Proposed FY 2021 Statewide Average Capital Cost-to-Charge 
Ratios (CCRs) for Acute Care Hospitals
Table 16.--Proxy Hospital Value-Based Purchasing (VBP) Program 
Adjustment Factors for FY 2021
Table 18.--Proposed FY 2021 Medicare DSH Uncompensated Care Payment 
Factor 3

    The following LTCH PPS tables for this FY 2021 proposed rule are 
available through the internet on the CMS website at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/LongTermCareHospitalPPS/index.html under the list item for 
Regulation Number CMS-1735-P:

Table 8C.--Proposed FY 2021 Statewide Average Total Cost-to-Charge 
Ratios (CCRs) for LTCHs (Urban and Rural)
Table 11.--Proposed MS-LTC-DRGs, Relative Weights, Geometric Average 
Length of Stay, and Short-Stay Outlier (SSO) Threshold for LTCH PPS 
Discharges Occurring from October 1, 2020 through September 30, 2021
Table 12A.--Proposed LTCH PPS Wage Index for Urban Areas for 
Discharges Occurring from October 1, 2020 through September 30, 2021
Table 12B.--Proposed LTCH PPS Wage Index for Rural Areas for 
Discharges Occurring from October 1, 2020 through September 30, 2021
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Appendix A: Economic Analyses

I. Regulatory Impact Analysis

A. Statement of Need

    This proposed rule is necessary in order to make payment and 
policy changes under the Medicare IPPS for Medicare acute care 
hospital inpatient services for operating and capital-related costs 
as well as for certain hospitals and hospital units excluded from 
the IPPS. This proposed rule also is necessary to make payment and 
policy changes for Medicare hospitals under the LTCH PPS. Also as we 
note later in this Appendix, 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 proposed changes in this proposed rule, such 
as the proposed updates to the IPPS and LTCH PPS rates, and the 
proposals and discussions relating to applications for new 
technology add-on payments, 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.
    For example, without additional payments for new medical 
technologies that meet the criteria for approval for new technology 
add-on payments, Medicare beneficiaries may not have appropriate 
access to these new technologies. We discuss the technologies for 
which we received applications for add-on payments for new medical 
technologies for FY 2021 in sections II.G.5. and 6. of the preamble 
to this proposed rule. As discussed in section II.G.6. of the 
preamble of this proposed rule, under the alternative pathway for 
new technology add-on payments, new technologies that are medical 
products with a Qualified Infectious Disease Product (QIDP) 
designation or are part of the Breakthrough Device program will be 
considered new and not substantially similar to an existing 
technology and will not need to demonstrate that the technology 
represents a substantial clinical improvement. These technologies 
must still meet the cost criterion.
    We are proposing to approve nine alternative pathway applicant 
technologies (three Breakthrough devices and six QIDPs) for FY 2021 
based our analysis of the cost criterion. We have not yet determined 
whether any of the 15 technologies under the traditional pathway 
discussed in section II.G.5. of the preamble of this proposed rule 
will meet the criteria for new technology add-on payments for FY 
2021. Those determinations will be made in the final rule following 
a review of the comments received.
    We expect that the proposals in this proposed rule would 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 proposed rule as required 
by Executive Order 12866 on Regulatory Planning and Review 
(September 30, 1993), Executive Order 13563 on Improving Regulation 
and Regulatory Review (January 18, 2011), the Regulatory Flexibility 
Act (RFA) (September 19, 1980, Pub. L. 96-354), section 1102(b) of 
the Social Security Act, section 202 of the Unfunded Mandates Reform 
Act of 1995 (March 22, 1995; Pub. L. 104-4), Executive Order 13132 
on Federalism (August 4, 1999), the Congressional Review Act (5 
U.S.C. 804(2), and Executive Order 13771 on Reducing Regulation and 
Controlling Regulatory Costs (January 30, 2017).
    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that 
maximize net benefits (including potential economic, environmental, 
public health and safety effects, distributive impacts, and equity). 
Section 3(f) of Executive Order 12866 defines a ``significant 
regulatory action'' as an action that is likely to result in a rule: 
(1) Having an annual effect on the economy of $100 million or more 
in any 1 year, or adversely and materially affecting a sector of the 
economy, productivity, competition, jobs, the environment, public 
health or safety, or State, local or tribal governments or 
communities (also referred to as ``economically significant''); (2) 
creating a serious inconsistency or otherwise interfering with an 
action taken or planned by another agency; (3) materially altering 
the budgetary impacts of entitlement grants, user fees, or loan 
programs or the rights and obligations of recipients thereof; or (4) 
raising novel legal or policy issues arising out of legal mandates, 
the President's priorities, or the principles set forth in the 
Executive Order.
    We have determined that this proposed rule is a major rule as 
defined in 5 U.S.C. 804(2). We estimate that the proposed changes 
for FY 2021 acute care hospital operating and capital payments would 
redistribute amounts in excess of $100 million to acute care 
hospitals. The proposed applicable percentage increase to the IPPS 
rates required by the statute, in conjunction with other proposed 
payment changes in this proposed rule, would result in an estimated 
$2.07 billion increase in FY 2021 payments, primarily driven by a 
combined $1.98 billion increase in FY 2021 operating payments and 
uncompensated care payments, and a net increase of $89 million 
resulting from estimated changes in FY 2021 capital payments and new 
technology add-on payments. These proposed changes are relative to 
payments made in FY 2020. The impact analysis of the capital 
payments can be found in section I.I. of this Appendix. In addition, 
as described in section I.J. of this Appendix, LTCHs are expected to 
experience a decrease in payments by approximately 36 million in FY 
2021 relative to FY 2020, primarily due to the end of the statutory 
transition period for site neutral payment rate cases.
    Our operating impact estimate includes the proposed 0.5 
percentage point adjustment required under section 414 of the MACRA 
applied to the IPPS standardized amount, as discussed in section 
II.D. of the preamble of this proposed rule. In addition, our 
operating payment impact estimate includes the proposed 2.6 percent 
hospital update to the standardized amount (which includes the 
estimated 3.0 percent market basket update less the proposed 0.4 
percentage point for the multifactor productivity (MFP) adjustment). 
The estimates of IPPS operating payments to acute care hospitals do 
not reflect any changes in hospital admissions or real case-mix 
intensity, which will also affect overall payment changes.
    The analysis in this Appendix, in conjunction with the remainder 
of this document, demonstrates that this proposed rule is consistent 
with the regulatory philosophy and principles identified in 
Executive Orders 12866 and 13563, the RFA, and section 1102(b) of 
the Act. This proposed rule would affect payments to a substantial 
number of small rural hospitals, as well as other classes of 
hospitals, and the effects on some hospitals may be significant. 
Finally, in accordance with the provisions of Executive Order 12866, 
the Executive Office of Management and Budget has reviewed this 
proposed rule.

[[Page 32931]]

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 proposed changes in this proposed rule would 
further each of these goals while maintaining the financial 
viability of the hospital industry and ensuring access to high 
quality health care for Medicare beneficiaries. We expect that these 
proposed changes would ensure that the outcomes of the prospective 
payment systems are reasonable and equitable, while avoiding or 
minimizing unintended adverse consequences.
    Because this proposed rule contains a range of policies, we 
refer readers to the section of the proposed rule where each policy 
is discussed. These sections include the rationale for our 
decisions, including the need for the proposed policy.

D. Limitations of Our Analysis

    The following quantitative analysis presents the projected 
effects of our proposed policy changes, as well as statutory changes 
effective for FY 2021, on various hospital groups. We estimate the 
effects of individual proposed policy changes by estimating payments 
per case, while holding all other payment policies constant. We use 
the best data available, but, generally 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 proposed policies in the 
discussion of those proposed policies as needed.

E. Hospitals Included in and Excluded From the IPPS

    The prospective payment systems for hospital inpatient operating 
and capital-related costs of acute care hospitals encompass most 
general short-term, acute care hospitals that participate in the 
Medicare program. There were 27 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 Total Cost of 
Care Model, and hospitals located outside the 50 States, the 
District of Columbia, and Puerto Rico (that is, 6 short-term acute 
care hospitals located in the U.S. Virgin Islands, Guam, the 
Northern Mariana Islands, and American Samoa) receive payment for 
inpatient hospital services they furnish on the basis of reasonable 
costs, subject to a rate-of-increase ceiling.
    As of March 2020, there were 3,199 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 1,414 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, 1 extended neoplastic disease care 
hospital, and 6 short-term acute care hospitals located in the 
Virgin Islands, Guam, the Northern Mariana Islands, and American 
Samoa. Changes in the prospective payment systems for IPFs and IRFs 
are made through separate rulemaking. Payment impacts of proposed 
changes to the prospective payment systems for these IPPS-excluded 
hospitals and units are not included in this proposed rule. The 
impact of the proposed update and policy changes to the LTCH PPS for 
FY 2021 is discussed in section I.J. of this Appendix.

F. Effects on Hospitals and Hospital Units Excluded From the IPPS

    As of March 2020, there were 95 children's hospitals, 11 cancer 
hospitals, 6 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 15 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, 302 rehabilitation hospitals and 815 rehabilitation 
units, and approximately 360 LTCHs, are paid the Federal prospective 
per discharge rate under the IRF PPS and the LTCH PPS, respectively, 
and 549 psychiatric hospitals and 1,016 psychiatric units are paid 
the Federal per diem amount under the IPF PPS. As stated previously, 
IRFs and IPFs are not affected by the proposed rate updates 
discussed in this proposed rule. The impacts of the proposed changes 
on LTCHs are discussed in section I.J. of this Appendix.
    For children's hospitals, the 11 cancer hospitals, the 6 short-
term acute care hospitals located in the Virgin Islands, Guam, the 
Northern Mariana Islands, and American Samoa, the 1 extended 
neoplastic disease care hospital, and RNHCIs, the proposed update of 
the rate-of-increase limit (or target amount) is the estimated FY 
2021 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 fourth quarter 2019 forecast of the 
2014-based IPPS market basket increase, we are estimating the 
proposed FY 2021 update to be 3.0 percent (that is, the estimate of 
the market basket rate-of-increase). We are proposing that if more 
recent data become available for the final rule, we would use such 
data, if appropriate, to calculate the IPPS operating market basket 
update for FY 2021. However, the Affordable Care Act requires an 
adjustment for multifactor productivity (proposed 0.4 percentage 
point for FY 2021), resulting in a proposed 2.6 percent applicable 
percentage increase for IPPS hospitals that submit quality data and 
are meaningful EHR users, as discussed in section IV.B. of the 
preamble of this proposed rule. Children's hospitals, the 11 cancer 
hospitals, the 6 short-term acute care hospitals located in the 
Virgin Islands, Guam, the Northern Mariana Islands, and American 
Samoa, the 1 extended neoplastic disease care hospital, and RNHCIs 
that continue to be paid based on reasonable costs subject to rate-
of-increase limits under Sec.  413.40 of the regulations are not 
subject to the reductions in the applicable percentage increase 
required under the Affordable Care Act. Therefore, for those 
hospitals paid under Sec.  413.40 of the regulations, the proposed 
update is the percentage increase in the 2014-based IPPS operating 
market basket for FY 2021, estimated at 3.0 percent
    The impact of the proposed update in the rate-of-increase limit 
on those excluded hospitals depends on the cumulative cost increases 
experienced by each excluded hospital since its applicable base 
period. For excluded hospitals that have maintained their cost 
increases at a level below the rate-of-increase limits since their 
base period, the major effect is on the level of incentive payments 
these excluded hospitals receive. Conversely, for excluded hospitals 
with cost increases above the cumulative update in their rate-of-
increase limits, the major effect is the amount of excess costs that 
would not be paid.
    We note that, under Sec.  413.40(d)(3), an excluded hospital 
that continues to be paid under the TEFRA system and whose costs 
exceed 110 percent of its rate-of-increase limit receives its rate-
of-increase limit plus the lesser of: (1) 50 percent of its 
reasonable costs in excess of 110 percent of the limit; or (2) 10 
percent of its limit. In addition, under the various provisions set 
forth in Sec.  413.40, hospitals can obtain payment adjustments for 
justifiable increases in operating costs that exceed the limit.

G. Quantitative Effects of the Proposed Policy Changes Under the 
IPPS for Operating Costs

1. Basis and Methodology of Estimates

    In this proposed rule, we are announcing proposed policy changes 
and payment rate updates for the IPPS for FY 2021 for operating 
costs of acute care hospitals. The proposed FY 2021 updates to the 
capital payments to acute care hospitals are discussed in section 
I.I. of this Appendix.
    Based on the overall proposed percentage change in payments per 
case estimated using our payment simulation model, we estimate that 
total FY 2021 operating payments would increase by 2.5 percent, 
compared to FY 2020. In addition to the proposed applicable 
percentage increase, this amount reflects the proposed +0.5 
percentage point permanent adjustment to the standardized amount 
required under section 414 of MACRA. The impacts do not reflect 
changes in the number of hospital admissions or real case-mix 
intensity, which would also affect overall payment changes.
    We have prepared separate impact analyses of the proposed 
changes to each system. This section deals with the proposed changes 
to the operating inpatient prospective payment system for acute care 
hospitals. Our payment simulation model relies on the most recent

[[Page 32932]]

available claims data to enable us to estimate the impacts on 
payments per case of certain proposed changes in this proposed rule. 
However, there are other proposed changes for which we do not have 
data available that would allow us to estimate the payment impacts 
using this model. For those proposed changes, we have attempted to 
predict the payment impacts based upon our experience and other more 
limited data.
    The data used in developing the quantitative analyses of 
proposed changes in payments per case presented in this section are 
taken from the FY 2019 MedPAR file and the most current Provider-
Specific File (PSF) that are used for payment purposes. Although the 
analyses of the proposed changes to the operating PPS do not 
incorporate cost data, data from the most recently available 
hospital cost reports were used to categorize hospitals. Our 
analysis has several qualifications. First, in this analysis, we do 
not make adjustments for future changes in such variables as 
admissions, lengths of stay, or underlying growth in real case-mix. 
Second, due to the interdependent nature of the IPPS payment 
components, it is very difficult to precisely quantify the impact 
associated with each proposed change. Third, we use various data 
sources to categorize hospitals in the tables. In some cases, 
particularly the number of beds, there is a fair degree of variation 
in the data from the different sources. We have attempted to 
construct these variables with the best available source overall. 
However, for individual hospitals, some miscategorizations are 
possible.
    Using cases from the FY 2019 MedPAR file, we simulate payments 
under the operating IPPS given various combinations of payment 
parameters. As described previously, Indian Health Service hospitals 
and hospitals in Maryland were excluded from the simulations. The 
impact of proposed payments under the capital IPPS, and the impact 
of proposed payments for costs other than inpatient operating costs, 
are not analyzed in this section. Estimated payment impacts of the 
capital IPPS for FY 2021 are discussed in section I.I. of this 
Appendix.
    We discuss the following proposed changes:
     The effects of the application of the proposed 
applicable percentage increase of 2.6 percent (that is, a 3.0 
percent market basket update with a proposed reduction of 0.4 
percentage point for the multifactor productivity adjustment), and a 
proposed 0.5 percentage point adjustment required under section 414 
of the MACRA to the IPPS standardized amount, and the proposed 
applicable percentage increase (including the market basket update 
and the proposed multifactor productivity adjustment) to the 
hospital-specific rates.
     The effects of the proposed changes to the relative 
weights and MS-DRG GROUPER.
     The effects of the proposed changes in hospitals' wage 
index values reflecting updated wage data from hospitals' cost 
reporting periods beginning during FY 2017, compared to the FY 2016 
wage data, to calculate the proposed FY 2021 wage index.
     The effects of the geographic reclassifications by the 
MGCRB (as of publication of this proposed rule) that will be 
effective for FY 2021.
     The effects of the proposed rural floor with the 
application of the national budget neutrality factor to the wage 
index.
     The effects of the proposed frontier State wage index 
adjustment under the statutory provision that requires hospitals 
located in States that qualify as frontier States to not have a wage 
index less than 1.0. This provision is not budget neutral.
     The effects of the 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 2021. This provision is not budget neutral.
     The effects of the wage index including our proposed 
adoption of the revised labor market area delineations in OMB 
Bulletin No. 18-04 and the effects of the proposed transition to 
apply a 5-percent cap on any decrease in a hospital's wage index 
from the hospital's final wage index from the prior fiscal year.
     The total estimated change in payments based on the 
proposed FY 2021 policies relative to payments based on FY 2020 
policies, including estimated changes in outlier payments.
    To illustrate the impact of the proposed FY 2021 changes, our 
analysis begins with a FY 2020 baseline simulation model using: the 
FY 2020 applicable percentage increase of 2.6 percent; the 0.5 
percentage point adjustment required under section 414 of the MACRA 
applied to the IPPS standardized amount; the FY 2020 MS-DRG GROUPER 
(Version 37); the FY 2020 CBSA designations for hospitals based on 
the OMB definitions from the 2010 Census; the FY 2020 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, as discussed in section IV.B.1. of the preamble of this 
proposed rule, for FY 2021, we are proposing that hospitals that do 
not submit quality information under rules established by the 
Secretary and that are meaningful EHR users under section 
1886(b)(3)(B)(ix) of the Act would receive an applicable percentage 
increase of 1.85 percent. At the time this impact was prepared, 54 
hospitals are estimated to not receive the full market basket rate-
of-increase for FY 2021 because they failed the quality data 
submission process or did not choose to participate, but are 
meaningful EHR users. For purposes of the simulations shown later in 
this section, we modeled the proposed payment changes for FY 2021 
using a reduced update for these hospitals.
    For FY 2021, 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, as 
discussed in section IV.B.1. of the preamble of this proposed rule, 
for FY 2021, we are proposing that hospitals that are identified as 
not meaningful EHR users and do submit quality information under 
section 1886(b)(3)(B)(viii) of the Act would receive an applicable 
percentage increase of 0.35 percent. At the time this impact 
analysis was prepared, 67 hospitals are estimated to not receive the 
full market basket rate-of-increase for FY 2021 because they are 
identified as not meaningful EHR users that do submit quality 
information under section 1886(b)(3)(B)(viii) of the Act. For 
purposes of the simulations shown in this section, we modeled the 
proposed payment changes for FY 2021 using a reduced update for 
these hospitals.
    Hospitals that are identified as not meaningful EHR users under 
section 1886(b)(3)(B)(ix) of the Act and also do not submit quality 
data under section 1886(b)(3)(B)(viii) of the Act would receive a 
proposed applicable percentage increase of -0.4 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 together with the proposed 0.4 percentage point reduction for 
the multifactor productivity adjustment. At the time this impact was 
prepared, 14 hospitals are estimated to not receive the full market 
basket rate-of-increase for FY 2021 because they are identified as 
not meaningful EHR users that do not submit quality data under 
section 1886(b)(3)(B)(viii) of the Act.
    Each proposed policy change, statutory or otherwise, is then 
added incrementally to this baseline, finally arriving at an FY 2021 
model incorporating all of the proposed changes. This simulation 
allows us to isolate the effects of each change.
    Our comparison illustrates the proposed percent change in 
payments per case from FY 2020 to FY 2021. Two factors not discussed 
separately have significant impacts here. The first factor is the 
proposed update to the standardized amount. In accordance with 
section 1886(b)(3)(B)(i) of the Act, we are proposing to update the 
standardized amounts for FY 2021 using a proposed applicable 
percentage increase of 2.6 percent. This includes our forecasted 
IPPS operating hospital market basket increase of 3.0 percent with a 
proposed 0.4 percentage point reduction for the multifactor 
productivity adjustment. Hospitals that fail to comply with the 
quality data submission requirements and are meaningful EHR users 
would receive a proposed update of 1.85

[[Page 32933]]

percent. This proposed update includes a reduction of one-quarter of 
the market basket update for failure to submit these data. Hospitals 
that do comply with the quality data submission requirements but are 
not meaningful EHR users would receive a proposed update of 0.35 
percent, which includes a reduction of three-quarters of the market 
basket update. Furthermore, hospitals that do not comply with the 
quality data submission requirements and also are not meaningful EHR 
users would receive a proposed update of -0.4 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 2.6 percent, if the hospital submits quality data and 
is a meaningful EHR user.
    A second significant factor that affects the proposed changes in 
hospitals' payments per case from FY 2020 to FY 2021 is the change 
in hospitals' geographic reclassification status from 1 year to the 
next. That is, payments may be reduced for hospitals reclassified in 
FY 2020 that are no longer reclassified in FY 2021. Conversely, 
payments may increase for hospitals not reclassified in FY 2020 that 
are reclassified in FY 2021.

