The EASA, which is the Technical Agent for the Member States of the European Union, has issued EASA AD 2020-0133, dated June 10, 2020 (“EASA AD 2020-0133”) (also referred to as the Mandatory Continuing Airworthiness Information, or “the MCAI”), to correct an unsafe condition for all Airbus SAS Model A318-111, -112, -121, and -122; A319-111, -112, -113, -114, -115, -131, -132, -133, -151N, -153N, and -171N; A320-211, -212, -214, -215, -216, -231, -232, -233, -251N, -252N, -253N, -271N, -272N, and -273N; and A321-111, -112, -131, -211, -212, -213, -231, -232, -251N, -252N, -253N, -271N, -272N, -251NX, -252NX, -253NX, -271NX, and -272NX airplanes. Model A320-215 airplanes are not certificated by the FAA and are not included on the U.S. type certificate data sheet; this AD therefore does not include those airplanes in the applicability.

This AD was prompted by reports of low halon concentration in the forward and aft cargo compartments due to air leakage through cargo door seals. The FAA is issuing this AD to address low halon concentration. This condition, if not corrected, could affect the fire extinguishing system efficiency in the cargo compartments, possibly resulting in failure of the system to contain a cargo compartment fire. See the MCAI for additional background information.

EASA AD 2020-0133 describes procedures for repetitive cleaning and greasing of affected cargo door seals.

This material is reasonably available because the interested parties have access to it through their normal course of business or by the means identified in the ADDRESSES section.

This product has been approved by the aviation authority of another country, and is approved for operation in the United States. Pursuant to our bilateral agreement with the State of Design Authority, the FAA has been notified of the unsafe condition described in the MCAI referenced above. The FAA is issuing this AD because the FAA evaluated all pertinent information and determined the unsafe condition exists and is likely to exist or develop on other products of the same type design.

This AD requires accomplishing the actions specified in EASA AD 2020-0133, described previously, as incorporated by reference, except for any differences identified as exceptions in the regulatory text of this AD and discussed under “Differences Between this AD and the MCAI.”

In the FAA's ongoing efforts to improve the efficiency of the AD process, the FAA initially worked with Airbus and EASA to develop a process to use certain EASA ADs as the primary source of information for compliance with requirements for corresponding FAA ADs. The FAA has since coordinated with other manufacturers and civil aviation authorities (CAAs) to use this process. As a result, EASA AD 2020-0133 is incorporated by reference in this final rule. This AD, therefore, requires compliance with EASA AD 2020-0133 in its entirety, through that incorporation, except for any differences identified as exceptions in the regulatory text of this AD. Using common terms that are the same as the heading of a particular section in the EASA AD does not mean that operators need comply only with that section. For example, where the AD requirement refers to “all required actions and compliance times,” compliance with this AD requirement is not limited to the section titled “Required Action(s) and Compliance Time(s)” in the EASA AD. Service information specified in EASA AD 2020-0133 that is required for compliance with EASA AD 2020-0133 is available on the internet at https://www.regulations.gov by searching for and locating Docket No. FAA-2020-0672.

An unsafe condition exists that requires the immediate adoption of this AD without providing an opportunity for public comments prior to adoption. The FAA has found that the risk to the flying public justifies waiving notice and comment prior to adoption of this rule because the fire extinguishing system efficiency in the forward and aft cargo compartments is adversely affected due to air leakage through cargo door seals. This condition, if not corrected, may result in failure of the fire extinguishing system to contain a cargo compartment fire. In addition, the compliance time for the required action is shorter than the time necessary for the public to comment and for publication of the final rule. Therefore, the FAA finds good cause that notice and opportunity for prior public comment are impracticable. In addition, for the reasons stated above, the FAA finds that good cause exists for making this amendment effective in less than 30 days.

This AD is a final rule that involves requirements affecting flight safety, and the FAA did not precede it by notice and opportunity for public comment. The FAA invites you to send any written relevant data, views, or arguments about this AD. Send your comments to an address listed under the ADDRESSES section. Include “Docket No. FAA-2020-0672; Project Identifier MCAI-2020-01008-T” at the beginning of your comments. The most helpful comments reference a specific portion of the proposal, explain the reason for any recommended change, and include supporting data. The FAA will consider all comments received by the closing date and may amend this AD based on those comments.