2. Analysis of Table I

    Table I displays the results of our analysis of the proposed 
changes for FY 2021. 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 3,199 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 2,459 
hospitals located in urban areas and 740 hospitals in rural areas 
included in our analysis. 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 2021 payment classifications, including any 
reclassifications under section 1886(d)(10) of the Act. For example, 
the rows labeled 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 2,028, and 1,171, 
respectively.
    The next three groupings examine the impacts of the proposed 
changes on hospitals grouped by whether or not they have GME 
residency programs (teaching hospitals that receive an IME 
adjustment) or receive Medicare DSH payments, or some combination of 
these two adjustments. There are 2,043 nonteaching hospitals in our 
analysis, 901 teaching hospitals with fewer than 100 residents, and 
255 teaching hospitals with 100 or more residents.
    In the DSH categories, hospitals are grouped according to their 
DSH payment status, and whether they are considered urban or rural 
for DSH purposes. The next category groups together hospitals 
considered urban or rural, in terms of whether they receive the IME 
adjustment, the DSH adjustment, both, or neither.
    The next three rows examine the impacts of the proposed changes 
on rural hospitals by special payment groups (SCHs, MDHs and RRCs). 
There were 471 RRCs, 304 SCHs, 146 MDHs, 148 hospitals that are both 
SCHs and RRCs, and 24 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 2017 or FY 
2016 Medicare cost reports.
    The next grouping concerns the geographic reclassification 
status of hospitals. The first subgrouping is based on whether a 
hospital is reclassified or not. The second and third subgroupings 
are based on whether urban and rural hospitals were reclassified by 
the MGCRB for FY 2021 or not, respectively. The fourth subgrouping 
displays hospitals that reclassified from urban to rural in 
accordance with section 1886(d)(8)(E) of the Act. The fifth 
subgrouping displays hospitals deemed urban in accordance with 
section 1886(d)(8)(B) of the Act.
BILLING CODE 4120-01-P

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[[Page 32935]]


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[[Page 32936]]


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BILLING CODE 4120-01-C

a. Effects of the Proposed Hospital Update and Other Proposed 
Adjustments (Column 1)

    As discussed in section IV.B. of the preamble of this proposed 
rule, this column includes the proposed hospital update, including 
the proposed 3.0 percent market basket update and the proposed 
reduction of 0.4 percentage point for the multifactor

[[Page 32937]]

productivity adjustment. In addition, as discussed in section II.D. 
of the preamble of this proposed rule, this column includes the FY 
2021 +0.5 percentage point adjustment required under section 414 of 
the MACRA. As a result, we are proposing to make a 3.1 percent 
update to the national standardized amount. This column also 
includes the proposed update to the hospital-specific rates which 
includes the proposed 3.0 percent market basket update and the 
proposed reduction of 0.4 percentage point for the multifactor 
productivity adjustment. As a result, we are proposing to make a 2.6 
percent update to the hospital-specific rates.
    Overall, hospitals would experience a 3.1 percent increase in 
payments primarily due to the combined effects of the proposed 
hospital update to the national standardized amount and the proposed 
hospital update to the hospital-specific rate. Hospitals that are 
paid under the hospital-specific rate would experience a 2.6 percent 
increase in payments; therefore, hospital categories containing 
hospitals paid under the hospital-specific rate would experience a 
lower than average increase in payments.

b. Effects of the Proposed Changes to the MS-DRG Reclassifications and 
Relative Cost-Based Weights With Recalibration Budget Neutrality 
(Column 2)

    Column 2 shows the effects of the proposed changes to the MS-
DRGs and relative weights with the application of the proposed 
recalibration budget neutrality factor to the standardized amounts. 
Section 1886(d)(4)(C)(i) of the Act requires us annually to make 
appropriate classification changes in order to reflect changes in 
treatment patterns, technology, and any other factors that may 
change the relative use of hospital resources. Consistent with 
section 1886(d)(4)(C)(iii) of the Act, we calculated a proposed 
recalibration budget neutrality factor to account for the changes in 
MS-DRGs and relative weights to ensure that the overall payment 
impact is budget neutral.
    As discussed in section II.E. of the preamble of this proposed 
rule, the FY 2021 MS-DRG relative weights will be 100 percent cost-
based and 100 percent MS-DRGs. For FY 2021, the MS-DRGs are 
calculated using the FY 2019 MedPAR data grouped to the proposed 
Version 38 (FY 2021) MS-DRGs. The methodology to calculate the 
proposed relative weights and the reclassification changes to the 
GROUPER are described in more detail in section II.G. of the 
preamble of this proposed rule.
    The ``All Hospitals'' line in Column 2 indicates that proposed 
changes due to the MS-DRGs and relative weights would result in a 
0.0 percent change in payments with the application of the proposed 
recalibration budget neutrality factor of 0.998761to the 
standardized amount. Hospital categories that generally treat 
relatively less complex cases, such as rural hospitals and smaller 
urban hospitals, would experience a decrease in their payments, 
while hospitals that generally treat relatively more complex cases, 
such as larger urban hospitals, would experience an increase in 
their payments under the proposed relative weights. For example, 
rural hospitals with 50-99 beds and urban hospitals of 99 beds or 
less would experience a -0.3 percent decrease in payments. 
Conversely, urban hospitals of 500 beds or more would experience a 
+0.2 percent increase in payments.

c. Effects of the Proposed Wage Index Changes (Column 3)

    Column 3 shows the impact of the proposed updated wage data 
using FY 2017 cost report data, with the application of the proposed 
wage budget neutrality factor. The wage index is calculated and 
assigned to hospitals on the basis of the labor market area in which 
the hospital is located. Under section 1886(d)(3)(E) of the Act, 
beginning with FY 2005, we delineate hospital labor market areas 
based on the Core Based Statistical Areas (CBSAs) established by 
OMB. The current statistical standards used in FY 2021 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 the FY 2017 IPPS/LTCH 
PPS final rule (81 FR 56913) for a discussion of our adoption of the 
CBSA updates in OMB Bulletin No. 15-01, which were effective 
beginning with the FY 2017 wage index, and to the FY 2020 IPPS/LTCH 
PPS final rule (83 FR 41362) for a discussion of our adoption of the 
CBSA update in OMB Bulletin No. 17-01 for the FY 2020 wage index.)
    As discussed in section III.A.2.a. of the preamble of this 
proposed rule, OMB Bulletin No. 18-04 established revised 
delineations for statistical areas, and in order to implement these 
changes for the IPPS, it is necessary to identify the new labor 
market area delineation for each county and hospital in the country 
that would be affected by the revised OMB delineations. We believe 
that adopting the revised OMB delineations described in OMB Bulletin 
No. 18-04 would allow us to maintain a more accurate payment system 
that reflects the reality of population shifts and labor market 
conditions. We further believe that using these delineations will 
increase the integrity of the IPPS wage index system by creating a 
more accurate representation of geographic variations in wage 
levels. As discussed in this section, in this proposed rule, we are 
proposing to implement the revised OMB delineations as described in 
the September 14, 2018 OMB Bulletin No. 18-04, effective beginning 
with the FY 2021 IPPS wage index.
    Section 1886(d)(3)(E) of the Act requires that, beginning 
October 1, 1993, we annually update the wage data used to calculate 
the wage index. In accordance with this requirement, the proposed 
wage index for acute care hospitals for FY 2021 is based on data 
submitted for hospital cost reporting periods, beginning on or after 
October 1, 2016 and before October 1, 2017. The estimated impact of 
the updated wage data using the FY 2017 cost report data and the 
proposed revised OMB labor market area delineations on hospital 
payments is isolated in Column 3 by holding the other proposed 
payment parameters constant in this simulation. That is, Column 3 
shows the proposed percentage change in payments when going from a 
model using the FY 2020 wage index, based on FY 2016 wage data, the 
labor-related share of 68.3 percent, under the proposed revised OMB 
delineations and having a 100-percent occupational mix adjustment 
applied, to a model using the proposed FY 2021 pre-reclassification 
wage index based on FY 2017 wage data with the labor-related share 
of 68.3 percent, under the proposed revised OMB delineations, also 
having a 100-percent occupational mix adjustment applied, while 
holding other payment parameters, such as use of the proposed 
Version 38 MS-DRG GROUPER constant. The proposed FY 2021 
occupational mix adjustment is based on the CY 2016 occupational mix 
survey.
    In addition, the column shows the impact of the application of 
the proposed wage budget neutrality to the national standardized 
amount. In FY 2010, we began calculating separate wage budget 
neutrality and recalibration budget neutrality factors, in 
accordance with section 1886(d)(3)(E) of the Act, which specifies 
that budget neutrality to account for wage index changes or updates 
made under that subparagraph must be made without regard to the 62 
percent labor-related share guaranteed under section 
1886(d)(3)(E)(ii) of the Act. Therefore, for FY 2021, we are 
proposing to calculate the proposed wage budget neutrality factor to 
ensure that payments under updated wage data and the labor-related 
share of 68.3 percent are budget neutral, without regard to the 
lower labor-related share of 62 percent applied to hospitals with a 
wage index less than or equal to 1.0. In other words, the wage 
budget neutrality is calculated under the assumption that all 
hospitals receive the higher labor-related share of the standardized 
amount. The proposed FY 2021 wage budget neutrality factor is 
0.999362 and the overall proposed payment change is 0 percent.
    Column 3 shows the impacts of updating the wage data using FY 
2017 cost reports. Overall, the new wage data and the labor-related 
share, combined with the proposed wage budget neutrality adjustment, 
would lead to no change for all hospitals, as shown in Column 3.
    In looking at the wage data itself, the national average hourly 
wage would increase 1.02 percent compared to FY 2020. Therefore, the 
only manner in which to maintain or exceed the previous year's wage 
index was to match or exceed the proposed 1.02 percent increase in 
the national average hourly wage. Of the 3,181 hospitals with wage 
data for both FYs 2020 and 2021, 1,655 or 52 percent would 
experience an average hourly wage increase of 1.02 percent or more.
    The following chart compares the shifts in wage index values for 
hospitals due to proposed changes in the average hourly wage data 
for FY 2021 relative to FY 2020. These figures reflect proposed 
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 note 
that this analysis was

[[Page 32938]]

performed by applying the proposed revised OMB labor market area 
delineations to the FY 2021 proposed wage data and also by 
recomputing the FY 2020 final wage data to reflect the proposed 
revised OMB delineations. (We refer readers to sections III.G. 
through III.L. of the preamble of this proposed rule for a complete 
discussion of the exceptions and adjustments to the wage index.) We 
note that the ``post-reclassified wage index'' or ``payment wage 
index,'' which is the wage index that includes all such exceptions 
and adjustments (as reflected in Tables 2 and 3 associated with this 
proposed rule, which are available via the internet on the CMS 
website) is used to adjust the labor-related share of a hospital's 
standardized amount, either 68.3 percent or 62 percent, depending 
upon whether a hospital's wage index is greater than 1.0 or less 
than or equal to 1.0. Therefore, the proposed pre-reclassified wage 
index figures in the following chart may illustrate a somewhat 
larger or smaller proposed change than would occur in a hospital's 
payment wage index and total payment.
    The following chart shows the projected impact of proposed 
changes in the area wage index values for urban and rural hospitals.
[GRAPHIC] [TIFF OMITTED] TP29MY20.237

d. Effects of MGCRB Reclassifications (Column 4)

    Our impact analysis to this point has assumed acute care 
hospitals are paid on the basis of their actual geographic location 
(with the exception of ongoing policies that provide that certain 
hospitals receive payments on bases other than where they are 
geographically located). The proposed changes in Column 4 reflect 
the per case payment impact of moving from this baseline to a 
simulation incorporating the MGCRB decisions for FY 2021.
    By spring of each year, the MGCRB makes reclassification 
determinations that will be effective for the next fiscal year, 
which begins on October 1. The MGCRB may approve a hospital's 
reclassification request for the purpose of using another area's 
wage index value. Hospitals may appeal denials of MGCRB decisions to 
the CMS Administrator. Further, hospitals have 45 days from the date 
the IPPS proposed rule is issued in the Federal Register to decide 
whether to withdraw or terminate an approved geographic 
reclassification for the following year (we refer readers to the 
discussion of our clarification of this policy in section III.I.2. 
of the preamble to this proposed rule).
    The overall effect of geographic reclassification is required by 
section 1886(d)(8)(D) of the Act to be budget neutral. Therefore, 
for purposes of this impact analysis, we are proposing to apply an 
adjustment of 0.988003 to ensure that the effects of the 
reclassifications under sections 1886(d)(8)(B) and (C) and 
1886(d)(10) of the Act are budget neutral (section II.A. of the 
Addendum to this proposed rule). Geographic reclassification 
generally benefits hospitals in rural areas. We estimate that the 
geographic reclassification would increase payments to rural 
hospitals by an average of 1.1 percent. By region, most rural 
hospital categories would experience increases in payments due to 
MGCRB reclassifications. Hospitals in the rural West North Central 
and Mountain regions would experience a decrease in payments due to 
MGCRB reclassifications, while hospitals in the rural New England 
region would experience no change in payments due to MGCRB 
reclassifications,
    Table 2 listed in section VI. of the Addendum to this proposed 
rule and available via the internet on the CMS website reflects the 
reclassifications for FY 2021.

e. Effects of the Proposed Rural Floor, Including Application of 
National Budget Neutrality (Column 5)

    As discussed in section III.B. of the preamble of the FY 2009 
IPPS final rule, the FY 2010 IPPS/RY 2010 LTCH PPS final rule, the 
FYs 2011 through 2020 IPPS/LTCH PPS final rules, and this FY 2021 
IPPS/LTCH PPS proposed rule, section 4410 of Public Law 105-33 
established the rural floor by requiring that the wage index for a 
hospital in any urban area cannot be less than the wage index 
applicable to hospitals located in rural areas in the same State. We 
will apply a uniform budget neutrality adjustment to the wage index. 
Column 5 shows the effects of the proposed rural floor.
    The Affordable Care Act requires that we apply one rural floor 
budget neutrality factor to the wage index nationally. We have 
calculated a proposed FY 2021 rural floor budget neutrality factor 
to be applied to the wage index of 0.993991, which would reduce wage 
indexes by 0.6 percent.
    Column 5 shows the projected impact of the proposed rural floor 
with the national rural floor budget neutrality factor applied to 
the wage index based on the proposed revised OMB labor market area 
delineations. The column compares the post-reclassification FY 2021 
wage index of providers before the rural floor adjustment and the 
post-reclassification FY 2021 wage index of providers with the rural 
floor adjustment based on the proposed revised OMB labor market area 
delineations. Only urban hospitals can benefit from the rural floor. 
Because the provision is budget neutral, all other hospitals that do 
not receive an increase to their wage index from the rural floor 
adjustment (that is, all rural hospitals and those urban hospitals 
to which the adjustment is not made) would experience a decrease in 
payments due to the budget neutrality adjustment that is applied to 
the wage index nationally. (As finalized in the FY 2020 IPPS/LTCH 
PPS final rule, we calculate the rural floor without including the 
wage data of hospitals that have reclassified as rural under Sec.  
412.103.)
    We estimate that 255 hospitals would receive the rural floor in 
FY 2021. All IPPS hospitals in our model would have their wage 
indexes reduced by the proposed rural floor budget neutrality 
adjustment of 0.993991 We project that, in aggregate, rural 
hospitals would experience a 0.1 percent decrease in payments as a 
result of the application of the proposed rural floor budget 
neutrality because the rural hospitals do not benefit from the rural 
floor, but have their wage indexes downwardly adjusted to ensure 
that the application of the rural floor is budget neutral overall. 
We project that, in the aggregate, hospitals located in urban areas 
would experience no change in payments because increases in payments 
to hospitals benefitting from the rural floor offset decreases in 
payments to nonrural floor urban hospitals whose wage index is 
downwardly adjusted by the rural floor budget neutrality factor. 
Urban hospitals in the New England region would experience a 2.1 
percent increase in payments primarily due to the application of the 
rural floor in Massachusetts. Fifty-three urban providers in 
Massachusetts are expected to receive the rural floor wage index 
value, including the rural floor budget neutrality adjustment, which 
would increase payments overall to hospitals in Massachusetts by an 
estimated $145 million. We estimate that Massachusetts hospitals 
would receive approximately a 3.8 percent increase in IPPS payments 
due to the application of the rural floor in FY 2021. Urban Puerto 
Rico hospitals are expected to experience a 0.2 percent increase in 
payments as a result of the application of the proposed rural floor 
for FY 2021.

[[Page 32939]]

f. Effects of the Application of the Proposed Frontier State Wage Index 
and Proposed Out-Migration Adjustment (Column 6)

    This column shows the combined effects of the application of 
section 10324(a) of the Affordable Care Act, which requires that we 
establish a minimum post-reclassified wage index of 1.00 for all 
hospitals located in ``frontier States,'' and the effects of section 
1886(d)(13) of the Act, as added by section 505 of Public Law 108-
173, which provides for an increase in the wage index for hospitals 
located in certain counties that have a relatively high percentage 
of hospital employees who reside in the county, but work in a 
different area with a higher wage index. These two wage index 
provisions are not budget neutral and would increase payments 
overall by 0.1 percent compared to the provisions not being in 
effect.
    The term ``frontier States'' is defined in the statute as States 
in which at least 50 percent of counties have a population density 
less than 6 persons per square mile. Based on these criteria, 5 
States (Montana, Nevada, North Dakota, South Dakota, and Wyoming) 
are considered frontier States and 45 hospitals located in those 
States would receive a frontier wage index of 1.0000. Overall, this 
provision is not budget neutral and is estimated to increase IPPS 
operating payments by approximately $70 million. Urban hospitals 
located in the West North Central region would experience an 
increase in payments by 0.6 percent, 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 
203 providers that would receive the out-migration wage adjustment 
in FY 2021. Rural hospitals generally would qualify for the 
adjustment, resulting in a 0.1 percent increase in payments. This 
provision appears to benefit section 401 hospitals and RRCs in that 
they would each experience a 0.1 percent increase in payments. This 
out-migration wage adjustment also is not budget neutral, and we 
estimate the impact of these providers receiving the out-migration 
increase would be approximately $46 million.

g. Effects of All FY 2021 Proposed Changes (Column 7)

    Column 7 shows our estimate of the proposed changes in payments 
per discharge from FY 2020 and FY 2021, resulting from all proposed 
changes reflected in this proposed rule for FY 2021. It includes 
combined effects of the year-to-year change of the previous columns 
in the table.
    The proposed average increase in payments under the IPPS for all 
hospitals is approximately 2.5 percent for FY 2021 relative to FY 
2020 and for this row is primarily driven by the proposed changes 
reflected in Column 1. Column 7 includes the proposed annual 
hospital update of 3.1 percent to the national standardized amount. 
This proposed annual hospital update includes the proposed 3.0 
percent market basket update and the proposed 0.4 percentage point 
reduction for the multifactor productivity adjustment. As discussed 
in section II.D. of the preamble of this proposed rule, this column 
also includes the +0.5 percentage point adjustment required under 
section 414 of the MACRA. Hospitals paid under the hospital-specific 
rate would receive a 2.6 percent hospital update. As described in 
Column 1, the proposed annual hospital update with the proposed +0.5 
percent adjustment for hospitals paid under the national 
standardized amount, combined with the proposed annual hospital 
update for hospitals paid under the hospital-specific rates, would 
result in a 2.5 percent increase in payments in FY 2021 relative to 
FY 2020. This estimated increase also reflects the effects of the 
proposed adoption of the revised labor market area delineations in 
OMB Bulletin 18-04 and the effects of the proposed transition to 
apply a 5-percent cap on any decrease in a hospital's wage index 
from the hospital's final wage index from the prior fiscal year. 
Additionally, the estimated increase also reflects an estimated 
decrease in outlier payments of 0.4 percent (from our current 
estimate of FY 2020 outlier payments of approximately 5.5 percent to 
5.1 percent projected for FY 2021 based on the FY 2019 MedPAR data 
used for this proposed rule calculated for purposes of this impact 
analysis). There are also interactive effects among the various 
factors comprising the payment system that we are not able to 
isolate, which contribute to our estimate of the proposed changes in 
payments per discharge from FY 2020 and FY 2021 in Column 7.
    Overall payments to hospitals paid under the IPPS due to the 
proposed applicable percentage increase and proposed changes to 
policies related to MS-DRGs, geographic adjustments, and outliers 
are estimated to increase by 2.5 percent for FY 2021. Hospitals in 
urban areas would experience a 2.5 percent increase in payments per 
discharge in FY 2021 compared to FY 2020. Hospital payments per 
discharge in rural areas are estimated to increase by 2.3 percent in 
FY 2021.

3. Impact Analysis of Table II

    Table II presents the projected impact of the proposed changes 
for FY 2021 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 2020 with the estimated 
proposed average payments per discharge for FY 2021, as calculated 
under our models. Therefore, this table presents, in terms of the 
average dollar amounts paid per discharge, the combined effects of 
the proposed changes presented in Table I. The estimated percentage 
changes shown in the last column of Table II equal the estimated 
percentage changes in average payments per discharge from Column 7 
of Table I.

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H. Effects of Other Proposed Policy Changes

    In addition to those proposed policy changes discussed 
previously that we are able to model using our IPPS payment 
simulation model, we are proposing to make various other changes in 
this proposed rule. 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 proposed changes in this proposed rule. Generally, we 
have limited or no specific data available with which to estimate 
the impacts of these proposed changes using that payment simulation 
model. For those proposed 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 proposed changes are discussed in this section.

1. Effects of Proposed Policies Relating to New Medical Service and 
Technology Add-On Payments

a. Proposed Changes to the Alternative Pathway for Certain 
Antimicrobial Products

    In section II.H.9.b of the preamble of this proposed rule, we 
are proposing to revise Sec.  412.87(d)(1) to add drugs approved 
under FDA's LPAD pathway to the current alternative new technology 
add-on payment pathway for QIDPs, beginning with

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discharges occurring on or after October 1, 2021.
    Given the relatively recent introduction of the FDA's LPAD 
pathway there have not been any drugs that were approved under the 
FDA's LPAD pathway that applied for an NTAP under the IPPS and were 
not approved for that NTAP. If all of the future LPADs that would 
have applied for new technology add-on payments would have been 
approved under existing criteria, this proposal has no impact 
relative to current policy. To the extent that there are future 
LPADs that are the subject of applications for new technology add-on 
payments, and those applications would have been denied under the 
current new technology add-on payment criteria, this proposal is a 
cost, but that cost is not estimable. We also note that as this 
proposal, if finalized, would be effective beginning with new 
technology add-on payment applications for FY 2022, there would be 
no impact of this proposal in FY 2021.

b. Proposed Change to Announcement of Determinations and Deadline for 
Consideration of New Medical Service or Technology Applications for 
Certain Antimicrobial Products

    In section II.H.9.c. of the preamble of this proposed rule, we 
are proposing to revise Sec.  412.87(e) to add a new paragraph (3) 
which would provide for conditional new technology add-on payment 
approval for a technology for which an application is submitted 
under the alternative pathway for certain antimicrobial products at 
Sec.  412.87(d) that does not receive FDA marketing authorization by 
the July 1 deadline specified in Sec.  412.87(e)(2), provided that 
the technology receives FDA marketing authorization by July 1 of the 
particular fiscal year for which the applicant applied for new 
technology add-on payments.
    If all of the future antimicrobial products eligible for the 
alternative pathway for certain antimicrobial products at Sec.  
412.87(d) receive marketing authorization by the July 1 deadline 
specified in Sec.  412.87(e)(2), this proposal has no impact. To the 
extent that there are future antimicrobial products that do not 
receive marketing authorization by that deadline, but do receive FDA 
marketing authorization by July 1 of the particular fiscal year for 
which the applicant applied for new technology add-on payments, this 
proposal is a cost, but that cost is not estimable.

c. Proposed FY 2021 Status of Technologies Approved for FY 2020 New 
Technology Add-On Payments

    In section II.H.4. of the preamble of this proposed rule, we are 
proposing to discontinue new technology add-on payments for the 
AQUABEAM System (Aquablation), ERLEADA[supreg], 
GIAPREZATM, the remede[macr][supreg] System, 
VABOMERETM, VYXEOSTM, the Sentinel[supreg] 
Cerebral Protection System, and KYMRIAH[supreg] and YESCARTA[supreg] 
for FY 2021 because these technologies will have been on the U.S. 
market for 3 years. We also are proposing to continue to make new 
technology add-on payments for AndexXaTM, AZEDRA[supreg], 
BALVERSATM, Cablivi[supreg], ELZONRIS[supreg], 
Esketamine, Jakafi[supreg], T2 Bacteria Test Panel, XOSPATA[supreg], 
and ZEMDRITM in FY 2021 because these technologies would 
still be considered new for purposes of new technology add-on 
payments. Under Sec.  412.88(a)(2) and in conjunction with our 
proposed change to the calculation of the new technology add-on 
payments for products approved under the LPAD pathway, the new 
technology add-on payment for each case would be limited to the 
lesser of: (1) 65 percent of the costs of the new technology (or 75 
percent of the costs for technologies designated as QIDPs or 
approved under the LPAD pathway); or (2) 65 percent of the amount by 
which the costs of the case exceed the standard MS-DRG payment for 
the case (or 75 percent of the amount for technologies designated as 
QIDPs or approved under the LPAD pathway). 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 2021 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 2021 for the 10 
technologies for which we are proposing to continue to make new 
technology add-on payments in FY 2021:
     Based on the applicant's estimate for FY 2019, we 
currently estimate that new technology add-on payments for 
AndexXaTM would increase overall FY 2021 payments by 
$98,755,313 (maximum add-on payment of $18,281.25 * 5,402 patients).
     Based on the applicant's estimate for FY 2020, we 
currently estimate that new technology add-on payments for 
AZEDRA[supreg] would increase overall FY 2021 payments by 
$39,260,000 (maximum add-on payment of $98,150 * 400 patients).
     Based on the applicant's estimate for FY 2020, we 
currently estimate that new technology add-on payments for 
BALVERSATM would increase overall FY 2021 payments by 
$178,162 (maximum add-on payment of $3,563.23 * 50 patients).
     Based on the applicant's estimate for FY 2020, we 
currently estimate that new technology add-on payments for 
Cablivi[supreg] would increase overall FY 2021 payments by 
$4,351,165 (maximum add-on payment of $33,215 * 131 patients).
     Based on the applicant's estimate for FY 2020, we 
currently estimate that new technology add-on payments for 
ELZONRIS[supreg] would increase overall FY 2021 payments by 
$30,985,668 (maximum add-on payment of $125,448.05 * 247 patients).
     Based on the applicant's estimate for FY 2020, we 
currently estimate that new technology add-on payments for 
Esketamine would increase overall FY 2021 payments by $6,494,656 
(maximum add-on payment of $1,014.79 * 6,400 patients).
     Based on the applicant's estimate for FY 2020, we 
currently estimate that new technology add-on payments for 
Jakafi[supreg] would increase overall FY 2021 payments by $556,788 
(maximum add-on payment of $3,977.06 * 140 patients).
     Based on the applicant's estimate for FY 2020, we 
currently estimate that new technology add-on payments for T2 
Bacteria Test Panel would increase overall FY 2021 payments by 
$3,669,803 (maximum add-on payment of $97.50 * 37,639 patients).
     Based on the applicant's estimate for FY 2020, we 
currently estimate that new technology add-on payments for 
XOSPATA[supreg] would increase overall FY 2021 payments by 
$13,710,938 (maximum add-on payment of $7,312.50 * 1,875 patients).
     Based on the applicant's estimate for FY 2019 we 
currently estimate that new technology add-on payments for 
ZEMDRITM would increase overall FY 2021 payments by 
$10,209,375 (maximum add-on payment of $4,083.75 * 2,500 patients).
    Overall, we estimate that FY 2021 new technology add-on payments 
for technologies that were approved in FY 2020 would be 
approximately $208 million.

d. Proposed FY 2021 Applications for New Technology Add-On Payments

    In sections II.G.5. and 6. of the preamble to this proposed 
rule, we discuss 24 technologies for which we received applications 
for add-on payments for new medical services and technologies for FY 
2021. We note that three applicants withdrew their application prior 
to the issuance of this proposed rule. As explained in the preamble 
to this proposed rule, add-on payments for new medical services and 
technologies under section 1886(d)(5)(K) of the Act are not required 
to be budget neutral. As discussed in section II.G.6. of the 
preamble of this proposed rule, under the alternative pathway for 
new technology add-on payments, new technologies that are medical 
products with a QIDP designation or are part of the Breakthrough 
Device program will be considered new and not substantially similar 
to an existing technology and will not need to demonstrate that the 
technology represents a substantial clinical improvement. These 
technologies must still meet the cost criterion.
    As also discussed in section II.G.6. of the preamble of this 
proposed rule, to provide additional transparency and predictability 
with respect to these technologies, in this proposed rule we are 
making a proposal to approve or disapprove each of the nine 
alternative pathway applications based on whether the technology 
meets the cost criterion. Specifically, we are proposing to approve 
the nine alternative pathway applicant technologies (3 Breakthrough 
devices and 6 QIDPs) for FY 2021 based on our analysis of the cost 
criterion. Based on preliminary information from the applicants at 
the time of this proposed rule, we estimate that total payments for 
the nine technologies that applied under the alternative pathway, if 
approved, would be approximately $240 million for FY 2021. Total 
estimated FY 2021 payments for new technologies that are designated 
as a QIDP would be approximately $200 million, and total estimated 
FY 2021 payments for new technologies that are part of the 
Breakthrough Device program would be approximately $40 million. We 
note that these estimated payments may be updated in the final rule 
based on revised or additional information CMS receives prior to the 
final rule.
    We have not yet determined whether any of the 15 technologies 
that applied under the traditional pathway discussed in section

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II.G.5. of the preamble of this proposed rule will meet the criteria 
for new technology add-on payments for FY 2021. Consequently, it is 
premature to estimate the potential payment impact of these 15 
technologies for any potential new technology add-on payments for FY 
2021. We note that, as in past years, if any of the 15 technologies 
that applied under the traditional pathway are found to be eligible 
for new technology add-on payments for FY 2021, in the FY 2021 IPPS/
LTCH PPS final rule, we would discuss the estimated payment impact 
for FY 2021.

2. Effects of Proposed Changes to MS-DRGs Subject to the Postacute Care 
Transfer Policy and the MS-DRG Special Payment Policy

    In section IV.A. of the preamble of this proposed rule, we 
discuss our proposed changes to the list of MS-DRGs subject to the 
postacute care transfer policy and the MS DRG special payment policy 
for FY 2021. As reflected in Table 5 listed in section VI. of the 
Addendum to this proposed rule (which is available via the internet 
on the CMS website), using criteria set forth in regulations at 42 
CFR 412.4, we evaluated MS-DRG charge, discharge, and transfer data 
to determine which proposed new or revised MS-DRGs would qualify for 
the postacute care transfer and MS-DRG special payment policies. As 
a result of our proposals to revise the MS-DRG classifications for 
FY 2021, which are discussed in section II.F. of the preamble of 
this proposed rule, we are proposing to add two MS-DRGs to the list 
of MS-DRGs that would be subject to the postacute care transfer 
policy and the MS-DRG special payment policy. Column 2 of Table I in 
this Appendix A shows the effects of the proposed changes to the MS-
DRGs and the proposed relative payment weights and the application 
of the proposed recalibration budget neutrality factor to the 
standardized amounts.
    Section 1886(d)(4)(C)(i) of the Act requires us annually to make 
appropriate DRG classification changes in order to reflect changes 
in treatment patterns, technology, and any other factors that may 
change the relative use of hospital resources. The analysis and 
methods for determining the changes due to the MS-DRGs and relative 
payment weights account for and include changes as a result of the 
proposed changes to the MS-DRGs subject to the MS-DRG postacute care 
transfer and MS-DRG special payment policies. We refer readers to 
section I.G. of this Appendix A for a detailed discussion of payment 
impacts due to the proposed MS-DRG reclassification policies for FY 
2021.

3. Effects of the Proposed Changes to Medicare DSH and Uncompensated 
Care Payments for FY 2021

    As discussed in section IV.G. of the preamble of this proposed 
rule, under section 3133 of the Affordable Care Act, hospitals that 
are eligible to receive Medicare DSH payments will receive 25 
percent of the amount they previously would have received under the 
statutory formula for Medicare DSH payments under section 
1886(d)(5)(F) of the Act. The remainder, equal to an estimate of 75 
percent of what formerly would have been paid as Medicare DSH 
payments (Factor 1), reduced to reflect changes in the percentage of 
uninsured individuals and any additional statutory adjustment 
(Factor 2), is available to make additional payments to each 
hospital that qualifies for Medicare DSH payments and that has 
uncompensated care. Each hospital eligible for Medicare DSH payments 
will receive an additional payment based on its estimated share of 
the total amount of uncompensated care for all hospitals eligible 
for Medicare DSH payments. The uncompensated care payment 
methodology has redistributive effects based on the proportion of a 
hospital's amount of uncompensated care relative to the aggregate 
amount of uncompensated care of all hospitals eligible for Medicare 
DSH payments (Factor 3). The change to Medicare DSH payments under 
section 3133 of the Affordable Care Act is not budget neutral.
    In this proposed rule, we are proposing to establish the amount 
to be distributed as uncompensated care payments to DSH eligible 
hospitals, which for FY 2021 is $7,816,726,242.92. This figure 
represents 75 percent of the amount that otherwise would have been 
paid for Medicare DSH payment adjustments adjusted by a proposed 
Factor 2 of 67.86 percent. For FY 2020, the amount available to be 
distributed for uncompensated care was $8,350,599,096.04, or 75 
percent of the amount that otherwise would have been paid for 
Medicare DSH payment adjustments adjusted by a Factor 2 of 67.14 
percent. To calculate Factor 3 for FY 2021, we are proposing to use 
information on uncompensated care costs from Worksheet S-10 of 
hospitals' FY 2017 cost reports for all eligible hospitals, with the 
exception of Puerto Rico hospitals and Indian Health Service and 
Tribal hospitals, for which we are proposing to continue to use low-
income insured days from FY 2013 cost report and FY 2018 SSI days to 
determine Factor 3. For purposes of this proposed rule, we used 
uncompensated care data from the HCRIS database, as updated through 
February 19, 2020, Medicaid days from hospitals' FY 2013 cost 
reports from the same extract of HCRIS, and SSI days from the FY 
2018 SSI ratios. For a complete discussion of the proposed 
methodology for calculating Factor 3, we refer readers to section 
IV.G.4. of the preamble of this proposed rule.
    To estimate the impact of the combined effect of the proposed 
changes to Factors 1 and 2, as well as the proposed changes to the 
data used in determining Factor 3, on the calculation of Medicare 
uncompensated care payments, we compared total uncompensated care 
payments estimated in the FY 2020 IPPS/LTCH PPS final rule to total 
uncompensated care payments estimated in this FY 2021 IPPS/LTCH PPS 
proposed rule. For FY 2020, 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 
67.14 percent and multiplied by a Factor 3 calculated using the 
methodology described in the FY 2020 IPPS/LTCH PPS final rule. For 
FY 2021, 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 proposed Factor 2 of 67.86 
percent and multiplied by a Factor 3 calculated using the proposed 
methodology described previously.
    Our analysis included 2,410 hospitals that are projected to be 
eligible for DSH in FY 2021. It did not include hospitals that 
terminated their participation from the Medicare program as of 
January 22, 2020, Maryland hospitals, new hospitals, MDHs, and SCHs 
that are expected to be paid based on their hospital-specific rates. 
The 27 hospitals participating in the Rural Community Hospital 
Demonstration Program were also excluded from this analysis, as 
participating hospitals are not eligible to receive empirically 
justified Medicare DSH payments and uncompensated care payments. In 
addition, the data from merged or acquired hospitals were combined 
under the surviving hospital's CMS certification number (CCN), and 
the nonsurviving CCN was excluded from the analysis. The estimated 
impact of the proposed changes in Factors 1, 2, and 3 on 
uncompensated care payments across all hospitals projected to be 
eligible for DSH payments in FY 2021, by hospital characteristic, is 
presented in the following table.
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    The proposed changes in projected uncompensated care payments 
for FY 2021 in relation to the uncompensated care payments for FY 
2020 are driven by a proposed decrease in Factor 1 and a proposed 
increase in Factor 2, as well as by a decrease in the number of 
hospitals projected to be eligible to receive DSH in FY 2021 
relative to FY 2020. Proposed Factor 1 has decreased from $12.643 
billion to $11.519 billion, while the proposed percent change in the 
percent of individuals who are uninsured (Factor 2) has increased 
from 67.14 percent to 67.86 percent. Based on the proposed changes 
in these two factors, the impact analysis found that, across all 
projected DSH eligible hospitals, proposed FY 2021 uncompensated 
care payments are estimated at approximately $7.817 billion, or a 
proposed decrease of approximately 6.39 percent from FY 2020 
uncompensated care payments (approximately $8.351 billion). While 
these proposed changes would result in a net decrease in the amount 
available to be distributed in uncompensated care payments, the 
projected payment decreases vary by hospital type. This 
redistribution of uncompensated care payments is caused by proposed 
changes in Factor 3. As seen in the previous table, a percent change 
lower than negative 6.39 percent indicates that hospitals within the 
specified category are projected to experience a larger decrease in 
uncompensated care payments, on average, compared to the universe of 
projected FY 2021 DSH hospitals. Conversely, a percent change 
greater than negative 6.39 percent indicates that a hospital type is 
projected to have a smaller decrease than the overall average. 
Similarly, a positive percent change indicates an increase in 
uncompensated care payments. The variation in the distribution of 
payments by hospital characteristic is largely dependent on a given 
hospital's uncompensated care costs as reported in the Worksheet S-
10, or number of Medicaid days and SSI days for Puerto Rico 
hospitals and Indian Health Service and Tribal hospitals, used in 
the Factor 3 computation.
    Rural hospitals, in general, are projected to experience larger 
decreases in uncompensated care payments than their urban 
counterparts. Overall, rural hospitals are projected to receive an 
11.48 percent decrease in uncompensated care payments, while urban 
hospitals are projected to receive a 6.05 percent decrease in 
uncompensated care payments.
    By bed size, smaller rural hospitals are projected to receive 
the largest decreases in uncompensated care payments. Rural 
hospitals with 0-99 beds are projected to receive a 14.13 percent 
payment decrease, and rural hospitals with 100-249 beds are 
projected to receive an 11.44 percent

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decrease. These decreases for smaller rural hospitals are greater 
than the overall hospital average. However, larger rural hospitals 
with 250+ beds are projected to receive a 5.47 percent payment 
increase. This is not consistent with the trend among urban 
hospitals, with the smallest urban hospitals (0-99 beds) projected 
to receive a decrease in uncompensated care payments of 3.55 
percent, urban hospitals with 100-249 beds projected to receive a 
decrease of 6.23 percent, and larger urban hospitals with 250+ beds 
projected to receive a 6.12 percent decrease in uncompensated care 
payments, all of which are smaller decreases than the overall 
hospital average.
    By region, rural hospitals are expected to receive larger than 
average decreases in uncompensated care payments in all Regions, 
except for rural hospitals in the East North Central and West North 
Central Regions, which are projected to receive smaller than average 
decreases. Regionally, urban hospitals are projected to receive a 
more varied range of payment changes. Urban hospitals in the New 
England, the Middle Atlantic, West South Central, and Mountain 
Regions, as well as urban hospitals in Puerto Rico, are projected to 
receive larger than average decreases in uncompensated care 
payments. Hospitals in the South Atlantic, East North Central, East 
South Central, and West North Central Regions are projected to 
receive smaller than average decreases in uncompensated care 
payments, while urban hospitals in the Pacific Region are projected 
to receive a 3.31 percent increase in uncompensated care payments.
    By payment classification, although hospitals in urban areas 
overall are expected to receive a 5.77 percent decrease in 
uncompensated care payments, hospitals in large urban areas are 
expected to see a decrease in uncompensated care payments of 4.76 
percent, while hospitals in other urban areas are expected to 
receive a decrease in uncompensated care payments of 7.66 percent. 
By payment classification, hospitals in rural areas are projected to 
receive a decrease of 7.97 percent.
    Nonteaching hospitals are projected to receive a payment 
decrease of 6.28 percent, teaching hospitals with fewer than 100 
residents are projected to receive a payment decrease of 6.30 
percent, and teaching hospitals with 100+ residents have a projected 
payment decrease of 6.57 percent. All of these decreases are 
consistent with the overall hospital average. Proprietary and 
government hospitals are projected to receive larger than average 
decreases of 7.41 and 7.46 percent respectively, while voluntary 
hospitals are expected to receive a payment decrease of 5.52 
percent. Hospitals with less than 65 percent Medicare utilization 
are projected to receive decreases in uncompensated care payments 
consistent with the overall hospital average percent change, while 
hospitals with greater than 65 percent Medicare utilization are 
projected to receive a larger decrease of 28.82 percent. Effects of 
Proposed Reductions Under the Hospital Readmissions Reduction 
Program for FY 2021.
    In section IV.K. of the preamble of this proposed rule, we 
discuss our proposed policies for the FY 2021 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 and procedures. The table and 
analysis in this proposed rule illustrate the estimated financial 
impact of the Hospital Readmission Reduction Program payment 
adjustment methodology by hospital characteristic. 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, 2015 and June 30, 2018 (that is, the FY 2020 
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. 
For the purpose of modeling the proposed FY 2021 payment adjustment 
factors for this proposed rule, we used the payment adjustment 
factors from the FY 2020 Hospital Readmissions Reduction Program and 
the FY 2020 Hospital IPPS proposed rule Impact File to analyze 
results by hospital characteristics. In the FY 2021 IPPS/LTCH PPS 
final rule, we will provide an updated estimate of the financial 
impact using the proportion of dual-eligibles, excess readmission 
ratios, and aggregate payments for each condition/procedure and all 
discharges for applicable hospitals from the FY 2021 Hospital 
Readmissions Reduction Program applicable period (that is, July 1, 
2016 through June 30, 2019).
    These analyses include 3,027 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, 2015 and June 
30, 2018. 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, 82.80 percent of eligible 
hospitals characterized as non-teaching hospitals are expected to be 
penalized. Among teaching hospitals, 88.41 percent of eligible 
hospitals with fewer than 100 residents and 95.22 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 characteristic. The table shows the share of 
penalties as a percentage of all base operating 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, 2017 and September 30, 2018 (FY 2018). For example, the penalty 
as a share of payments for urban hospitals is 0.69 percent. This 
means that total penalties for all urban hospitals are 0.69 percent 
of total payments for urban hospitals. Measuring the financial 
impact on hospitals as a 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.
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5. Effects of Requirements Under the FY 2021 Hospital Value-Based 
Purchasing (VBP) Program

    In section IV.L. of the preamble of this proposed rule, we 
discuss the Hospital VBP Program under which the Secretary makes 
value-based incentive payments to hospitals based on their 
performance on measures during the performance period with respect 
to a fiscal year. These incentive payments will be funded for FY 
2021 through a reduction to the FY 2021 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 2021 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.L.1.b. of the preamble of this proposed rule, we 
estimate the available pool of funds for value-based incentive 
payments in the FY 2021 program year, which, in accordance with 
section 1886(o)(7)(C)(v) of the Act, will be 2.00 percent of base 
operating DRG payment amounts, or a total of approximately $1.9 
billion. This estimated available pool for FY 2021 is based on the 
historical pool of hospitals that were eligible to participate in 
the FY 2020 program year and the payment information from the 
December 2019 update to the FY 2019 MedPAR file.
    The estimated impacts of the FY 2021 program year by hospital 
characteristic, found in the table in this section, are based on 
historical TPSs. We used the FY 2020 program year's TPSs to 
calculate the proxy adjustment factors used for this impact 
analysis. These are the most recently available scores that 
hospitals were given an opportunity to review and correct. The proxy 
adjustment factors use estimated annual base operating DRG payment 
amounts derived from the December 2019 update to the FY 2019 MedPAR 
file. The proxy adjustment factors can be found in Table 16 
associated with this proposed rule (available via the internet on 
the CMS website).
    The impact analysis shows that, for the FY 2021 program year, 
the number of hospitals that are expected to receive an increase in 
their base operating DRG payment amount is higher than the number of 
hospitals that are expected to receive a decrease. On average, among 
urban hospitals, hospitals in the West North Central region are 
expected to have the largest positive percent change in base 
operating DRG payment amounts, and among rural hospitals, hospitals 
in the Pacific region are expected to have the largest positive 
percent change in base operating DRG payment amounts. Urban Middle 
Atlantic, Urban East South Central, and Urban West South Central 
regions are expected to experience, on average, a decrease in base 
operating DRG payment amounts. All other regions, both urban and 
rural, are expected to experience, on average, an increase in base 
operating DRG payment amounts.
    As DSH patient percentage increases, the average percent change 
in base operating DRG payment amounts is expected to decrease. With 
respect to hospitals' Medicare utilization as a percent of inpatient 
days (MCR), as the MCR percent increases, the average percent change 
in base operating DRG payment amounts is expected to increase for 
MCR percent 0 to 65, but for MCR percent greater than 65, the 
average percent change in base operating DRG payment amounts is 
expected to decrease. On average, teaching hospitals are expected to 
have a decrease in base operating DRG payment amounts while non-
teaching hospitals are expected to have an increase in base 
operating DRG payment amounts.
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    Actual FY 2021 program year's TPSs will not be reviewed and 
corrected by hospitals until after the FY 2021 IPPS/LTCH PPS final 
rule has been published. Therefore, the same

[[Page 32950]]

historical universe of eligible hospitals and corresponding TPSs 
from the FY 2020 program year were used for the updated impact 
analysis in this proposed rule.