Except for Confidential Business Information (CBI) as described in the following paragraph, and other information as described in 14 CFR 11.35, the FAA will post all comments the FAA receives, without change, to https://www.regulations.gov, including any personal information you provide. The FAA will also post a report summarizing each substantive verbal contact the FAA receives about this AD.

CBI is commercial or financial information that is both customarily and actually treated as private by its owner. Under the Freedom of Information Act (FOIA) (5 U.S.C. 552), CBI is exempt from public disclosure. If your comments responsive to this final rule, request for comments, contain commercial or financial information that is customarily treated as private, that you actually treat as private, and that is relevant or responsive to this final rule, request for comments, it is important that you clearly designate the submitted comments as CBI. Please mark each page of your submission containing CBI as “PROPIN.” The FAA will treat such marked submissions as confidential under the FOIA, and they will not be placed in the public docket of this AD. Submissions containing CBI should be sent to person identified in the FOR FURTHER INFORMATION CONTACT section. Any commentary that the FAA receives which is not specifically designated as CBI will be placed in the public docket for this rulemaking.

EASA AD 2020-0133 defines “affected parts” as those having certain part numbers, but this AD defines “affected parts” as those specified in EASA AD 2020-0133 and forward and aft cargo door seals part number D5237106020400S, approved under PMA PQ1715CE. The FAA has determined that the part number approved under PMA PQ1715CE is also affected by the unsafe condition. This difference has been coordinated with EASA and EASA has indicated they may revise EASA AD 2020-0133 to include this part number.

The FAA considers this AD interim action. If final action is later identified, the agency might consider further rulemaking then.

The requirements of the RFA do not apply when an agency finds good cause pursuant to 5 U.S.C. 553 to adopt a rule without prior notice and comment. Because the FAA has determined that it has good cause to adopt this rule without notice and comment, RFA analysis is not required.

The FAA estimates that this AD affects 1,630 airplanes of U.S. registry. The FAA estimates the following costs to comply with this AD:

Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, section 106, describes the authority of the FAA Administrator. Subtitle VII: Aviation Programs, describes in more detail the scope of the Agency's authority.

The FAA is issuing this rulemaking under the authority described in Subtitle VII, Part A, Subpart III, Section 44701: General requirements. Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action.

The FAA determined that this AD will not have federalism implications under Executive Order 13132. This AD will not have a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government.

For the reasons discussed above, I certify that this AD:

(1) Is not a “significant regulatory action” under Executive Order 12866, and

(2) Will not affect intrastate aviation in Alaska.

Accordingly, under the authority delegated to me by the Administrator, the FAA amends 14 CFR part 39 as follows:

Authority for This Rulemaking

The FAA's authority to issue rule regarding aviation safety is found in Title 49 of the United States Code. Subtitle I, Section 106 describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the agency's authority. This rulemaking is promulgated under the authority described in Subtitle VII, Part A, Subpart I, Section 40103. Under that section, the FAA is charged with prescribing regulations to assign the use of airspace necessary to ensure the safety of aircraft and the efficient use of airspace. This regulation is within the scope of that authority as it amends Class E airspace at Schuylkill County/Joe Zerbey Airport, Pottsville, PA, to support IFR operations in the area.

The FAA published a notice of prosed rulemaking in the Federal Register (85 FR 33587, June 2, 2020) for Docket No. FAA-2020-0277 to amend Class E airspace extending upward from 700 feet above the surface at Schuylkill County/Joe Zerbey Airport, Pottsville, PA from a 6.8-mile radius to a 7-mile radius. In addition, the FAA proposes to update the airport's geographic coordinates, and the name and geographic coordinates of Schuylkill Medical Center Heliport, to coincide with the FAA's aeronautical database.

Interested parties were invited to participate in this rulemaking effort by submitting written comments on the proposal to the FAA. No comments were received.

Class E airspace designations are published in Paragraph 6005, of FAA Order 7400.11D, dated August 8, 2019, and effective September 15, 2019, which is incorporated by reference in 14 CFR 71.1. The Class E airspace designations listed in this document will be published subsequently in the Order.