6. Effects of Requirements Under the HAC Reduction Program for FY 2021

    In section IV.M. of the preamble of this proposed rule, we 
discuss the requirements for the HAC Reduction Program for FY 2021. 
In this proposed rule, we are not proposing to remove measures or 
adopt any new measures into the HAC Reduction Program.

a. Burden Associated With Validation

    In section IV.M.6. of the preamble of this proposed rule, we 
propose to change the pool of hospitals selected for validation 
under the HAC Reduction Program from up to 600 hospitals to up to 
400 hospitals, in alignment with the proposal under the Hospital IQR 
Program, as discussed in section VIII.A. of the preamble of this 
proposed rule. In section XI.B.7. of the preamble of this proposed 
rule, we update our burden estimates to reflect the proposal to 
decrease the number hospitals selected for validation and to reflect 
an updated median hourly wage, and the updated burden estimates show 
a decrease in burden of 14,400 hours and -$558,720 for each program 
year. We note the burden associated with these requirements is 
captured in an information collection request currently available 
for review and comment, OMB control number 0938-1352 (expires 
December 31, 2021).
    We also note the burden associated with collecting and 
submitting data via the NHSN system is captured under a separate OMB 
control number, 0920-0666 (expiration date November 30, 2021), and 
therefore is not included in our burden estimates.

b. The Cumulative Effect of Program Measures and the Scoring 
Methodology

    We are presenting the estimated impact of the FY 2021 HAC 
Reduction Program on hospitals by hospital characteristic. These FY 
2021 HAC Reduction Program results were calculated using the same 
scoring methodology used in the FY 2020 HAC Reduction Program. 
Hospitals received a measure score for each measure, calculated as 
the hospital's Winsorized z-score for that measure relative to other 
hospitals in the program. Each hospital's Total HAC Score was 
calculated as the equally weighted average of the hospital's measure 
scores. The table in this section presents the estimated proportion 
of hospitals in the worst-performing quartile of Total HAC Scores by 
hospital characteristic.
    Hospitals' CMS Patient Safety Indicator 90 (CMS PSI 90) measure 
results are based on Medicare fee-for-service (FFS) discharges from 
July 1, 2017 through June 30, 2019 and version 10.0 of the PSI 
software. Hospitals' measure results for Centers for Disease Control 
and Prevention (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) are derived from standardized 
infection ratios (SIRs) calculated with hospital surveillance data 
reported to the National Healthcare Safety Network (NHSN) for 
infections occurring between January 1, 2017 and December 31, 2018.
    To analyze the results by hospital characteristic, we used the 
FY 2020 final rule Impact File. This table includes 3,125 non-
Maryland hospitals with a FY 2021 Total HAC Score. Maryland 
hospitals and hospitals without a Total HAC Score are excluded from 
the table. Of these 3,125 hospitals, 3,116 hospitals had information 
for geographic location with bed size, Safety-net status, 
disproportionate share hospital (DSH) percent, and teaching status; 
3,125 had information on region, 3,088 had information for 
ownership; and 3,104 had information for Medicare Cost Report (MCR) 
percent. The first column presents a breakdown of each 
characteristic.
    The second column in the table indicates the total number of 
non-Maryland hospitals with a FY 2021 Total HAC Score and available 
data for each characteristic. For example, with regard to teaching 
status, 2,020 hospitals are characterized as non-teaching hospitals, 
846 are characterized as teaching hospitals with fewer than 100 
residents, and 250 are characterized as teaching hospitals with at 
least 100 residents. This only represents a total of 3,116 hospitals 
because the other 9 hospitals are missing from the FY 2020 final 
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 2021 HAC Reduction Program. For 
example, with regard to teaching status, 443 hospitals out of 2,020 
hospitals characterized as non-teaching hospitals would be subject 
to a payment reduction. Among teaching hospitals, 208 out of 846 
hospitals with fewer than 100 residents and 122 out of 250 hospitals 
with 100 or more residents would be subject to a payment reduction.
    The fourth column in the table indicates the proportion of 
hospitals for each characteristic that would be in the worst-
performing quartile of Total HAC Scores and thus receive a payment 
reduction under the FY 2021 HAC Reduction Program. For example, 21.9 
percent of the 2,020 hospitals characterized as non-teaching 
hospitals, 24.6 percent of the 846 teaching hospitals with fewer 
than 100 residents, and 48.8 percent of the 250 teaching hospitals 
with 100 or more residents would be subject to a payment reduction.
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7. Proposed Policy Change Related to Medical Residents Affected by 
Residency Program or Teaching Hospital Closure

    In section IV.N. of this proposed rule, we are proposing to 
amend the Medicare policy with regard to closing teaching hospitals 
and closing residency programs to address the needs of residents 
attempting to find alternative hospitals in which to complete their 
training and the incentives of home and receiving hospitals with 
regard to seamless Medicare IME and direct GME funding. There are no 
new Medicare funded slots being created by this proposal; as under 
current policy, the maximum number of FTE cap slots that may be 
transferred with displaced residents is the number equal to the 
closing hospital's IME and direct GME FTE caps. Additionally, all of 
the funding for these residents would eventually be transferred 
permanently to new hospitals under current law (section 5506 of the 
Affordable Care Act, which provides for permanent redistribution of 
slots due to hospital closure), regardless of whether or not we do 
or do not finalize these proposed changes. As a result, we believe 
that ultimately, there is no new cost generated for the Medicare 
program as a result of this proposal.

8. Effect of the Proposed Payment for Allogeneic Hematopoietic Stem 
Cell Acquisition Costs

    Section 108 of the Further Consolidated Appropriations Act, 2020 
(Pub. L. 116-94) provides that, effective for cost reporting periods 
beginning on or after October 1, 2020, payment to a subsection (d) 
hospital that furnishes an allogeneic hematopoietic stem cell 
transplant for hematopoietic stem cell acquisition shall be made on 
a reasonable cost basis, and that the Secretary shall specify the 
items included in such hematopoietic stem cell acquisition in 
rulemaking. This statutory provision also requires that, beginning 
in FY 2021, the payments made based on reasonable cost for

[[Page 32953]]

the acquisition costs of allogeneic hematopoietic stem cells be made 
in a budget neutral manner. Our proposals to implement section 108 
of the Further Consolidated Appropriations Act, 2020 are discussed 
in section II.H. of the preamble of this proposed rule, including 
our proposed adjustment to the standardized amount to ensure the 
effects of the additional payments for allogeneic hematopoietic stem 
cell acquisition costs are budget neutral, as required under that 
law.

9. Effects of Implementation of the Rural Community Hospital 
Demonstration Program in FY 2021

    In section IV.O. of the preamble of this proposed rule for FY 
2021, 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 section 410A(g)(4) of Public Law 
108-173.
    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) of Public Law 108-173 requires that in 
conducting the demonstration program under this section, the 
Secretary shall ensure that the aggregate payments made by the 
Secretary do not exceed the amount which the Secretary would have 
paid if the demonstration program under this section was not 
implemented (budget neutrality).
    In the preamble to this proposed rule, we described the terms of 
participation for the extension period authorized by Public Law 114-
255. In the FY 2018 IPPS/LTCH PPS final rule, we finalized our 
policy with regard to the effective date for the application of the 
reasonable cost-based payment methodology under the demonstration 
for those among the hospitals that had previously participated and 
were choosing to participate in the second 5-year extension period. 
According to our finalized policy, each of these previously 
participating hospitals began the second 5 years of the 10-year 
extension period on the date immediately after the date the period 
of performance under the 5-year extension period ended. 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, while 13 
additional hospitals were selected to participate. One of the 
hospitals selected in 2017 withdrew from the demonstration prior to 
beginning participation on July 1, 2018, while each of the remaining 
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. In addition, one among the previously 
participating hospitals closed effective January 2019, while one 
withdrew effective October 1, 2019. Thus, 27 hospitals are scheduled 
to participate in FY 2021.
    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.
    For this proposed rule, the resulting amount applicable to FY 
2021 is $40,804,704, which we are including in the budget neutrality 
offset adjustment for FY 2021. This estimated amount is based on the 
specific assumptions regarding the data sources used, that is, 
recently available ``as submitted'' cost reports and historical and 
currently finalized update factors for cost and payment.
    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 2015 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. All finalized cost reports are 
not yet all available for the 19 hospitals that completed a cost 
reporting period beginning in FY 2016 according to the demonstration 
cost-based payment methodology. If the entire set of finalized cost 
reports is available in time, we will include within the budget 
neutrality adjustment in the FY 2021 IPPS/LTCH final rule the 
difference between the actual costs of the demonstration as 
determined from these cost reports and the estimated costs of the 
demonstration as determined in the FY 2016 IPPS final rule.
    For this proposed rule for FY 2021, the total amount that we are 
applying to the national IPPS rates is $40,804,704.

10. Effects of Continued Implementation of the Frontier Community 
Health Integration Project (FCHIP) Demonstration

    In section VI.B.2. of the preamble of this proposed we discuss 
the implementation of the FCHIP demonstration, which allows eligible 
entities to develop and test new models for the delivery of health 
care services in eligible counties in order to improve access to and 
better integrate the delivery of acute care, extended care, and 
other health care services to Medicare beneficiaries in no more than 
four States. Budget neutrality estimates for the demonstration will 
be based on the demonstration period of August 1, 2016 through July 
31, 2019. The demonstration includes three intervention prongs, 
under which specific waivers of Medicare payment rules will allow 
for enhanced payment: Telehealth, skilled nursing facility/nursing 
facility services, and ambulance services. These waivers were 
implemented with the goal of increasing access to care with no net 
increase in costs. (We also discussed this policy in the FY 2018 
IPPS/LTCH PPS final rule (82 FR 38294 through 38296), the FY 2019 
IPPS/LTCH PPS final rule (83 FR 41516 through 41517), and the FY 
2020 IPPS/LTCH PPS final rule (84 FR 42044 through 42701), but did 
not make any changes to the policy that was adopted in FY 2017.)
    We specified the payment enhancements for the demonstration and 
selected CAHs for participation with the goal of maintaining the 
budget neutrality of the demonstration on its own terms (that is, 
the demonstration will produce savings from reduced transfers and 
admissions to other health care providers, thus offsetting any 
increase in payments resulting from the demonstration). However, 
because of the small size of this demonstration program and 
uncertainty associated with projected Medicare utilization and 
costs, in the FY 2017 IPPS/LTCH PPS final rule we adopted a 
contingency plan (81 FR 57064 through 57065) to ensure that the 
budget neutrality requirement in section 123 of Public Law 110-275 
is met. Accordingly, if analysis of claims data for the Medicare 
beneficiaries

[[Page 32954]]

receiving services at each of the participating CAHs, as well as of 
other data sources, including cost reports, shows that increases in 
Medicare payments under the demonstration during the 3-year period 
are not sufficiently offset by reductions elsewhere, we will recoup 
the additional expenditures attributable to the demonstration 
through a reduction in payments to all CAHs nationwide. The 
demonstration is projected to impact payments to participating CAHs 
under both Medicare Part A and Part B. Thus, in the event that we 
determine that aggregate payments under the demonstration exceed the 
payments that would otherwise have been made, we will recoup 
payments through reductions of Medicare payments to all CAHs under 
both Medicare Part A and Part B. Because of the small scale of the 
demonstration, it would not be feasible to implement budget 
neutrality by reducing payments only to the participating CAHs. 
Therefore, we will make the reduction to payments to all CAHs, not 
just those participating in the demonstration, because the FCHIP 
demonstration is specifically designed to test innovations that 
affect delivery of services by this provider category. As we 
explained in the FY 2017 IPPS/LTCH PPS final rule (81 FR 57064 
through 57065), we believe that the language of the statutory budget 
neutrality requirement at section 123(g)(1)(B) of the Act permits 
the agency to implement the budget neutrality provision in this 
manner. The statutory language merely refers to ensuring that 
aggregate payments made by the Secretary do not exceed the amount 
which the Secretary estimates would have been paid if the 
demonstration project was not implemented, and does not identify the 
range across which aggregate payments must be held equal.
    Under the policy adopted as stated in FY 2017 IPPS/LTCH PPS 
final rule, in the event the demonstration is found not to have been 
budget neutral, any excess costs will be recouped beginning in CY 
2020. Based on the currently available data, the determination of 
budget neutrality results is preliminary and the amount of any 
reduction to CAH payments that would be needed in order to recoup 
excess costs under the demonstration remains uncertain. Therefore, 
we are proposing to revise the policy originally adopted in the FY 
2017 IPPS/LTCH PPS final rule, to delay the implementation of any 
budget neutrality adjustment and will revisit this policy in 
rulemaking for FY 2022 when we expect to have complete data for the 
demonstration period. Since our data analysis is incomplete, it is 
not possible to determine the impact of this policy for any national 
payment system for FY 2021.

11. Effects of the Proposed Submission of Electronic Medical Records to 
Quality Improvement Organizations (QIOs)

    In section IX.A. of this proposed rule, we specify our proposals 
regarding the reimbursement to providers, practitioners and 
institutions for electronic submission of patient records required 
for QIO purposes. Over the last several years, numerous healthcare 
providers subject to QIO review activity under Sec.  476.78 and 
480.111 have requested reimbursement for submitting requested 
patient records in an electronic format. However, our regulations 
concerning reimbursement to providers and practitioners for 
submitting patient records and information required for QIO review 
activity under Sec.  476.78 only permitted reimbursement for records 
sent via photocopying and mailing or facsimile. This had the 
unintended consequence of discouraging providers from using the more 
efficient and cost effective means of submitting patient records and 
information to the QIOs in an electronic format solely because 
reimbursement was available only for patient records and information 
submitted via photocopying and mailing.
    The proposed updates to the regulation respond to requests from 
providers, by addressing reimbursement for submitting records to the 
QIO in electronic format as well as by photocopying and mailing and 
facsimile. According to 2017 Office of National Coordinator survey 
result, 96 percent of all non-federal acute care hospitals possessed 
certified health IT. Ninety-nine percent of large hospitals (more 
than 300 beds) had certified health IT, while 97 percent of medium-
sized hospitals (more than 100 beds) had certified health IT. Also 
nearly 9 in 10 (86 percent) of office-based physicians had adopted 
any EHR, and nearly 4 in 5 (80 percent) had adopted a certified EHR 
(https://dashboard.healthit.gov/quickstats/quickstats.php). Given 
the widespread adoption of the Certified Electronic Health Record 
Technology (CEHRT), we believe that the providers and QIOs now have 
the capacity to send and receive patient records in electronic 
format. In light of these facts, we believe that it would now be 
appropriate for us to require providers, practitioners and 
institutions to submit patient records to the QIOs in electronic 
format. Our proposal would also provide appropriate reimbursement 
for patient records submitted to the QIOs in an electronic format. 
We believe these changes would result in a large shift among 
providers, practitioners and institutions, which are subject to QIO 
review and which submit information and documents for the QIOs to 
perform their QIO functions under Sec. Sec.  476.78 and 480.111, 
toward submitting patient records in electronic format. As discussed 
later in this section, we believe these proposals would help reduce 
CMS's costs for QIO labor associated with scanning and uploading 
patient records they receive by mail or facsimile, as well as 
reducing the time to complete QIO reviews as electronic records are 
generally easier to store and search. Thus, a requirement for 
providers to submit patient records to QIOs in electronic format 
would be advantageous for CMS. Providers and practitioners who are 
unable to send patient records to the QIOs in an electronic format 
would be able to obtain a waiver to permit them to submit records to 
the QIO via facsimile or photocopying and mailing under our 
proposal. We are proposing a new reimbursement rate for patient 
records submitted by facsimile or by photocopying and mailing to 
account for current wage and materials costs, and proposing a waiver 
process that is minimally burdensome for providers, practitioners, 
and institutions.
    We expect that our proposal to require providers and 
practitioners to submit records to QIOs in and electronic format 
would have significant implications in terms of cost savings. 
Because CMS reimburses the QIOs directly for all payments to 
providers and practitioners for sending records to the QIOs and pays 
QIOs for their work, including the additional time and overhead 
expenses related to using paper records instead of electronic 
records. Therefore, any cost savings to the QIOs as a result of the 
adoption of electronic formats for submission of patient records 
would result in a cost savings to CMS. The less it costs to send 
records to the QIOs, the less CMS has to reimburse for those costs.
    To estimate savings, we assumed 100% compliance and that CMS 
would receive, and therefore issue, zero requests for waivers. 
Although we assume that 20 percent of providers could seek a waiver, 
given the percentage of providers that currently have access to 
Certified Electronic Health Record Technology (CEHRT), the ultimate 
projection is that all providers will be able to submit patient 
records in electronic format in the future. We are interested in 
hearing from commenters whether this is a reasonable assumption.
    We then estimate the total savings by subtracting the total cost 
of sending records electronically from the total cost of sending 
records by photocopying and mailing. Over the last 5 years, 
providers and practitioners have sent about 1.2 million patient 
records to the QIOs, totaling approximately 342 million pages of 
documents. Currently, providers are reimbursed at the rate of 12 
cents per page, which results in a total reimbursement cost of about 
$41 million over 5 years. In contrast, under our current proposal, 
sending 1.2 million records electronically at a rate of 
reimbursement of $3 per record would amount to a total reimbursement 
cost of roughly $3.6 million. Subtracting $3.6 million (the 
estimated cost of sending records electronically over 5 years) from 
$41 (the cost of sending records by fax or by mail), would result in 
a total estimated savings to CMS of $37.4 million. We would save 
money on the efforts of the QIOs to scan and process the paper 
records before sending them on for review electronically. However, 
these longer-run savings would be preceded by short-run transition 
costs, and we request comment that would facilitate the estimation 
of upfront costs experienced by QIOs.
    Based on our estimates for case volume set forth previously, and 
assuming the QIOs cost for scanning and labor is $0.10 per page, 
based on the information set out in Table 1 of this Appendix, we 
estimate that it would save CMS about $34.3 million if the agency no 
longer needed to scan 342 million pages of records. Savings in 
payments for the labor and materials costs provided to both 
providers and QIOs for photocopying, scanning, and uploading results 
in total savings to CMS of $71.8 million. Tables 2 and 3 of this 
Appendix illustrate the cost savings to CMS over 5 years.
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    The BFCC-QIO contracts under the 12th scope of work currently 
have four task orders that are awarded on a staggered 5-year basis. 
Currently CMS has budgeted $95.8 million per year for each of the 
four BFCC-QIOs task orders, for an estimated 5-year cost of $479 
million. We estimate that the costs of file transfer through 
photocopying and mailing, facsimile and in electronic formats would 
be a small fraction of the total operations budget of the QIOs. We 
believe that he proposed

[[Page 32957]]

changes would also benefit providers and practitioners in fulfilling 
their responsibilities under Sec.  476.78 (obligating providers and 
practitioners to, among other things, furnish records to QIOs) and 
under Sec.  480.111 (obligating institutions and practitioners to 
provide access, records and information to QIOs), by providing 
reimbursement for electronically providing copies of patient's 
medical records to the QIOs.
    Given our estimate, discussed in section IX.A.2.d. of this 
proposed rule that an appropriate employee can reasonably photocopy 
6 pages of documents per minute and scan documents at the rate of 6 
documents per minute, we estimate that these proposed changes would 
save providers and CMS a total of approximately 1.9 million labor 
hours over 5 years. We expect these proposals would also result in a 
positive environmental impact by avoiding printing, photocopying, 
faxing, scanning, and recycling about 342.2 million pages of medical 
records by providers and QIOs over 5 years.