This document amends FAA Order 7400.11D, Airspace Designations and Reporting Points, dated August 8, 2019, and effective September 15, 2019. FAA Order 7400.11D is publicly available as listed in the ADDRESSES section of this document. FAA Order 7400.11D lists Class A, B, C, D, and E airspace areas, air traffic routes, and reporting points.

This amendment to Title 14 Code of Federal Regulations (14 CFR) part 71 amends Class E airspace extending upward from 700 feet above the surface at Schuylkill County/Joe Zerbey Airport, Pottsville, PA, from a 6.8-mile radius to a 7-mile radius, due to the extension of runway 11. Also, the geographic coordinates of the airport, and the name and geographic coordinates of Schuylkill Medical Center Heliport, are updated to coincide with the FAA's aeronautical database. These changes are necessary for continued safety and management of IFR operations in the area. Subsequent to publication of the NPRM, the FAA found the airport name (Schuylkill County/Joe Zerbey Airport) required modification. This action makes the correction.

FAA Order 7400.11, Airspace Designations and Reporting Points, is published yearly and effective on September 15.

The FAA has determined that this regulation only involves an established body of technical regulations for which frequent and routine amendments are necessary to keep them operationally current. It therefore: (1) Is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under DOT Regulatory Policies and Procedures (44 FR 11034; February 26, 1979); and (3) does not warrant preparation of a regulatory evaluation as the anticipated impact is so minimal. Since this is a routine matter that only affects air traffic procedures an air navigation, it is certified that this rule, when promulgated, does not have a significant economic impact on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

The FAA has determined that this action qualifies for categorical exclusion under the National Environmental Policy Act in accordance with FAA Order 1050.1F, “Environmental Impacts: Policies and Procedures,” paragraph 5-6.5a. This airspace action is not expected to cause any potentially significant environmental impacts, and no extraordinary circumstances exist that warrant preparation of an environmental assessment.

The FAA's authority to issue rules regarding aviation safety is found in Title 49 of the United States Code. Subtitle I, Section 106 describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the agency's authority. This rulemaking is promulgated under the authority described in Subtitle VII, Part A, Subpart I, Section 40103. Under that section, the FAA is charged with prescribing regulations to assign the use of airspace necessary to ensure the safety of aircraft and the efficient use of airspace. This regulation is within the scope of that authority as it amends Class D and Class E airspace at North Las Vegas Airport, Las Vegas, NV, to ensure the safety and management of Instrument Flight Rules (IFR) operations at the airport.

The FAA published a notice of proposed rulemaking in the Federal Register (85 FR 27180; May 7, 2020) for Docket No. FAA-2020-0353 to amend Class D and Class E airspace at North Las Vegas Airport, Las Vegas, NV. Interested parties were invited to participate in this rulemaking effort by submitting written comments on the proposal to the FAA. No comments were received.

Class D, E4, and E5 airspace designations are published in paragraphs 5000, 6004, and 6005, respectively, of FAA Order 7400.11D, dated August 8, 2019, and effective September 15, 2019, which is incorporated by reference in 14 CFR 71.1. The Class E airspace designation listed in this document will be published subsequently in the Order.

This document amends FAA Order 7400.11D, Airspace Designations and Reporting Points, dated August 8, 2019, and effective September 15, 2019. FAA Order 7400.11D is publicly available as listed in the ADDRESSES section of this document. FAA Order 7400.11D lists Class A, B, C, D, and E airspace areas, air traffic service routes, and reporting points.

This amendment to Title 14 Code of Federal Regulations (14 CFR) part 71 modifies Class E airspace at North Las Vegas Airport, Las Vegas, NV. This action adds an area, designated as an extension to a Class D or Class E surface area, to the northwest of the airport. The area extends from the airport's Class D airspace. This area is described as follows: That airspace extending upward from the surface within 2 miles each side of the 314° bearing from the airport, extending from the 4.3-mile radius to 13.2 miles northwest of North Las Vegas Airport. This Class E airspace area is effective during the specific dates and times established in advance by a Notice to Airmen. The effective date and time will thereafter be continuously published in the Chart Supplement.

This action implements several administrative amendments to the airspace legal descriptions for the Class D and Class E airspace extending upward from 700 feet above the surface. The first line of the airspace text headers is updated to “AWP NV D Las Vegas, NV” and “AWP NV E5 Las Vegas, NV”, respectively. The second line of the airspace text headers for both areas is updated to “North Las Vegas Airport, NV”. The airport's geographic coordinates are updated to lat. 36°12′39″ N, long. 115°11′40″ W. The term “Airport/Facility Directory” in the Class D airspace description is updated to “Chart Supplement”.

FAA Order 7400.11, Airspace Designations and Reporting Points, is published yearly and effective on September 15.

The FAA has determined that this regulation only involves an established body of technical regulations for which frequent and routine amendments are necessary to keep them operationally current, is non-controversial, and unlikely to result in adverse or negative comments. It, therefore: (1) Is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under DOT Regulatory Policies and Procedures (44 FR 11034; February 26, 1979); and (3) does not warrant preparation of a regulatory evaluation as the anticipated impact is so minimal. Since this is a routine matter that will only affect air traffic procedures and air navigation, it is certified that this rule, when promulgated, would not have a significant economic impact on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

The FAA has determined that this action qualifies for categorical exclusion under the National Environmental Policy Act in accordance with FAA Order 1050.1F, “Environmental Impacts: Policies and Procedures,” paragraph 5-6.5a. This airspace action is not expected to cause any potentially significant environmental impacts, and no extraordinary circumstances exist that warrant preparation of an environmental assessment.

In consideration of the foregoing, the Federal Aviation Administration amends 14 CFR part 71 as follows:

Interested persons are invited to participate in this rulemaking by submitting written data, views, or arguments on all aspects of this interim final rule. U.S. Customs and Border Protection (CBP) also invites comments that relate to the economic, environmental, or federalism effects that might result from this interim final rule. Comments that will provide the most assistance to CBP will reference a specific portion of the interim final rule, explain the reason for any recommended change, and include data, information, or authority that support such recommended change.

In response to the ongoing opioid crisis, the Substance Use-Disorder Prevention that Promotes Opioid Recovery and Treatment for Patients and Communities Act (SUPPORT for Patients and Communities Act), Public Law 115-271 (2018), was enacted on October 24, 2018. In addition to providing resources and support to communities grappling with opioid addiction, the legislation directs the United States Postal Service (USPS) and CBP to take certain actions to help prevent illicit opioids from reaching the United States.

Title VIII, Subtitle A of the SUPPORT for Patients and Communities Act is the Synthetics Trafficking and Overdose Prevention Act of 2018 (STOP Act). Among other things, the STOP Act amends subsection 13031(b)(9) of the Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1985 (19 U.S.C. 58c(b)(9)), to add a new paragraph (D) (hereafter referred to as “new subsection 13031(b)(9)(D)” or “new subsection 13031(b)(9)(D) of COBRA”), which requires certain fees for the processing of Inbound Express Mail Service (Inbound EMS) items at international mail facilities. Inbound Express Mail Service refers to the optional postal express service for sending postal items from other countries. 1 CBP is responsible for screening inbound international mail and removing packages with illicit goods (including, but not limited to, opioids) from the mail stream before delivery to intended recipients in the United States. 2 New subsection 13031(b)(9)(D) of COBRA requires a payment of $1 per Inbound EMS item, subject to annual adjustment, for services rendered in screening and processing of Inbound EMS items and, if an Inbound EMS item is formally entered, a payment of the fee provided for under subsection 13031(a)(9) of COBRA, if applicable. The fee provided for under subsection 13031(a)(9) is a merchandise processing fee. 3 Under new subsection 13031(b)(9)(D), USPS must remit 50 percent of the $1 fee per Inbound EMS item that it collects to CBP on a quarterly basis as reimbursement to CBP for processing of Inbound EMS items, and retain the other 50 percent to cover its processing of these items. The new subsection 13031(b)(9)(D) of COBRA requires the Secretary of the Treasury to issue regulations regarding the details of the quarterly remittances. 4

CBP is amending its regulations to implement the provisions of new subsection 13031(b)(9)(D) pertaining to Inbound EMS items, including the applicable fees, adjustments to the fees, details about the remittances from USPS to CBP and the required supporting documentation. CBP is also amending its regulations to make certain conforming amendments to reflect the provisions of the new subsection 13031(b)(9)(D) of COBRA. First, CBP is amending its regulations to reflect the fact that the subsection 13031(a)(9) merchandise processing fee will apply to Inbound EMS items as provided in the new subsection 13031(b)(9)(D). Second, CBP is amending its regulations to reflect that the dutiable mail fee previously authorized by subsection 13031(a)(6) will no longer apply to Inbound EMS items, based on the amendments made to subsection 13031(a)(6) of COBRA by section 8002(b) of the STOP Act that specifically exclude Inbound EMS items from the dutiable mail fee.