12. Effects of the Proposed Changes To Allow for Electronic Filing of 
Provider Reimbursement Review Board Appeals

    In section IX.B. of the preamble of this proposed rule, we are 
proposing changes regarding PRRB appeals. We believe that these 
proposed changes would have minimal impact in terms of burden or 
cost on users. We also believe that requiring all parties involved 
in PRRB appeals to use OH CDMS would create efficiencies and reduce 
the burden and cost to external users in that, when a file or 
document is uploaded into the system and filed with the Board, the 
system simultaneously serves it on the opposing party. As a result, 
the system would eliminate the need to print documents and pay for 
postage for most submissions. Additionally, there is no material 
out-of-pocket direct cost or investment to utilize OH CDMS; parties 
do not need to purchase separate software. Finally, the required use 
of the system would also reduce the administrative burden on OH 
staff to enter data and scan correspondence, and would free up 
government resources to adjudicate cases and manage the docket. 
Similarly, it would enhance the PRRB's ability to strategically 
manage the PRRB's complex docket as it would provide better 
analytics for case management activities such as scheduling, 
jurisdictional and procedural reviews, and long-range docket 
planning. Last, the required use of the system would also reduce 
paper documents and the related costs associated with processing and 
securely storing the PRRB's records.

13. Effects of the Proposed Revisions of Medicare Bad Debt Policy

    In section IX.C. of the preamble of this proposed rule, we are 
proposing clarifications and codification of certain longstanding 
Medicare bad debt reimbursement provisions and requirements for all 
Medicare providers, suppliers, and other entities eligible to 
receive Medicare payment for bad debt by revising 42 CFR 413.89, Bad 
debts, charity, and courtesy allowances. We are also proposing to 
codify our longstanding reasonable collection effort to require a 
Medicaid remittance advice (RA) for dual eligible beneficiaries. We 
are also seeking suggestions from stakeholders regarding the best 
alternative documentation to the Medicaid RA that a provider could 
obtain and submit to Medicare to evidence the State's Medicare cost 
sharing liability (or absence thereof) in instances where the State 
does not process a Medicare crossover claim and issue a Medicaid RA 
for certain dual eligible beneficiaries. In addition, we are 
recognizing the new Accounting Standard Update--Topic 606 for 
revenue recognition and classification of Medicare bad debts. We are 
also making a technical correction to the cross references in 42 CFR 
412.622(b)(2)(i) and 42 CFR 417.536(g) to Medicare bad debt 
reimbursement policy. As a result of our proposals, there would be 
no costs to the Medicare Program and no increased burden placed upon 
providers, suppliers or other entities. As a result of our 
proposals, there would be a savings to the Medicare Program by the 
reduction of appeal and litigation costs. Providers would benefit 
and realize a burden reduction with our proposal to accept 
alternative documentation to evidence a provider's reasonable 
collection effort for certain dual eligible beneficiaries.

14. Effects of a Potential Market Based MS-DRG Relative Weight 
Methodology

    In section IV.P.4. of the preamble of this proposed rule, we are 
seeking comment on a potential methodology for estimating the MS-DRG 
relative weights beginning in FY 2024 based on the median payer-
specific negotiated charge information we are proposing to collect 
on the cost report and which we may consider adopting in the FY 2021 
IPPS/LTCH PPS final rule. We note that the estimated total annual 
burden hours for this proposal are as follows: 3,189 hospitals times 
15 hours per hospital equals 47,835 annual burden hours and 
$3,096,838. We refer readers to section XI.B.11. of the preamble of 
this proposed rule for further analysis of this assessment.
    If CMS were to adopt a change to the MS-DRG relative weight 
methodology, we would apply a budget neutrality factor to ensure 
that the overall payment impact of any MS-DRG relative weight 
changes was budget neutral, as required by section 
1886(d)(4)(C)(iii) of the Act and consistent with our current 
practice.
    Once we have access to the proposed payer-specific negotiated 
charge information at the MS-DRG level, we will be able to more 
precisely estimate the potential payment impact of any potential 
changes to the MS-DRG relative weight methodology beginning in FY 
2024. However, to explore the potential impacts more generally, we 
conducted a literature search to compare the payment rates of 
Medicare FFS, MA organizations, and other commercial payers. As 
noted in section IV.P.2.b. of the preamble of this proposed rule, 
Berenson et al.\518\ surveyed senior hospital and health plan 
executives and found that MA plans nominally pay only 100 to 105 
percent of traditional Medicare rates and, in real economic terms, 
possibly less. Respondents broadly identified three primary reasons 
for near-payment equivalence: Statutory and regulatory provisions 
that limit out-of-network payments to traditional Medicare rates, de 
facto budget constraints that MA plans face because of the need to 
compete with traditional Medicare and other MA plans, and a market 
equilibrium that permits relatively lower MA rates as long as 
commercial rates remain well above the traditional Medicare rates.
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    \518\ Berenson RA, Sunsine JH, Helms D, Lawton E. Why Medicare 
Advantage plans pay hospitals traditional Medicare prices. Health 
Aff (Millwood). 2015;34(8):1289-1295.
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    We next researched empirically based comparisons of Medicare FFS 
rates, MA organization rates, and rates of other commercial payers. 
Baker et al.\519\ used data from Medicare and the Health Care Cost 
Institute (HCCI) to identify the prices paid for hospital services 
by FFS Medicare, MA plans, and commercial insurers in 2009 and 2012. 
They calculated the average price per admission, and its trend over 
time, in each of the three types of insurance for fixed baskets of 
hospital admissions across metropolitan areas. After accounting for 
differences in hospital networks, geographic areas, and case-mix 
between MA and FFS Medicare, they found that MA plans paid 5.6 
percent less for hospital services compared to FFS Medicare. For the 
time period studied, the authors suggest that at least one channel 
through which MA plans paid lower prices was by obtaining greater 
discounts on types of FFS Medicare admissions that were known to 
have very short lengths-of-stay. They also found that the rates paid 
by commercial plans were much higher than those of either MA or FFS 
Medicare, and growing. At least some of this difference they 
indicated came from the much higher prices that commercial plans 
paid for profitable service lines.
---------------------------------------------------------------------------

    \519\ Baker LC, Bundorf MK, Devlin AM, Kessler DP. Medicare 
Advantage plans pay less than traditional Medicare pays. Health Aff 
(Millwood). 2016;35(8):1444-1451.
---------------------------------------------------------------------------

    Maeda and Nelson \520\ also analyzed data from the HCCI in their 
research. They compared the hospital prices paid by MA organizations 
and commercial plans with Medicare FFS prices using 2013 claims from 
the HCCI. The HCCI claims were used to calculate hospital prices for 
private insurers, and Medicare's payment rules were used to estimate 
Medicare FFS prices. The authors focused on stays at acute care 
hospitals in metropolitan statistical areas (MSAs). They found MA 
prices to be roughly equal to Medicare FFS prices, on average, but 
commercial prices were 89 percent higher than FFS prices. In 
addition, commercial prices varied greatly across and within MSAs, 
but MA prices varied much less. The authors considered their results 
generally consistent with the Baker et al. study findings in that 
hospital payments by MA plans were much more similar to Medicare FFS 
levels than they were to commercial payment levels, although they 
noted that

[[Page 32958]]

they used slightly different methods to calculate Medicare FFS 
prices.
---------------------------------------------------------------------------

    \520\ Maeda JLK, Nelson L. How Do the Hospital Prices Paid by 
Medicare Advantage Plans and Commercial Plans Compare with Medicare 
Fee-for-Service Prices? The Journal of Health Care Organization, 
Provision, and Financing. 2018;55(1-8)
---------------------------------------------------------------------------

    In their study, Maeda and Nelson also examined whether the ratio 
of MA prices to FFS prices varied across DRGs to assess whether 
there were certain DRGs for which MA plans tended to pay more or 
less than FFS. They ranked the ratio of MA prices to FFS prices and 
adjusted for outlier payments. They found that there were some DRGs 
where the average MA price was much higher than FFS and there were 
some DRGs where the average MA price was a bit lower than FFS. For 
example, for the time period in question on average MA plans paid 
129 percent more than FFS for rehabilitation stays (DRG 945), 33 
percent more for depressive neuroses (DRG 881), and 27 percent more 
for stays related to psychoses (DRG 885). But MA plans paid an 
average of 9 percent less than FFS for stays related to pathological 
fractures (DRG 542) and wound debridement and skin graft (DRG 464) 
(see Online Appendix Table 5 from their study). The authors state 
these results suggest that there may be certain services where MA 
plans pay more than FFS, possibly because the FFS rate for those 
services is too low, but there may be other services where MA plans 
pay less than FFS, possibly because the FFS rate for those DRGs is 
too high.
    As described previously, this body of research suggests that 
while the payer-specific charges negotiated between hospitals and MA 
organizations are generally well-correlated with Medicare IPPS 
payment rates, there may be instances where those negotiated charges 
may reflect the relative hospital resources used within an MS-DRG 
differently than our current cost-based methodology. Payer-specific 
charges negotiated between hospitals and commercial payers are 
generally not as well-correlated with Medicare IPPS payment rates.
    As previously noted, once we have access to the proposed payer-
specific negotiated charge information at the MS-DRG level, we can 
more precisely estimate the potential payment impact of any 
potential changes to the MS-DRG relative weight methodology 
beginning in FY 2024. As part of our request for comments on this 
potential new market-based methodology for estimating the MS-DRG 
relative weights, we also welcome analysis from researchers and 
others who may currently have access to payer-specific negotiated 
charge data, regarding the potential impact of the use of such data 
on the MS-DRG relative weights. As under the current methodology, 
the impact of any MS-DRG relative weight changes on an individual 
hospital would depend on the mix of services provided by that 
particular hospital.

I. Effects of Proposed Changes in the Capital IPPS

1. General Considerations

    For the impact analysis presented in this section, we used data 
from the December 2019 update of the FY 2019 MedPAR file and the 
December 2019 update of the Provider-Specific File (PSF) that was 
used for payment purposes. Although the analyses of the proposed 
changes to the capital prospective payment system do not incorporate 
cost data, we used the December 2019 update of the most recently 
available hospital cost report data (FYs 2017 and 2018) 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 
proposed change. In addition, we draw upon various sources for the 
data used to categorize hospitals in the tables. In some cases (for 
instance, the number of beds), there is a fair degree of variation 
in the data from different sources. We have attempted to construct 
these variables with the best available sources overall. However, it 
is possible that some individual hospitals are placed in the wrong 
category.
    Using cases from the December 2019 update of the FY 2019 MedPAR 
file, we simulated payments under the capital IPPS for FY 2020 and 
the proposed payments for FY 2021 for a comparison of total payments 
per case. Short-term, acute care hospitals not paid under the 
general IPPS (for example, hospitals in Maryland) are excluded from 
the simulations.
    The methodology for determining a capital IPPS payment is set 
forth at Sec.  412.312. The basic methodology for calculating the 
proposed capital IPPS payments in FY 2021 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. Then we 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:
     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. of the Addendum to this proposed rule, the proposed update 
to the capital Federal rate is 1.5 percent for FY 2021.
     In addition to the proposed FY 2021 update factor, the 
proposed FY 2021 capital Federal rate was calculated based on a 
proposed GAF/DRG budget neutrality adjustment factor of 0.9983 and a 
proposed outlier adjustment factor of 0.9461.

2. Results

    We used the payment simulation model previously described in 
section I.I. of Appendix A of this proposed rule to estimate the 
potential impact of the proposed changes for FY 2021 on total 
capital payments per case, using a universe of 3,199 hospitals. As 
previously described, the individual hospital payment parameters are 
taken from the best available data, including the December 2019 
update of the FY 2019 MedPAR file, the December 2019 update to the 
PSF, and the most recent cost report data from the December 2019 
update of HCRIS. In Table III, we present a comparison of estimated 
proposed total payments per case for FY 2020 and estimated total 
payments per case for FY 2021 based on the proposed FY 2021 payment 
policies. Column 2 shows estimates of payments per case under our 
model for FY 2020. Column 3 shows estimates of proposed payments per 
case under our model for FY 2021. Column 4 shows the proposed total 
percentage change in payments from FY 2020 to FY 2021. The change 
represented in Column 4 includes the proposed 1.5 percent update to 
the capital Federal rate and other proposed changes in the 
adjustments to the capital Federal rate. The comparisons are 
provided by: (1) Geographic location; (2) region; and (3) payment 
classification.
    The simulation results show that, on average, capital payments 
per case in FY 2021 are expected to increase as compared to capital 
payments per case in FY 2020. This expected increase overall is 
primarily due to the proposed 1.5 percent update to the capital 
Federal rate for FY 2021, in conjunction with estimated changes in 
outlier payments and DSH payments. Under Sec.  412.320, in order to 
receive capital DSH payments a hospital must be located in an urban 
area for payment purposes and have 100 or more beds. As discussed in 
section III.A.2. of the preamble of this proposed rule, there are 
counties that would become rural if we finalize our proposal to 
implement the revised OMB delineations, and therefore, hospitals in 
those areas (that have 100 or more beds) would no longer be eligible 
for capital DSH payments beginning in FY 2021. In general, regional 
variations in estimated capital payments per case in FY 2021 as 
compared to capital payments per case in FY 2020 are primarily due 
to changes in GAFs, and are generally consistent with the projected 
changes in payments due to proposed changes in the wage index (and 
proposed policies affecting the wage index), as shown in Table I in 
section I.G. of this Appendix A.
    The net impact of these proposed changes is an estimated 0.62 
percent increase in capital payments per case from FY 2020 to FY 
2021 for all hospitals (as shown in Table III).
    The geographic comparison shows that, on average, hospitals in 
both urban and rural classifications would experience an increase in 
capital IPPS payments per case in FY 2021 as compared to FY 2020. 
Capital IPPS payments per case would increase by an estimated 0.5 
percent for hospitals in urban areas while payments to hospitals in 
rural areas would increase by 0.7 percent in FY 2020 to FY 2021.
    The comparisons by region show that the estimated changes in 
capital payments per case from FY 2020 to FY 2021 would increase in 
nearly all urban areas, ranging from a 0.1 percent increase for the 
South Atlantic region to a 1.2 percent increase for the Pacific 
region. We estimate a decrease for the Mountain region of 0.4 
percent in capital

[[Page 32959]]

payments per case from FY 2020 to FY 2021. Similarly, nearly all 
rural regions are expected to increase in capital payments per case 
from FY 2020 to FY 2021, ranging from 0.3 percent for the South 
Atlantic and Mountain rural regions to a 1.6 percent increase for 
the East North Central rural region. We estimate no change in 
capital payments per case from FY 2020 to FY 2021 for the West North 
Central rural region. These regional differences are primarily due 
to the changes in the proposed GAFs and estimated changes in outlier 
payments.
    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 2020 to FY 2021. The projected increase in capital payments for 
government hospitals is estimated to be 0.9 percent. Proprietary 
hospitals and voluntary hospitals are both expected to experience an 
increase in capital IPPS payments of 0.5 percent.
    Section 1886(d)(10) of the Act established the MGCRB. Hospitals 
may apply for reclassification for purposes of the wage index for FY 
2021. Reclassification for wage index purposes also affects the GAFs 
because that factor is constructed from the hospital wage index. To 
present the effects of the hospitals being reclassified as of the 
publication of this proposed rule for FY 2021, we show the proposed 
average capital payments per case for reclassified hospitals for FY 
2021. Urban reclassified hospitals are expected to experience a 
decrease in capital payments of 0.1 percent; urban nonreclassified 
hospitals are expected to experience an increase in capital payments 
of 1.0 percent. The estimated percentage increase for rural 
reclassified hospitals is 0.9 percent, and for rural nonreclassified 
hospitals, the estimated percentage increase in capital payments is 
0.8 percent. The estimated percentage decrease for All 401 
reclassified hospitals is 0.6 percent, which is mostly due to the 
changes in the proposed GAFs.
BILLING CODE 4120-01-P

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[GRAPHIC] [TIFF OMITTED] TP29MY20.249


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BILLING CODE 4120-01-C

J. Proposed 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 proposed rule and 
section V. of the Addendum to this proposed rule, we set forth the 
annual update to the payment rates for the LTCH PPS for FY 2021. In 
the preamble of this proposed rule, we specify the statutory 
authority for the provisions that are presented, identify the 
policies for FY 2021, and present rationales for our decisions as 
well as alternatives that were considered. In this section of 
Appendix A to this proposed rule, we discuss the impact of the 
changes to the payment rate, factors, and other payment rate 
policies related to the LTCH PPS that are presented in the preamble 
of this proposed rule in terms of their estimated fiscal impact on 
the Medicare budget and on LTCHs.
    There are 360 LTCHs included in this impact analysis. We note 
that, although there are currently approximately 366 LTCHs, for 
purposes of this impact analysis, we excluded the data of all-
inclusive rate providers consistent with the development of the FY 
2021 MS-LTC-DRG relative weights (discussed in section VII.B.3.c. of 
the preamble of this proposed rule). In the impact analysis, we used 
the payment rate, factors, and policies presented in this proposed 
rule, the proposed 2.5 percent annual update to the LTCH PPS 
standard Federal payment rate, the permanent one-time budget 
neutrality adjustment factor for the estimated cost of eliminating 
the 25-percent threshold policy in FY 2021 as discussed in section 
VII.D. of the preamble of this proposed rule, the proposed update to 
the MS-LTC-DRG classifications and relative weights, the proposed 
update to the wage index values, labor-related share, and changes to 
the geographic labor-market area designations, and the proposed 5-
percent cap transition policy, and the best available claims and CCR 
data to estimate the change in payments for FY 2021.
    Under the dual rate LTCH PPS payment structure, payment for LTCH 
discharges that

[[Page 32962]]

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), reduced by 4.6 percent for FYs 2018 through 2026; or 100 
percent of the estimated cost of the case as determined under Sec.  
412.529(d)(2). In addition, there are two separate high cost outlier 
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. For FY 
2021, we expected no site neutral payment rate cases would still be 
eligible for the transitional payment method since it only applies 
to those site neutral payment rate cases whose discharges occur 
during a LTCH's cost reporting period that begins before October 1, 
2019. Site neutral payment rate cases whose discharges from an LTCH 
occur during the LTCH's cost reporting period that begins on or 
after October 1, 2019 are paid the site neutral payment rate amount 
determined under Sec.  412.522(c)(1).
    Based on the best available data for the 360 LTCHs in our 
database that were considered in the analyses used for this proposed 
rule, we estimate that overall LTCH PPS payments in FY 2021 will 
decrease by approximately 0.9 percent (or approximately $36 million) 
based on the rates and factors presented in section VII. of the 
preamble and section V. of the Addendum to this proposed rule.
    The applicability of this transitional payment method for site 
neutral payment rate cases is dependent upon both the discharge date 
of the case and the start date of the LTCH's FY 2020 cost reporting 
period. 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 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 prospective payment rate amount for the discharge 
(Sec.  412.522(c)(3)). There are LTCHs that have a cost reporting 
period beginning during FY 2019 that includes discharges that occur 
during Federal FY 2020. For example, an LTCH with a January 1, 2020 
through December 31, 2020 cost reporting period would have 9 months 
of discharges that occur during Federal FY 2020 (that is, discharges 
that occur from January 1, 2020 through September 30, 2020).
    Therefore, when estimating FY 2020 LTCH PPS payments for site 
neutral payment rate cases for this impact analysis, because the 
statute specifies that the site neutral payment rate effective date 
for a given LTCH is based on the date that the LTCH's cost reporting 
period begins during FY 2020, we included an adjustment to account 
for this rolling effective date, consistent with the general 
approach used for the LTCH PPS impact analysis presented in the FY 
2016 IPPS/LTCH PPS proposed rule (80 FR 49831). This approach 
accounts for the fact that site neutral payment rate cases in FY 
2020 that are in an LTCH's cost reporting period that begins before 
October 1, 2019 continue to be paid under the transitional payment 
method until the start of the LTCH's first cost reporting period 
beginning on or after October 1, 2019. Site neutral payment rate 
cases whose discharges from LTCHs occurring during an LTCH's cost 
reporting period that begins on or after October 1, 2019 will no 
longer be paid under the transitional payment method and will 
instead be paid the site neutral payment rate amount as determined 
under Sec.  412.522(c)(1).
    For purposes of this impact analysis, to estimate total FY 2020 
LTCH PPS payments for site neutral payment rate cases, we are 
proposing to use the same general approach as was used in the FY 
2016 IPPS/LTCH PPS proposed rule with modifications to account for 
the rolling end date to the transitional blended payment rate in FY 
2020 instead of the rolling effective date for implementation of the 
transitional site neutral payment rate in FY 2016. (We note, this is 
the same approach as was used in the FY 2018 IPPS/LTCH PPS proposed 
and final rules, which was prior to the extension of the 
transitional blended payment for LTCH cost reporting periods 
beginning in FY 2018 and FY 2019 provided by the provisions of 
section 51005(a) of the Bipartisan Budget Act of 2018 (Pub. L. 115-
123). In summary, under this approach, we grouped LTCHs based on the 
quarter their cost reporting periods will begin during FY 2020. For 
example, LTCHs with cost reporting periods that begin during October 
through December 2020 begin during the first quarter of FY 2020. For 
LTCHs grouped in each quarter of FY 2020, we modeled those LTCHs' 
estimated FY 2020 site neutral payment rate payments under the 
transitional blended payment rate based on the quarter in which the 
LTCHs in each group will 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, the first group consists of 36 LTCHs 
whose cost reporting period begins in the first quarter of FY 2020 
so that, for purposes of this estimate, we assume all 36 LTCHs began 
their FY 2020 cost reporting period on October 1, 2019.) Second, we 
estimated the proportion of FY 2020 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, as 
discussed in more detail later in this section, we estimate the 
first quarter group will discharge 7.9 percent of all FY 2020 site 
neutral payment rate cases; and therefore, we estimate that group of 
LTCHs will discharge 7.9 percent of all FY 2020 site neutral payment 
rate cases in each quarter of FY 2020.) Then, we modeled estimated 
FY 2020 payments on a quarterly basis under the LTCH PPS standard 
Federal payment rate based on the assumptions described previously. 
We continue to believe that this approach is a reasonable means of 
taking the rolling effective date into account when estimating FY 
2020 payments.
    For purposes of this impact analysis, to estimate total FY 2021 
LTCH PPS payments for site neutral payment rate cases, the 
transitional blended payment rate was not applied to such cases 
because all discharges in FY 2021 are either in the LTCH's cost 
reporting period that began during FY 2020 or in the LTCH's cost 
reporting period that will begin during FY 2021. Site neutral 
payment rate cases whose discharges from an LTCH occur during the 
LTCH's cost reporting period that begins on or after October 1, 2019 
are paid the site neutral payment rate amount determined under Sec.  
412.522(c)(1).
    Based on the fiscal year begin date information in the December 
2019 update of the provider specific file (PSF) and the LTCH claims 
from the December 2019 update of the FY 2019 MedPAR files for the 
360 LTCHs in our database used for this proposed rule, we found the 
following: 7.9 percent of site neutral payment rate cases are from 
36 LTCHs whose cost reporting periods began during the first quarter 
of FY 2020; 26.5 percent of site neutral payment rate cases are from 
84 LTCHs whose cost reporting periods will begin in the second 
quarter of FY 2020; 9.4 percent of site neutral payment rate cases 
are from 48 LTCHs whose cost reporting periods will begin in the 
third quarter of FY 2020; and 56.2 percent of site neutral payment 
rate cases are from 188 LTCHs whose cost reporting periods will 
begin in the fourth quarter of FY 2020. (We note, four of the 360 
LTCHs in our database used for this proposed rule did not have any 
site neutral payment rate cases.) Therefore, the following 
percentages apply in the approach described previously:
     First Quarter FY 2020: 7.9 percent of site neutral 
payment rate cases (that is, the percentage of discharges from LTCHs 
whose FY 2020 cost reporting period began in the first quarter of FY 
2020) are no longer eligible for the transitional blended payment 
method, while the remaining 92.1 percent of site neutral payment 
rate discharges are eligible to be paid under the transitional 
payment method.
     Second Quarter FY 2020: 34.4 percent of site neutral 
payment rate second quarter discharges (that is, the percentage of 
discharges from LTCHs whose FY 2020 cost reporting period that 
begins in the first or second quarter of FY 2020) are no longer 
eligible for the transitional blended payment method, while the 
remaining 65.6 percent of site neutral payment rate second quarter 
discharges are eligible to be paid under the transitional payment 
method.
     Third Quarter FY 2020: 43.8 percent of site neutral 
payment rate third quarter discharges (that is, the percentage of 
discharges from LTCHs whose FY 2020 cost reporting period that 
begins in the first, second, or third quarter of FY 2020) are no 
longer eligible for the transitional blended payment method while 
the remaining 56.2 percent of site neutral payment rate third 
quarter discharges are eligible to be paid under the transitional 
payment method.
     Fourth Quarter FY 2021: 100.0 percent of site neutral 
payment rate fourth quarter

[[Page 32963]]

discharges (that is, the percentage of discharges from LTCHs whose 
FY 2020 cost reporting period that begins in the first, second, 
third, or fourth quarter of FY 2020) are no longer eligible for the 
transitional blended payment method.
    Based on the FY 2019 LTCH cases that were used for the analysis 
in this proposed rule, approximately 25 percent of those cases were 
classified as site neutral payment rate cases (that is, 25 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 2021 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 2021, we 
estimate that aggregate LTCH PPS payments for these site neutral 
payment rate cases will decrease by approximately 21 percent (or 
approximately $105 million). We note, we estimate payments to site 
neutral payment rate cases in FY 2021 represent approximately 10 
percent of estimated aggregate FY 2021 LTCH PPS payments.
    Based on the FY 2019 LTCH cases that were used for the analysis 
in this proposed rule, approximately 75 percent of LTCH cases will 
meet the patient-level criteria for exclusion from the site neutral 
payment rate in FY 2021, 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 2021 will increase approximately 2.1 percent (or 
approximately $69 million). This estimated increase in LTCH PPS 
payments for LTCH PPS standard Federal payment rate cases in FY 2021 
is primarily due to the proposed 2.5 percent annual update to the 
LTCH PPS standard Federal payment rate for FY 2021 and the projected 
0.5 percent decrease in high cost outlier payments discussed in 
section V.D.3.b.(3). of the Addendum to this proposed rule.
    Based on the 360 LTCHs that were represented in the FY 2019 LTCH 
cases that were used for the analyses in this proposed rule 
presented in this Appendix, we estimate that aggregate FY 2020 LTCH 
PPS payments will be approximately $3.797 billion, as compared to 
estimated aggregate FY 2021 LTCH PPS payments of approximately 
$3.761 billion, resulting in an estimated overall decrease in LTCH 
PPS payments of approximately $36 million. As discussed earlier, 
this estimated decrease in payments is primarily due to the rolling 
end to the statutory transitional blended payment rate for site 
neutral payment rate cases. We also note that the estimated $36 
million decrease in LTCH PPS payments in FY 2021 does not reflect 
changes in LTCH admissions or case-mix intensity, which will also 
affect the overall payment effects of the policies in this proposed 
rule.
    The LTCH PPS standard Federal payment rate for FY 2020 is 
$42,677.64. For FY 2021, we are proposing to establish an LTCH PPS 
standard Federal payment rate of $43,849.28 which reflects the 
proposed 2.5 percent annual update to the LTCH PPS standard Federal 
payment rate, the incremental change in the one-time budget 
neutrality adjustment factor of 0.991249 for eliminating the 25-
percent threshold policy in FY 2021 as discussed in section VII.D. 
of the preamble of this proposed rule, and the proposed budget 
neutrality factor for general updates to the area wage level 
adjustment of 1.0018755 (discussed in section V.B.6. of the Addendum 
to this proposed rule). For LTCHs that fail to submit data for the 
LTCH QRP, in accordance with section 1886(m)(5)(C) of the Act, we 
are proposing an LTCH PPS standard Federal payment rate of 
$42,993.68. 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 2021 LTCH PPS standard Federal payment 
rate are applied to the FY 2020 LTCH PPS standard Federal rate set 
forth under Sec.  412.523(c)(3)(xvi) (that is, $42,677.64).
    Table IV shows the estimated impact for LTCH PPS standard 
Federal payment rate cases. The estimated change attributable solely 
to the proposed annual update of 2.5 percent to the LTCH PPS 
standard Federal payment rate is projected to result in an increase 
of 2.5 percent in payments per discharge for LTCH PPS standard 
Federal payment rate cases from FY 2020 to FY 2021, on average, for 
all LTCHs (Column 6). The estimated increase of 2.5 percent shown in 
Column 6 of Table IV also includes estimated payments for short-stay 
outlier (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 for LTCHs that 
do not submit the required LTCH QRP data. However, 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 still rounds to approximately 2.5 percent, the same as 
the proposed annual update for FY 2021.
    For FY 2021, we are proposing to update the wage index values 
based on the most recent available data (data from cost reporting 
periods beginning during FY 2017 which is the same data used for the 
proposed FY 2021 IPPS wage index), the proposed labor-related share 
of 68.0 for FY 2021, based on the most recent available data (IGI's 
fourth quarter 2019 forecast) on the relative importance of the 
labor-related share of operating and capital costs of the proposed 
2017-based LTCH market basket, and the proposed changes to the labor 
market areas based on the revisions to the CBSA delineations. We 
also are applying an area wage level budget neutrality factor of 
1.0018755 to ensure that the proposed changes to the area wage level 
adjustment, including the proposed 5-percent cap transition policy, 
would not result in any change in estimated aggregate LTCH PPS 
payments to LTCH PPS standard Federal payment rate cases.
    We currently estimate total high cost outlier payments for LTCH 
PPS standard Federal payment rate cases will decrease from FY 2020 
to FY 2021. Based on the FY 2019 LTCH cases that were used for the 
analyses in this proposed rule, we estimate that the FY 2020 high 
cost outlier threshold of $26,778 (as established in the FY 2020 
IPPS/LTCH PPS final rule) would result in estimated high cost 
outlier payments for LTCH PPS standard Federal payment rate cases in 
FY 2020 that are projected to exceed the 7.975 percent target. 
Specifically, we currently estimate that high cost outlier payments 
for LTCH PPS standard Federal payment rate cases will be 
approximately 8.5 percent of the estimated total LTCH PPS standard 
Federal payment rate payments in FY 2020. Combined with our estimate 
that FY 2021 high cost outlier payments for LTCH PPS standard 
Federal payment rate cases will be 7.975 percent of estimated total 
LTCH PPS standard Federal payment rate payments in FY 2021, this 
will result in an estimated decrease in high cost outlier payments 
of approximately 0.5 percent between FY 2020 and FY 2021. We note 
that, consistent with past practice, in calculating these estimated 
high cost outlier payments, we increased estimated costs by an 
inflation factor of 5.4 percent (determined by the Office of the 
Actuary) to update the FY 2019 costs of each case to FY 2021.
    Table IV shows the estimated impact of the payment rate and 
policy changes on LTCH PPS payments for LTCH PPS standard Federal 
payment rate cases for FY 2021 by comparing estimated FY 2020 LTCH 
PPS payments to estimated FY 2021 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.3. of this Appendix.
    As we discuss in detail throughout this proposed rule, based on 
the most recent available data, we believe that the provisions of 
this proposed rule relating to the LTCH PPS, which are projected to 
result in an overall 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.

2. Proposed Impact on Rural Hospitals

    For purposes of section 1102(b) of the Act, we define a small 
rural hospital as a hospital that is located outside of an urban 
area and has fewer than 100 beds. As shown in Table IV, we are 
projecting a 1.8 percent increase 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 2019 data for the 17 
rural LTCHs (out of 360 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. Proposed 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

[[Page 32964]]

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, 
reduced by 4.6 percent for FYs 2018 through 2026, including any 
applicable HCO payments, or 100 percent of the estimated cost of the 
case, reduced by 4.6 percent. 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.2. of this Appendix, we project a 
decrease in aggregate LTCH PPS payments in FY 2021 of approximately 
$36 million. This estimated decrease in payments reflects the 
projected increase in payments to LTCH PPS standard Federal payment 
rate cases of approximately $69 million and the projected decrease 
in payments to site neutral payment rate cases of approximately $105 
million under the dual rate LTCH PPS payment rate structure required 
by the statute beginning in FY 2016. (We note that these 
calculations are based on unrounded numbers and thus may not sum as 
expected.)
    As discussed in section V.D. of the Addendum to this proposed 
rule, our actuaries project cost and resource changes for site 
neutral payment rate cases due to the site neutral payment rates 
required under the statute. Specifically, our actuaries project that 
the costs and resource use for cases paid at the site neutral 
payment rate will likely be lower, on average, than the costs and 
resource use for cases paid at the LTCH PPS standard Federal payment 
rate, and will likely mirror the costs and resource use for IPPS 
cases assigned to the same MS-DRG. While we are able to incorporate 
this projection at an aggregate level into our payment modeling, 
because the historical claims data that we are using in this 
proposed rule to project estimated FY 2021 LTCH PPS payments (that 
is, FY 2019 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.3. 
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 proposed provider impact analysis for the 
changes that affect LTCH PPS payments for LTCH PPS standard Federal 
payment rate cases.

b. Proposed 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 412.533 and 412.535. 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), reduced by 4.6 
percent for FYs 2018 through 2026, 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 
proposed rule on different categories of LTCHs for FY 2021, it is 
necessary to estimate payments per discharge for FY 2020 using the 
rates, factors, and the policies established in the FY 2020 IPPS/
LTCH PPS proposed rule and estimate payments per discharge for FY 
2021 using the rates, factors, and the policies in this FY 2021 
IPPS/LTCH PPS proposed rule (as discussed in section VII. of the 
preamble of this proposed rule and section V. of the Addendum to 
this proposed rule). As discussed elsewhere in this proposed rule, 
these estimates are based on the best available LTCH claims data and 
other factors, such as the application of inflation factors to 
estimate costs for HCO cases in each year. The resulting analyses 
can then be used to compare how our policies applicable to LTCH PPS 
standard Federal payment rate cases affect different groups of 
LTCHs.
    For the following analysis, we group hospitals based on 
characteristics provided in the OSCAR data, cost report data in 
HCRIS, and PSF data. Hospital groups included the following:
     Location: Large urban/other urban/rural.
     Participation date.
     Ownership control.
     Census region.
     Bed size.

c. Proposed 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 policies on payments for LTCH PPS 
standard Federal payment rate cases, we simulated FY 2020 and 
proposed FY 2021 payments on a case-by-case basis using historical 
LTCH claims from the FY 2019 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 2019 MedPAR files. For 
modeling FY 2020 LTCH PPS payments, we used the FY 2020 standard 
Federal payment rate of $42,677.64 (or $41,844.90 for LTCHs that 
failed to submit quality data as required under the requirements of 
the LTCH QRP). Similarly, for modeling payments based on the 
proposed FY 2021 LTCH PPS standard Federal payment rate, we used the 
proposed FY 2021 standard Federal payment rate of $43,849.28 (or 
$42,993.68 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 
2020 LTCH PPS payments, we used the current FY 2020 labor-related 
share (66.3 percent), the wage index values established in the 
Tables 12A and 12B listed in the Addendum to the FY 2020 IPPS/LTCH 
PPS proposed rule (which are available via the internet on the CMS 
website), the FY 2020 HCO fixed-loss amount for LTCH PPS standard 
Federal payment rate cases of $26,778 (as reflected in the FY 2020 
IPPS/LTCH PPS final rule), and the FY 2020 COLA factors (shown in 
the table in section V.C. of the Addendum to that final rule) to 
adjust the FY 2020 nonlabor-related share (33.7 percent) for LTCHs 
located in Alaska and Hawaii. Similarly, for modeling FY 2021 LTCH 
PPS payments, we used the proposed FY 2021 LTCH PPS labor-related 
share (68.0 percent), the proposed FY 2021 wage index values from 
Tables 12A and 12B listed in section VI. of the Addendum to this 
proposed rule (which are available via the internet on the CMS 
website), the FY 2021 fixed-loss amount for LTCH PPS standard 
Federal payment rate cases of $30,515 (as discussed in section 
V.D.3. of the Addendum to this proposed rule), and the proposed FY 
2021 COLA factors (shown in the table in section V.C. of the 
Addendum to this proposed rule) to adjust the FY 2021 nonlabor-
related share (32.0 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

[[Page 32965]]

factor of 2.5 percent (determined by the Office of the Actuary) to 
update the FY 2019 costs of each case to FY 2020, and an inflation 
factor of 5.4 percent (determined by the Office of the Actuary) to 
update the FY 2019 costs of each case to FY 2021.
    The impacts that follow reflect the estimated ``losses'' or 
``gains'' among the various classifications of LTCHs from FY 2020 to 
FY 2021 based on the payment rates and policy changes applicable to 
LTCH PPS standard Federal payment rate cases presented in this 
proposed rule. Table IV illustrates the estimated aggregate impact 
of the 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 2020 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 2021 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 2020 to FY 
2021 due to the proposed annual update to the standard Federal rate 
(as discussed in section V.A.2. of the Addendum to this proposed 
rule).
     The seventh column shows the percentage change in 
estimated payments per discharge for LTCH PPS standard Federal 
payment rate cases from FY 2020 to FY 2021 for changes due to the 
proposed changes to the area wage level adjustment (that is, the 
updated hospital wage data, proposed labor-related share, and the 
proposed to the geographic labor-market area designations, including 
the proposed 5-percent cap transition policy), and the application 
of the proposed corresponding budget neutrality factor (as discussed 
in section V.B.6. of the Addendum to this proposed rule).
     The eighth column shows the percentage change in 
estimated payments per discharge for LTCH PPS standard Federal 
payment rate cases from FY 2020 (Column 4) to FY 2021 (Column 5) for 
all proposed changes.
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d. Results

    Based on the FY 2019 LTCH cases (from 360 LTCHs) that were used 
for the analyses in this proposed rule, we have prepared the 
following summary of the impact (as shown in Table IV) of the LTCH 
PPS payment rate and proposed policy changes for LTCH PPS standard 
Federal payment rate cases presented in this proposed rule. The 
impact analysis in Table IV shows that estimated payments per 
discharge for LTCH PPS

[[Page 32968]]

standard Federal payment rate cases are projected to increase 2.1 
percent, on average, for all LTCHs from FY 2020 to FY 2021 as a 
result of the payment rate and policy changes applicable to LTCH PPS 
standard Federal payment rate cases presented in this proposed rule. 
This estimated 2.1 percent increase in LTCH PPS payments per 
discharge was determined by comparing estimated FY 2021 LTCH PPS 
payments (using the proposed payment rates and factors discussed in 
this proposed rule) to estimated FY 2020 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.3. 
of this Appendix).
    As stated previously, we are proposing to update the LTCH PPS 
standard Federal payment rate for FY 2021 by 2.5 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. In addition, we are applying 
the incremental change in the one-time budget neutrality adjustment 
factor of 0.991249 for the cost of eliminating the 25-percent 
threshold policy in FY 2021 as discussed in section VII.D. of the 
preamble of this proposed rule. Consistent with Sec.  412.523(d)(4), 
we also are applying a proposed budget neutrality factor for 
proposed changes to the area wage level adjustment of 1.0018755 
(discussed in section V.B.6. of the Addendum to this proposed rule), 
based on the best available data at this time, to ensure that any 
proposed changes to the area wage level adjustment will not result 
in any change (increase or decrease) in estimated aggregate LTCH PPS 
standard Federal payment rate payments. As we also explained earlier 
in this section, for most categories of LTCHs (as shown in Table IV, 
Column 6), the estimated payment increase due to the proposed 2.5 
percent annual update to the LTCH PPS standard Federal payment rate 
is projected to result in approximately a 2.5 percent increase in 
estimated payments per discharge for LTCH PPS standard Federal 
payment rate cases for all LTCHs from FY 2020 to FY 2021. We note 
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 slightly less than 2.5 percent due to the 
annual update to the LTCH PPS standard Federal payment rate for FY 
2021.

(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 4 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 2020 to FY 2021 for all 
hospitals is 2.1 percent. The projected increase for urban hospitals 
is 2.1 percent for urban hospitals, while the projected increase for 
rural hospitals is 1.8 percent. This smaller than average projected 
increase for rural LTCHs is primarily due to the proposed changes to 
the area wage adjustment, including the proposed changes to the 
labor market areas.