As provided in section 8002(c) of the STOP Act, the amendments made to COBRA by section 8002 of the STOP Act took effect on January 1, 2020. This rule is effective on August 4, 2020, except with respect to the amendments to § 24.23(c)(1)(v) regarding the merchandise processing fee for formally entered Inbound EMS items, which take effect on September 3, 2020.

Further details about these changes are set forth in sections III and IV, below.

Section 8002 of the STOP Act amended subsection 13031(b)(9) of COBRA (19 U.S.C. 58c(b)(9)), by adding a new paragraph (D) (new subsection 13031(b)(9)(D)), which requires certain fees for the processing of items that are sent to the United States through the international postal network by “Inbound Express Mail service” or “Inbound EMS” (as that service is described in the mail classification schedule referred to in section 3631 of title 39, United States Code). 5 The initial fee set by Congress is $1 per Inbound EMS item (new subsection 13031(b)(9)(D)(i)(I)), plus an additional amount for Inbound EMS items that are formally entered (new subsection (b)(9)(D)(i)(II)). The Secretary of the Treasury, in consultation with the Postmaster General, may adjust the former amount annually by regulation. The latter amount is the merchandise processing fee provided for under subsection 13031(a)(9) of COBRA, which is subject to annual adjustment under subsection 13031(l) of COBRA. The new section 13031(b)(9)(D) provides that the above amounts shall be the only payments required for reimbursement of CBP for services provided in connection with the processing of an Inbound EMS item. The new subsection 13031(b)(9)(D) requires USPS to remit 50 percent of the $1 fee it collects to CBP on a quarterly basis in accordance with regulations issued by the Secretary of the Treasury. Details about these remittances are provided in section III.B., below. Details about the method for adjusting the $1 fee in new subsection 13031(b)(9)(D)(i)(I) are provided in section III.C., below.

The new subsection 13031(b)(9)(D) requires USPS to pay CBP on a quarterly basis 50 percent of the amount of the payments required by new subsection 13031(b)(9)(D)(i)(I)—initially set by Congress at $1 per EMS item—in accordance with regulations prescribed by the Secretary of the Treasury to reimburse CBP for services provided in connection with the processing of Inbound EMS items. USPS is to retain the other 50 percent to reimburse it for services it provided in connection with the processing of Inbound EMS items. New subsection 13031(b)(9)(D) requires that the quarterly remittances from USPS to CBP must be deposited into the Customs User Fee Account and used to reimburse appropriation accounts for amounts paid out of those accounts for the costs incurred by CBP in providing services to international mail facilities. It also provides that the payments retained by USPS with respect to the $1 processing fee for Inbound EMS items are to be used for reimbursement purposes only.

USPS and CBP conferred about the methodology for how these quarterly remittances from USPS to CBP will occur. The agreed upon methodology takes into account the fact that USPS will collect the $1 processing fee per Inbound EMS item from foreign postal operators and that USPS will reimburse CBP after settlement with foreign postal operators has occurred. The quarterly remittances from USPS to CBP will be made as follows: USPS will remit to CBP on a quarterly basis 50 percent of the amount required by new subsection 13031(b)(9)(D)(i)(I) of COBRA, for which settlement with foreign postal operators has occurred. Except for the first remittance, USPS must make such remittances to CBP every calendar quarter to cover preceding calendar quarters. As provided in section 8002(c) of the STOP Act, the amendments to COBRA took effect on January 1, 2020. Accordingly, the first remittance from USPS to CBP is due no later than July 31, 2020. It will cover, at a minimum, the first calendar quarter of 2020. 6 This methodology permits USPS to remit the required amounts after payment is settled with foreign postal operators and allows for standard processing times associated with inter-agency funds transfers. Additionally, CBP is requiring USPS to maintain documentation necessary for CBP to verify the accuracy of the fee calculations and to provide certain supporting documentation with each quarterly remittance.