(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 41 percent and 43 
percent, respectively) are in LTCHs that began participating in the 
Medicare program between October 1993 and September 2002 and after 
October 2002. These LTCHs are expected to experience an increase in 
estimated payments per discharge for LTCH PPS standard Federal 
payment rate cases from FY 2020 to FY 2021 of 2.0 percent and 2.1 
percent, respectively. LTCHs that began participating in the 
Medicare program between October 1983 and September 1993 are 
projected to experience the largest percent increase, 2.2 percent, 
in estimated payments per discharge for LTCH PPS standard Federal 
payment rate cases from FY 2020 to FY 2021, 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 1.9 percent in 
estimated payments per discharge for LTCH PPS standard Federal 
payment rate cases from FY 2020 to FY 2021. Approximately 40 percent 
of LTCHs began participating in the Medicare program between October 
1993 and September 2002, and these LTCHs are projected to experience 
an increase of 2.0 percent in estimated payments for LTCH PPS 
standard Federal payment rate cases from FY 2020 to FY 2021. LTCHs 
that began participating in the Medicare program after October 1, 
2002, which treat approximately 43 percent of all LTCH PPS standard 
Federal payment rate cases, are projected to experience a 2.1 
percent increase in estimated payments from FY 2020 to FY 2021.

(3) Ownership Control

    LTCHs are grouped into three categories based on ownership 
control type: Voluntary, proprietary, and government. Based on the 
most recent available data, approximately 17 percent of LTCHs are 
identified as voluntary (Table IV). The majority (approximately 80 
percent) of LTCHs are identified as proprietary, while government 
owned and operated LTCHs represent approximately 3 percent of LTCHs. 
Based on ownership type, voluntary and proprietary LTCHs are each 
expected to experience a 2.1 percent increase in payments to LTCH 
PPS standard Federal payment rate cases. Government owned and 
operated LTCHs, meanwhile, are expected to experience a 1.9 percent 
increase in payments to LTCH PPS standard Federal payment rate cases 
from FY 2020 to FY 2021.

(4) Census Region

    Estimated payments per discharge for LTCH PPS standard Federal 
payment rate cases for FY 2021 are projected to increase across all 
census regions. LTCHs located in the Pacific region are projected to 
experience the largest increase at 2.7 percent. The remaining 
regions are projected to experience an increase in payments in the 
range of 1.7 to 2.2 percent. These regional variations are primarily 
due to the proposed changes to the area wage adjustment, including 
the proposed changes to the labor market areas.

(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 lowest increase in payments for LTCH PPS standard Federal 
payment rate cases, 1.8 percent. The majority of LTCHs, that is 
those with 25-49 beds, 75-124 beds, and with 200 or more beds, will 
experience an increase in payments for LTCH PPS standard Federal 
payment rate cases of 2.1 percent. LTCHs with 50-74 beds are 
projected to experience the largest increase in payments of 2.2 
percent.

5. Effect on the Medicare Program

    As stated previously, we project that the provisions of this 
proposed rule will result in an increase in estimated aggregate LTCH 
PPS payments to LTCH PPS standard Federal payment rate cases in FY 
2021 relative to FY 2020 of approximately $69 million (or 
approximately 2.1 percent) for the 360 LTCHs in our database. 
Although, as stated previously, the hospital-level impacts do not 
include LTCH PPS site neutral payment rate cases, we estimate that 
the provisions of this proposed rule will result in a decrease in 
estimated aggregate LTCH PPS payments to site neutral payment rate 
cases in FY 2021 relative to FY 2020 of approximately $105 million 
(or approximately -21 percent) for the 360 LTCHs in our database. 
(As noted previously, we estimate payments to site neutral payment 
rate cases in FY 2021 represent approximately 10 percent of total 
estimated FY 2021 LTCH PPS payments.) Therefore, we project that the 
provisions of this proposed rule will result in a decrease in 
estimated aggregate LTCH PPS payments for all LTCH cases in FY 2021 
relative to FY 2020 of approximately $36 million (or approximately -
0.9 percent) for the 360 LTCHs in our database.

6. Effect on Medicare Beneficiaries

    Under the LTCH PPS, hospitals receive payment based on the 
average resources consumed by patients for each diagnosis. We do not 
expect any changes in the quality of care or access to services for 
Medicare beneficiaries as a result of this proposed rule, but we 
continue to expect that paying prospectively for LTCH services will 
enhance the efficiency of the Medicare program. As discussed 
previously, we do not expect the

[[Page 32969]]

continued implementation of the site neutral payment system to have 
a negative impact on access to or quality of care, as demonstrated 
in areas where there is little or no LTCH presence, general short-
term acute care hospitals are effectively providing treatment for 
the same types of patients that are treated in LTCHs.

K. Effects of Proposed Requirements for the Hospital Inpatient 
Quality Reporting (IQR) Program

    In section VIII.A. of the preamble of this proposed rule, we 
discuss our 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 2022 payment determination and 
subsequent years.
    In this proposed rule, we are proposing reporting, submission, 
and public display requirements for eCQMs, including policies to: 
(1) Progressively increase the numbers of quarters of eCQM data 
reported, from one self-selected quarter of data to four quarters of 
data over a 3-year period, by requiring hospitals to report: (a) Two 
quarters of data for the CY 2021 reporting period/FY 2023 payment 
determination for each of the four self-selected eCQMs; (b) three 
quarters of data for the CY 2022 reporting period/FY 2024 payment 
determination for three self-selected eCQMS and the Safe Use of 
Opioids eCQM; and (c) four quarters of data beginning with the CY 
2023 reporting period/FY 2025 payment determination and for 
subsequent years, while continuing to allow hospitals to report: (i) 
Three self-selected eCQMs, and (ii) the Safe Use of Opioids eCQM; 
and (2) begin public display of eCQM data beginning with data 
reported by hospitals for the CY 2021 reporting period and for 
subsequent years. The Hospital IQR Program eCQM-related proposals 
are in alignment with proposals under the Promoting Interoperability 
Program. We also are proposing to expand the requirement to use EHR 
technology certified to the 2015 Edition for submitting data on not 
only the previously finalized Hybrid Hospital-Wide Readmission 
measure, but all hybrid measures in the Hospital IQR Program. While 
we believe there would be no change to the information collection 
burden estimate due to public display of eCQM data, we acknowledge 
that there is other burden associated with this proposal. For 
example, there is burden associated with the optional reviewing of 
hospital-specific reports during the public reporting preview; 
however, we believe this burden is nominal because hospitals already 
review these reports with respect to other types of measures for the 
Hospital IQR Program.
    We also are proposing to make several changes to streamline 
validation processes under the Hospital IQR Program. We are 
proposing to: (1) Require the use of electronic file submissions via 
a CMS-approved secure file transmission process and no longer allow 
the submission of paper copies of medical records or copies on 
digital portable media such as CD, DVD, or flash drive starting with 
validation affecting the FY 2024 payment determination; (2) combine 
the validation processes for chart-abstracted measures and eCQMs for 
validation affecting the FY 2024 payment determination by: (a) 
Aligning data submission quarters; (b) combining hospital selection, 
including: (i) Reducing the pool of hospitals randomly selected for 
chart-abstracted measure validation; and (ii) integrating and 
applying targeting criteria for eCQM validation; (c) removing 
previous exclusion criteria; and (d) combining scoring processes by 
providing one combined validation score for the validation of chart-
abstracted measures and eCQMs with the eCQM portion of the combined 
score weighted at zero; and (3) formalize the process for conducting 
educational reviews for eCQM validation affecting the FY 2023 
payment determination in alignment with current processes for 
providing feedback for chart-abstracted validation results.
    We estimate a total information collection burden increase for 
3,300 IPPS hospitals of 6,533 hours (6,600 hours-67 hours) 
associated with our proposed policies and updated burden estimates 
and a total cost increase related to this information collection of 
approximately $253,480 ($38.80 hourly wage x 6,533 hours) (which 
also reflects use of an updated hourly wage rate), across a 4-year 
period from the CY 2021 reporting period/FY 2023 payment 
determination through the CY 2024 reporting period/FY 2026 payment 
determination, compared to our currently approved information 
collection burden estimates. We refer readers to section XI.B.7. of 
the preamble of this proposed rule (information collection 
requirements) for a detailed discussion of the calculations 
estimating the changes to the information collection burden for 
submitting data to the Hospital IQR Program.
    With regard to our proposal to combine the hospital selection 
process, including the reduction of the pool of hospitals randomly 
selected for chart-abstracted measure validation from 400 hospitals 
to up to 200 hospitals, while we expect no change to the information 
collection burden for the Hospital IQR Program as discussed in 
section XI.B.7.b. of this preamble of this proposed rule because we 
directly reimburse hospitals for medical records, we believe there 
may be other cost savings beyond information collection burden due 
to 200 fewer hospitals being selected for Hospital IQR Program 
validation each year.
    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.

L. Effects of Requirements for the PPS-Exempt Cancer Hospital 
Quality Reporting (PCHQR) Program

    In section VIII.B. of the preamble of this proposed rule, we 
discuss our proposed policies for the quality data reporting program 
for PPS-exempt cancer hospitals (PCHs), which we refer to as the 
PPS-exempt Cancer Hospital Quality Reporting (PCHQR) Program. The 
PCHQR Program is authorized under section 1866(k) of the Act, which 
was added by section 3005 of the Affordable Care Act. There is no 
financial impact to PCH Medicare reimbursement if a PCH does not 
submit data.
    In section VIII.B.4. of the preamble of this proposed rule, we 
are proposing to adopt refined versions of two existing measures: 
The Catheter-Associated Urinary Tract Infection (CAUTI) Outcome 
Measure and the Central Line-Associated Bloodstream Infection 
(CLABSI) Outcome Measure, beginning with the FY 2023 program year. 
As explained in section XI.B.8. of the preamble of this proposed 
rule, we do not anticipate any change in burden hours on the PCHs 
associated with our proposal to refine the CAUTI and CLABSI measures 
beginning with the FY 2023 program year because there are no changes 
to the data submission requirements for CAUTI and CLABSI.

M. Effects of Proposed Requirements for the Long-Term Care Hospital 
Quality Reporting Program (LTCH QRP)

    We are not proposing any new policies for the LTCH QRP in this 
proposed rule.

N. Effects of Proposed Requirements Regarding the Promoting 
Interoperability Programs

    In section VIII.D. of the preamble of this proposed rule, we 
discuss our proposed requirements for eligible hospitals and CAHs 
participating in the Medicare and Medicaid Promoting 
Interoperability Programs. Specifically, we are proposing the 
following changes for eligible hospitals and CAHs that attest to CMS 
under the Medicare Promoting Interoperability Program: (1) An EHR 
reporting period of a minimum of any continuous 90-day period in CY 
2022 for new and returning participants (eligible hospitals and 
CAHs); (2) to maintain the Electronic Prescribing Objective's Query 
of PDMP measure as optional and worth 5 bonus points in CY 2021; (3) 
to modify the name of the Support Electronic Referral Loops by 
Receiving and Incorporating Health Information measure; (4) to 
progressively increase the number of quarters for which hospitals 
are required to report eCQM data, from the current requirement of 
one self-selected calendar quarter of data, to four calendar 
quarters of data, over a three year period. Specifically, we propose 
to require: (a) 2 self-selected calendar quarters of data for the CY 
2021 reporting period; (b) 3 self-selected calendar quarters of data 
for the CY 2022 reporting period; and (c) 4 self-selected calendar 
quarters of data beginning with the CY 2023 reporting period, where 
the proposed submission period for the Medicare Promoting 
Interoperability Program would be the 2 months following the close 
of the CY 2023 (ending February 28, 2024); (5) to begin publicly 
reporting eCQM performance data beginning with the eCQM data 
reported by eligible hospitals and CAHs for the reporting period in 
CY 2021 on the Hospital Compare and/or data.medicare.gov websites or 
successor websites; (6) to correct errors and amend regulation text 
under Sec.  495.104(c)(5)(viii)(B) through (D) regarding transition 
factors under section 1886(n)(2)(E)(i) for the incentive payments 
for Puerto Rico eligible hospitals; and (7) to correct errors and 
amend regulation text

[[Page 32970]]

under Sec.  495.20(e)(5)(iii) and (l)(11)(ii)(C)(1) for regulatory 
citations for the ONC certification criteria. We are amending our 
regulation texts as necessary to incorporate these proposed changes. 
For the EHR reporting period in CY 2021, the proposals summarized 
here are mainly continuations of existing policies. However, two 
updated instances of a previous miscalculation and an updated Bureau 
of Labor Statistics wage rate will result in both a minor reduction 
of program burden hours (-44) as well as a small increase in total 
cost (+$24,024) for CY 2021.

O. Alternatives Considered

    This proposed rule contains a range of policies. It also 
provides descriptions of the statutory provisions that are 
addressed, identifies the proposed policies, and presents rationales 
for our decisions and, where relevant, alternatives that were 
considered.

1. Proposed Implementation of Revised Labor Market Area Delineations

    As discussed in section III.A.2. of the preamble of this 
proposed rule, the wage index is calculated and assigned to 
hospitals on the basis of the labor market area in which the 
hospital is located. Under section 1886(d)(3)(E) of the Act, 
beginning with FY 2005, we delineate hospital labor market areas 
based on OMB-established Core-Based Statistical Areas (CBSAs). 
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 September 14, 2018, OMB issued OMB Bulletin No. 18-04. While OMB 
Bulletin No. 18-04 is not based on new census data, it includes some 
material changes to the OMB statistical area delineations. 
Specifically, under the revised OMB delineations, there would be 
some new CBSAs, urban counties that would become rural, rural 
counties that would become urban, and existing CBSAs would be split 
apart. In addition, the revised OMB delineations would affect 
various hospital reclassifications, the out-migration adjustment 
(established by section 505 of Public Law 108-173), and treatment of 
hospitals located in certain rural counties (that is, ``Lugar'' 
hospitals) under section 1886(d)(8)(B) of the Act.
    We considered whether we should propose to implement the revised 
OMB delineations as described in OMB Bulletin No. 18-04, beginning 
with the FY 2021 IPPS wage index, or whether we should wait to 
propose to implement any further changes to the hospital labor 
market areas until OMB issues revisions to the statistical areas 
based on the results of the upcoming decennial census. We believe it 
is important for the IPPS to use the latest labor market area 
delineations as soon as reasonably possible in order to maintain a 
more accurate and up-to-date payment system that reflects the 
reality of population shifts and labor market conditions. 
Furthermore, we believe that using the most current delineations 
will increase the integrity of the IPPS wage index system by 
creating a more accurate representation of geographic variations in 
wage levels. Therefore, we decided not to wait until OMB issues 
revisions to the statistical areas based on the results of the 
upcoming decennial census, but are proposing to implement the 
revised OMB delineations as described in the September 14, 2018 OMB 
Bulletin No. 18-04, effective October 1, 2020 beginning with the FY 
2021 IPPS wage index. We note that as described in section 
III.A.2.c. of the preamble of this proposed rule, we are proposing a 
transition for hospitals that would see a decrease of more than 5 
percent in their FY 2021 wage index compared to their FY 2020 wage 
index.

2. Market-Based MS-DRG Relative Weight Estimation Data Collection and 
Potential Change in Methodology for Calculating MS-DRG Relative Weights

    In section IV.P.2.c. of the preamble of this proposed rule, we 
are proposing that hospitals would report on the Medicare cost 
report: (1) The median payer-specific negotiated charge that the 
hospital has negotiated with all of its Medicare Advantage (MA) 
organizations (also referred to as MA organizations) payers, by MS-
DRG; and (2) the median payer-specific negotiated charge the 
hospital has negotiated with all of its third-party payers, which 
would include MA organizations, by MS-DRG. The market-based rate 
information we are proposing to collect on the Medicare cost report 
would be the median of the payer-specific negotiated charges by MS-
DRG, as described previously, for a hospital's MA organization 
payers and all of its third party payers. The payer-specific 
negotiated charges used by hospitals to calculate these medians 
would be the payer-specific negotiated charges for service packages 
that hospitals are required to make public under the requirements we 
finalized in the Hospital Price Transparency final rule (84 FR 
65524) that can be cross-walked to an MS-DRG. We note that we may 
also consider finalizing the collection of alternative market-based 
data, such as the median negotiated reimbursement amount as 
explained in section IV.P.2.c. of this proposed rule, or any 
refinements to the definition of median payer-specific negotiated 
charge, based on review of public comments. We are also considering 
a modification to the market based data collection proposal, to 
require only the reporting of the median payer-specific negotiated 
charge for MA organizations on the Medicare cost report. We are 
inviting public comments on our proposed data collection, as well as 
on these or other alternative data collections of payer-specific 
negotiated charges or other market-based information on the Medicare 
cost report, which we may consider finalizing in the FY 2021 IPPS/
LTCH PPS final rule for cost reporting periods ending on or after 
January 1, 2021, after consideration of the comments received.
    In section IV.P.2.d. of the preamble of this proposed rule, we 
are requesting comments on a potential new market-based methodology 
for estimating the MS-DRG relative weights, beginning in FY 2024, 
and which we may consider adopting in the FY 2021 IPPS/LTCH PPS 
final rule. This potential new market-based methodology would be 
based on the proposed median payer-specific negotiated charge 
information collected on the Medicare cost report. In this 
methodology, we are also considering alternatives to this approach, 
such as the use of the median payer-specific negotiated charge for 
all third-party payers (instead of the median payer-specific 
negotiated charge for all MA organizations), or other alternative 
collections of payer-specific negotiated charges or other market-
based information such as a median negotiated reimbursement amount 
that a hospital negotiates with its MA organizations or third party 
payers (as described further in section IV.P.2.c of the preamble of 
this proposed rule), within the MS-DRG relative weight methodology.
    The same relative weight calculation described in section 
IV.P.2.d. would be used if an alternative to the median payer-
specific negotiated charge was collected on the Medicare cost 
report, as further described in that section. We are requesting 
comments on this potential new market-based methodology for 
estimating the MS-DRG relative weights beginning in FY 2024, 
including comments on any suggested refinements to this potential 
methodology or alternative approaches, which we may consider 
adopting in the FY 2021 IPPS/LTCH final rule. Within Step Two of the 
potential MS-DRG relative weight methodology described in section 
IV.P.2.d. of the preamble of this proposed rule, we note that we are 
considering alternative weighting factors such as using the 
unadjusted Medicare case counts, or other alternative approaches 
based on the review of public comments. In Step Three of the 
potential methodology we also reference that if an alternative 
weighting factor to the Medicare transfer adjusted case counts was 
used in Step Two we would use that same alternative weight factor in 
Step Three.
    If we were to finalize a change in the IPPS FY 2021 rulemaking 
to incorporate payer-specific negotiated charges within the MS-DRG 
relative weight methodology, effective for FY 2024, we are open to 
adjusting any finalized policy, through future rulemaking, prior to 
the FY 2024 effective date. Should we finalize our data collection 
proposal, we would conduct further analysis based on the data 
received and provide an opportunity for public comment on that 
analysis, prior to the FY 2024 effective date.

P. Reducing Regulation and Controlling Regulatory Costs

    Executive Order 13771, titled Reducing Regulation and 
Controlling Regulatory Costs, was issued on January 30, 2017. This 
proposed rule is considered to be an E.O. 13771 regulatory action. 
We estimate that this rule generates approximately $2.4 million in 
annualized costs, discounted at 7 percent relative to fiscal year 
2016, over a perpetual time horizon.
    We discuss the estimated burden and costs for the Hospital IQR 
Program in section XI.B.7. of the preamble of this proposed rule, 
and estimate that the impact of these changes is an increase in 
costs of approximately $253,480 (which also reflects use of an 
updated hourly wage rate), across a 4-year period from the CY 2021 
reporting period/FY

[[Page 32971]]

2023 payment determination through the CY 2024 reporting period/FY 
2026 payment determination, or $77 per hospital across the 4-year 
period.
    We discuss the estimated burden and costs for the PCHQR Program 
in section XI.B.8. of the preamble of this proposed rule, and 
estimate that the impact of these changes is an increase in costs of 
approximately $86,388 across all PPS-exempt cancer hospitals. This 
estimate reflects an updated hourly wage. There are no estimated 
changes to the estimated number of burden hours under the program.
    We do not anticipate an increase or decrease in burden and costs 
for the Long-Term Care Hospital Quality Reporting Program as there 
are no new proposed policies in this proposed rule.
    We discuss the estimated burden for the Hospital-Acquired 
Condition Reduction Program in section XI.B.6. of the preamble of 
this proposed rule and estimate the impact of these changes is a 
decrease in costs of approximately -$558,720 (which also reflects 
use of an updated hourly wage rate) across all subsection (d) 
hospitals annually.
    We do not anticipate an increase or decrease in burden and costs 
for the Hospital Readmissions Reduction Program or the Hospital 
Value-Based Purchasing Program based on the proposed policies in 
this proposed rule.
    Also, as noted in section I.R. of this Appendix, the regulatory 
review cost for this proposed rule is $16,090,234. Section I.H.11. 
of this Appendix discusses annual savings of $14.4 million, but this 
amount has not yet been incorporated into E.O. 13771 accounting, 
pending the estimation of associated transition costs.
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Q. Overall Conclusion

1. Acute Care Hospitals

    Acute care hospitals are estimated to experience an increase of 
approximately $2.067 billion in FY 2021, including operating, 
capital, and new technology changes as modeled for this proposed 
rule. The estimated change in operating payments is approximately 
$1.978 billion (discussed in section I.G. and I.H. of this 
Appendix). The estimated change in capital payments is approximately 
$0.036 billion (discussed in section I.I. of this Appendix). The 
estimated change in new technology add-on payments is approximately 
$0.053 billion as discussed in section I.H. of this Appendix. The 
change in new technology add-on payments reflects the net impact of 
continuing and expiring current new technology add on payments. 
Total may differ 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 proposed MS-DRG and wage index changes, and for 
the wage index reclassifications under the MGCRB.
    We estimate that hospitals would experience a 0.4 percent 
increase in capital payments per case, as shown in Table III. of 
section I.I. of this Appendix. We project that there would be a $36 
million increase in capital payments in FY 2021 compared to FY 2020.
    The discussions presented in the previous pages, in combination 
with the remainder of this proposed rule, constitute a regulatory 
impact analysis.

2. LTCHs

    Overall, LTCHs are projected to experience an increase in 
estimated payments per discharge in FY 2021. In the impact analysis, 
we are using the proposed rates, factors, and policies presented in 
this proposed rule based on the best available claims and CCR data 
to estimate the change in payments under the LTCH PPS for FY 2021. 
Accordingly, based on the best available data for the 360 LTCHs in 
our database, we estimate that overall FY 2021 LTCH PPS payments 
will decrease approximately $36 million relative to FY 2020 
primarily as a result of the end of the statutory transition period 
for site neutral payment rate cases.

R. Regulatory Review Costs

    If regulations impose administrative costs on private entities, 
such as the time needed to read and interpret a rule, we should 
estimate the cost associated with regulatory review. Due to the 
uncertainty involved with accurately quantifying the number of 
entities that would review the proposed rule, we assumed that the 
total number of timely pieces of correspondence on last year's 
proposed rule would be the number of reviewers of the proposed rule. 
We acknowledge that this assumption may understate or overstate the 
costs of reviewing the rule. It is possible that not all commenters 
reviewed last year's rule in detail, and it is also possible that 
some reviewers chose not to comment on the proposed rule. For those 
reasons, and consistent with our approach in previous rulemakings 
(83 FR 41777 and 84 FR 42697), we believe that the number of past 
commenters would be a fair estimate of the number of reviewers of 
the proposed rule. We welcome any public comments on the approach in 
estimating the number of entities that will review this proposed 
rule.
    We also recognize 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 previous rulemaking (83 FR 41777 and 84 FR 42697), we 
assume that each reviewer read approximately 50 percent of the 
proposed rule. We welcome public comments on this assumption.
    We have used the number of timely pieces of correspondence on 
the FY 2020 proposed rule as our estimate for the number of 
reviewers of this proposed rule. We continue to acknowledge the 
uncertainty involved with using this number, but we believe it is a 
fair estimate due to the variety of entities affected and the 
likelihood that some of them choose to rely (in full or in part) on 
press releases, newsletters, fact sheets, or other sources rather 
than the comprehensive review of preamble and regulatory text. Using 
the wage information from the BLS for medical and health service 
managers (Code 11-9111), we estimate that the cost of reviewing the 
proposed rule is $109.36 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 
18.76 hours for the staff to review half of this proposed rule. For 
each IPPS hospital or LTCH that reviews this proposed rule, the 
estimated cost is $2,051 (18.76 hours x $109.36). Therefore, we 
estimate that the total cost of reviewing this proposed rule is 
$16,090,234 ($2,051 x 7,844 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 
Table V. of this Appendix, we have prepared an accounting statement 
showing the classification of the expenditures associated with the 
provisions of this proposed rule as they relate to acute care 
hospitals. This table provides our best estimate of the change in 
Medicare payments to providers as a result of the proposed changes 
to the IPPS presented in this proposed rule. All expenditures are 
classified as transfers to Medicare providers.
    As shown in Table V. of this Appendix, the net costs to the 
Federal Government associated with the proposed policies in this 
proposed rule are estimated at $2.067 billion.

[[Page 32972]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.254

B. LTCHs

    As discussed in section I.J. of this Appendix, the impact 
analysis of the proposed payment rates and factors presented in this 
proposed rule under the LTCH PPS is projected to result in a 
decrease in estimated aggregate LTCH PPS payments in FY 2021 
relative to FY 2020 of approximately $36 million based on the data 
for 360 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. of this Appendix, we have prepared an 
accounting statement showing the classification of the expenditures 
associated with the provisions of this proposed rule as they relate 
to the changes to the LTCH PPS. Table VI. of this Appendix provides 
our best estimate of the estimated change in Medicare payments under 
the LTCH PPS as a result of the proposed payment rates and factors 
and other provisions presented in this proposed rule based on the 
data for the 360 LTCHs in our database. All expenditures are 
classified as transfers to Medicare providers (that is, LTCHs).
    As shown in Table VI. of this Appendix, the net cost to the 
Federal Government associated with the policies for LTCHs in this 
proposed rule are estimated at -$36 million.
[GRAPHIC] [TIFF OMITTED] TP29MY20.255

III. Regulatory Flexibility Act (RFA) Analysis

    The RFA requires agencies to analyze options for regulatory 
relief of small entities. For purposes of the RFA, small entities 
include small businesses, nonprofit organizations, and small 
government jurisdictions. We estimate that most hospitals and most 
other providers and suppliers are small entities as that term is 
used in the RFA. The great majority of hospitals and most other 
health care providers and suppliers are small entities, either by 
being nonprofit organizations or by meeting the SBA definition of a 
small business (having revenues of less than $7.5 million to $38.5 
million in any 1 year). (For details on the latest standards for 
health care providers, we refer readers to page 36 of the Table of 
Small Business Size Standards for NAIC 622 found on the SBA website 
at: http://www.sba.gov/sites/default/files/files/Size_Standards_Table.pdf.)
    For purposes of the RFA, all hospitals and other providers and 
suppliers are considered to be small entities. Individuals and 
States are not included in the definition of a small entity. We 
believe that the provisions of this proposed rule relating to acute 
care hospitals will have a significant impact on small entities as 
explained in this Appendix. For example, because all hospitals are 
considered to be small entities for purposes of the RFA, the 
hospital impacts described in this proposed rule are impacts on 
small entities. For example, we refer readers to ``Table I.--Impact 
Analysis of Proposed Changes to the IPPS for Operating Costs for FY 
2021.'' Because we lack data on individual hospital receipts, we 
cannot determine the number of small proprietary LTCHs. Therefore, 
we are assuming that all LTCHs are considered small entities for the 
purpose of the analysis in section I.J. of this Appendix. MACs are 
not considered to be small entities because they do not meet the SBA 
definition of a small business. Because we acknowledge that many of 
the affected entities are small entities, the analysis discussed 
throughout the preamble of this proposed rule constitutes our 
regulatory flexibility analysis. This proposed rule contains a range 
of proposed policies. It provides descriptions of the statutory 
provisions that are addressed, identifies the proposed policies, and 
presents rationales for our decisions and, where relevant, 
alternatives that were considered.
    For purposes of the RFA, as stated previously, all hospitals and 
other providers and suppliers are considered to be small entities. 
We estimate the provisions of this proposed rule would result in an 
estimated $1.98 billion increase in FY 2021 payments to IPPS 
hospitals, primarily driven by the proposed applicable percentage 
increase to the IPPS rates in conjunction with other proposed 
payment changes including uncompensated care payments, capital 
payments, new technology add-on payments, and low-volume hospital 
payments, as discussed in section I.B. of this Appendix. As 
discussed in section I.J. of this Appendix, the impact analysis of 
the proposed payment rates and factors presented in this proposed 
rule under the LTCH PPS is projected to result in a decrease in 
estimated aggregate LTCH PPS payments in FY 2021 relative to FY 2020 
of approximately $36 million. We are soliciting public comments on 
our estimates and analysis of the impact of our proposals on those 
small entities. Any public comments that we received and our 
responses will be presented throughout the final rule.

IV. Impact on Small Rural Hospitals

    Section 1102(b) of the 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. (As shown in Table I. in section I.G. of this Appendix, 
rural IPPS hospitals with 0-49 beds and 50-99 beds are expected to 
experience an increase in payments from FY 2020 to FY 2021 of 2.0 
percent and 2.3 percent, respectively. We refer readers to Table I. 
in section I.G. of this Appendix for additional information on the 
quantitative effects of the proposed policy changes under the IPPS 
for operating costs.)

V. Unfunded Mandates Reform Act Analysis

    Section 202 of the Unfunded Mandates Reform Act of 1995 (Pub. L. 
104-4) also requires that agencies assess anticipated costs and 
benefits before issuing any rule whose

[[Page 32973]]

mandates require spending in any 1 year of $100 million in 1995 
dollars, updated annually for inflation. In 2020, that threshold 
level is approximately $156 million. This proposed rule would not 
mandate any requirements for State, local, or tribal governments, 
nor would it affect private sector costs.

VI. Executive Order 13175

    Executive Order 13175 directs agencies to consult with Tribal 
officials prior to the formal promulgation of regulations having 
tribal implications. Section 1880(a) of the Act states that a 
hospital of the Indian Health Service, whether operated by such 
Service or by an Indian tribe or tribal organization, is eligible 
for Medicare payments so long as it meets all of the conditions and 
requirements for such payments which are applicable generally to 
hospitals. Consistent with section 1880(a) of the Act, this proposed 
rule contains general provisions also 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.
    As discussed in section IV.G.4. of the preamble of this proposed 
rule, we are seeking comment on a potential restructuring of 
Medicare DSH and uncompensated care payments for IHS and Tribal 
hospitals beginning in FY 2022. Consistent with Executive Order 
13175, we have engaged in initial consultation with Tribal officials 
on this issue. We intend to consider input received from further 
consultation with Tribal officials, as well as the comments on this 
proposed rule on this issue, and may revisit our policies for FY 
2022 either in the final rule or through future rulemaking.

VII. Executive Order 12866

    In accordance with the provisions of Executive Order 12866, the 
Executive Office of Management and Budget reviewed this proposed 
rule.

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

I. Background

    Section 1886(e)(4)(A) of the Act requires that the Secretary, 
taking into consideration the recommendations of MedPAC, recommend 
update factors for inpatient hospital services for each fiscal year 
that take into account the amounts necessary for the efficient and 
effective delivery of medically appropriate and necessary care of 
high quality. Under section 1886(e)(5) of the Act, we are required 
to publish update factors recommended by the Secretary in the 
proposed and final IPPS rules. Accordingly, this Appendix provides 
the recommendations for the update factors for the IPPS national 
standardized amount, the hospital-specific rate for SCHs and MDHs, 
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 2021, 
consistent with our approach for FY 2020, 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 2021

A. Proposed FY 2021 Inpatient Hospital Update

    As discussed in section IV.B. of the preamble to this proposed 
rule, for FY 2021, 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). Section 1886(b)(3)(B)(xi) of the 
Act, as added by section 3401(a) of the Affordable Care Act, states 
that application of the MFP adjustment may result in the applicable 
percentage increase being less than zero. (We note that section 
1886(b)(3)(B)(xii) of the Act required an additional reduction each 
year only for FYs 2010 through 2019.)
    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 and capital market baskets 
with the rebased and revised 2014-based IPPS operating and capital 
market baskets effective beginning in FY 2018.
    In this FY 2021 IPPS/LTCH PPS proposed rule, in accordance with 
section 1886(b)(3)(B) of the Act, we are proposing to base the 
proposed FY 2021 market basket update used to determine the 
applicable percentage increase for the IPPS on IGI's fourth quarter 
2019 forecast of the 2014-based IPPS market basket rate-of-increase 
with historical data through third quarter 2019, which is estimated 
to be 3.0 percent. In accordance with section 1886(b)(3)(B) of the 
Act, as amended by section 3401(a) of the Affordable Care Act, in 
section IV.B. of the preamble of this FY 2021 IPPS/LTCH PPS proposed 
rule, based on IGI's fourth quarter 2019 forecast, we are proposing 
a MFP adjustment of 0.4 percent for FY 2021. We also are proposing 
that if more recent data subsequently become available, we would use 
such data, if appropriate, to determine the FY 2021 market basket 
update and MFP adjustment for the final rule.
    Therefore, based on IGI's fourth quarter 2019 forecast of the 
2014-based IPPS market basket and the MFP adjustment, depending on 
whether a hospital submits quality data under the rules established 
in accordance with section 1886(b)(3)(B)(viii) of the Act (hereafter 
referred to as a hospital that submits quality data) and is a 
meaningful EHR user under section 1886(b)(3)(B)(ix) of the Act 
(hereafter referred to as a hospital that is a meaningful EHR user), 
we are proposing four possible applicable percentage increases that 
could be applied to the standardized amount, as shown in the 
following table.

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B. Proposed Update for SCHs and MDHs for FY 2021

    Section 1886(b)(3)(B)(iv) of the Act provides that the FY 2021 
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). Under current law, 
the MDH program is effective for discharges through September 30, 
2022, as discussed in the FY 2019 IPPS/LTCH PPS final rule (83 FR 
41429 through 41430).
    As previously mentioned, the update to the hospital specific 
rate for SCHs and MDHs is subject to section 1886(b)(3)(B)(i) of the 
Act, as amended by sections 3401(a) and 10319(a) of the Affordable 
Care Act. Accordingly, depending on whether a hospital submits 
quality data and is a meaningful EHR user, we are proposing the same 
four possible applicable percentage increases in the preceding table 
for the hospital-specific rate applicable to SCHs and MDHs.

C. Proposed FY 2021 Puerto Rico Hospital Update

    As discussed in the FY 2017 IPPS/LTCH PPS final rule (81 FR 
56939), prior to January 1, 2016, Puerto Rico hospitals were paid 
based on 75 percent of the national standardized amount and 25 
percent of the Puerto Rico-specific standardized amount. Section 601 
of Public Law 114-113 amended section 1886(d)(9)(E) of the Act to 
specify that the payment calculation with respect to operating costs 
of inpatient hospital services of a subsection (d) Puerto Rico 
hospital for inpatient hospital discharges on or after January 1, 
2016, shall use 100 percent of the national standardized amount. 
Because Puerto Rico hospitals are no longer paid with a Puerto Rico-
specific standardized amount under the amendments to section 
1886(d)(9)(E) of the Act, there is no longer a need for us to make 
an update to the Puerto Rico standardized amount. Hospitals in 
Puerto Rico are now paid 100 percent of the national standardized 
amount and, therefore, are subject to the same update to the 
national standardized amount discussed under section IV.B.1. of the 
preamble of this proposed rule. Accordingly, for FY 2021, we are 
proposing to establish an applicable percentage increase of 2.6 
percent to the standardized amount for hospitals located in Puerto 
Rico.

D. Proposed Update for Hospitals Excluded From the IPPS for FY 2021

    Section 1886(b)(3)(B)(ii) of the Act is used for purposes of 
determining the percentage increase in the rate-of-increase limits 
for children's hospitals, cancer hospitals, and hospitals located 
outside the 50 States, the District of Columbia, and Puerto Rico 
(that is, short-term acute care hospitals located in the U.S. Virgin 
Islands, Guam, the Northern Mariana Islands, and America Samoa). 
Section 1886(b)(3)(B)(ii) of the Act sets the percentage increase in 
the rate-of-increase limits equal to the market basket percentage 
increase. In accordance with Sec.  403.752(a) of the regulations, 
RNHCIs are paid under the provisions of Sec.  413.40, which also use 
section 1886(b)(3)(B)(ii) of the Act to update the percentage 
increase in the rate-of-increase limits. Currently, children's 
hospitals, PPS-excluded cancer hospitals, RNHCIs, and short-term 
acute care hospitals located in the U.S. Virgin Islands, Guam, the 
Northern Mariana Islands, and American Samoa are among the remaining 
types of hospitals still paid under the reasonable cost methodology, 
subject to the rate-of-increase limits. In addition, in accordance 
with Sec.  412.526(c)(3) of the regulations, extended neoplastic 
disease care hospitals (described in Sec.  412.22(i) of the 
regulations) also are subject to the rate-of-increase limits. As 
discussed in section VI. of the preamble of this proposed rule, in 
the FY 2018 IPPS/LTCH PPS final rule, we finalized the use of the 
percentage increase in the 2014-based IPPS operating market basket 
to update the target amounts for children's hospitals, PPS-excluded 
cancer hospitals, RNHCIs, and short-term acute care hospitals 
located in the U.S. Virgin Islands, Guam, the Northern Mariana 
Islands, and American Samoa for FY 2018 and subsequent fiscal years. 
In addition, as discussed in section IV.B. of the preamble of this 
proposed rule, the update to the target amount for extended 
neoplastic disease care hospitals for FY 2021 would be the 
percentage increase in the 2014-based IPPS operating market basket. 
Accordingly, for FY 2021, the rate-of-increase percentage to be 
applied to the target amount for these children's hospitals, cancer 
hospitals, RNHCIs, extended neoplastic disease care hospitals, and 
short-term acute care hospitals located in the U.S. Virgin Islands, 
Guam, the Northern Mariana Islands, and American Samoa would be the 
FY 2021 percentage increase in the 2014-based IPPS operating market 
basket. For this proposed rule, the current estimate of the IPPS 
operating market basket percentage increase for FY 2021 is 3.0 
percent.

E. Proposed Update for LTCHs for FY 2021

    Section 123 of Public Law 106-113, as amended by section 307(b) 
of Public Law 106-554 (and codified at section 1886(m)(1) of the 
Act), provides the statutory authority for updating payment rates 
under the LTCH PPS.
    As discussed in section V.A. of the Addendum to this proposed 
rule, we are proposing to update to the LTCH PPS standard Federal 
payment rate for FY 2021 by 2.5 percent, consistent with section 
1886(m)(3) of the Act which provides that any annual update be 
reduced by the productivity adjustment described in section 
1886(b)(3)(B)(xi)(II) of the Act (that is, the MFP adjustment). 
Furthermore, in accordance with the LTCHQR Program under section 
1886(m)(5) of the Act, we are proposing to reduce the annual update 
to the LTCH PPS standard Federal rate by 2.0 percentage points for 
failure of a LTCH to submit the required quality data. Accordingly, 
we are proposing to establish an update factor of 1.025 in 
determining the LTCH PPS standard Federal rate for FY 2021. For 
LTCHs that fail to submit quality data for FY 2021, we are proposing 
an annual update to the LTCH PPS standard Federal rate of 0.5 
percent (that is, the proposed annual update for FY 2021 of 2.5 
percent less 2.0 percentage points for failure to submit the 
required quality data in accordance with section 1886(m)(5)(C) of 
the Act and our rules) by applying a proposed update factor of 1.005 
in determining the LTCH PPS standard Federal rate for FY 2021. (We 
note that, as discussed in section VII.D. of the preamble of this 
proposed rule, the proposed update to the LTCH PPS standard Federal 
payment rate of 2.5 percent for FY 2021 does not reflect any 
proposed budget neutrality factors.)

III. Secretary's Recommendations

    MedPAC is recommending an inpatient hospital update of 2.0 
percent. Consistent with current law, depending on whether a 
hospital submits quality data and is a meaningful EHR user, we are 
recommending

[[Page 32975]]

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 3.0 percent.
    For FY 2021, consistent with policy set forth in section VII. of 
the preamble of this proposed rule, for LTCHs that submit quality 
data, we are recommending an update of 2.5 percent to the LTCH PPS 
standard Federal rate. For LTCHs that fail to submit quality data 
for FY 2021, we are recommending an annual update to the LTCH PPS 
standard Federal rate of 0.5 percent.

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

    In its March 2020 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 by 2 percent with the difference 
between this and the update amount specified in current law to be 
used to increase payments under MedPAC's proposed Medicare quality 
program, the ``Hospital Value Incentive Program (HVIP).'' MedPAC 
stated that together, these recommendations, paired with the 
recommendation to eliminate the current hospital quality program 
incentives, would increase hospital payments by increasing the base 
payment rate and by increasing the average rewards hospitals receive 
under MedPAC's proposed Medicare HVIP. We refer readers to the March 
2020 MedPAC report, which is available for download at 
www.medpac.gov, for a complete discussion on these recommendations.
    Response: With regard to MedPAC's recommendation of an update to 
the hospital inpatient rates equal to 2 percent, with the remainder 
of the 2.6 percent to be used to fund its recommended Medicare HVIP, 
section 1886(b)(3)(B) of the Act sets the requirements for the FY 
2021 applicable percentage increase. Therefore, consistent with the 
statute, we are proposing an applicable percentage increase for FY 
2021 of 2.6 percent, provided the hospital submits quality data and 
is a meaningful EHR user consistent with these statutory 
requirements. Furthermore, we appreciate MedPAC's recommendation 
concerning a new HVIP. We agree that continual improvement motivated 
by quality programs is an important incentive of the IPPS.
    We note that, because the operating and capital payments in the 
IPPS remain separate, we are continuing to use separate updates for 
operating and capital payments in the IPPS. The proposed update to 
the capital rate is discussed in section III. of the Addendum to 
this proposed rule.

[FR Doc. 2020-10122 Filed 5-11-20; 4:15 pm]
BILLING CODE 4120-01-P