New subsection 13031(b)(9)(D) does not include any specific requirements pertaining to the payment of the applicable merchandise processing fee, pursuant to subsection 13031(a)(9) of COBRA, for Inbound EMS items that are formally entered. 7 Therefore, CBP will collect this fee in the manner that it ordinarily collects a merchandise processing fee, which is directly from the importer of record. 8

New subsection 13031(b)(9)(D)(iv) provides that, beginning in fiscal year 2021, the Secretary of the Treasury, in consultation with the Postmaster General, may adjust the amount new subsection 13031(b)(9)(D)(i)(I), initially $1 per Inbound EMS item, no more than once per fiscal year. The adjustment is not to exceed the costs of services provided in connection with the processing of inbound EMS items  9 and must be consistent with the obligations of the United States under international agreements. CBP is incorporating this provision into its regulations. For the reasons noted below, the regulations will provide that this fee is not subject to the annual inflation adjustment requirement in subsection 13031(l) of COBRA.

Subsection 13031(l) of COBRA authorizes the Secretary of the Treasury to adjust the fees established under subsections 13031(a) and (b)(2), (b)(3), (b)(5), (b)(6), (b)(8), and (b)(9) of COBRA at the beginning of each fiscal year to reflect the percentage of the increase in the average of the Consumer Price Index for the preceding 12-month period. Although subsection 13031(l) references subsection 13031(b)(9), as noted above, the new subsection 13031(b)(9)(D) explicitly specifies an alternative procedure for adjustment of the $1 Inbound EMS item fee. In addition, it does not specify that the $1 per Inbound EMS item fee is “subject to adjustment under subsection (l).” This is in contrast to all the other provisions that are referenced in subsection 13031(b), which explicitly provide that the respective fees imposed by those provisions are “subject to adjustment under subsection (l).” CBP is of the view that by providing a separate and distinct adjustment procedure for the $1 Inbound EMS item fee, and by conspicuously omitting from new subsection 13031(b)(9)(D) any explicit reference to adjustment under subsection 13031(l), the new subsection 13031(b)(9)(D)(iv) is the sole applicable adjustment procedure—to the exclusion of the annual inflation adjustment procedures specified in subsection 13031(l) of COBRA. Any adjustment to the $1 fee will be done by regulation. USPS, CBP, and Treasury will consult on such adjustments.

Consistent with subsection 13031(a)'s explicit provision that the fees listed therein are all “subject to adjustment under subsection (l)”, the annual adjustment under subsection 13031(l) of COBRA will apply to the subsection 13031(a)(9) merchandise processing fee pertaining to formally entered Inbound EMS items.

CBP is amending its regulations to incorporate the fee provisions of new subsection 13031(b)(9)(D) regarding Inbound EMS items and to make the necessary conforming amendments pertaining to the merchandise processing fee and the dutiable mail fee. These amendments are explained in detail below.

Part 24 of Title 19 of the Code of Federal Regulations (CFR) sets forth the CBP regulations regarding customs financial and accounting procedures (19 CFR part 24). Section 24.22 (19 CFR 24.22) describes the customs COBRA user fees for certain services, and when such fees are required and subject to limitations and/or adjustments. Section 24.23 (19 CFR 24.23) sets forth the terms and conditions for when the fees for processing merchandise are required. These two sections will incorporate the fees associated with processing of Inbound EMS items that are subject to the new subsection 13031(b)(9)(D) of COBRA.

First, CBP is amending the definitions in §§ 24.22 and 24.23 to define the term “Inbound Express Mail service” or “Inbound EMS”. As described in new subsection 13031(b)(9)(D), “Inbound Express Mail service” or “Inbound EMS” is the service described in the mail classification schedule referred to in section 3631 of title 39, United States Code. The mail classification schedule referred to in section 3631 of title 39, United States Code, is further described in section 3040.104 of title 39 of the Code of Federal Regulations.

CBP is amending § 24.22 to add a new paragraph (l) to incorporate the new processing fees as provided in new subsection 13031(b)(9)(D) of COBRA. Paragraph (l)(1) implements the amendments made in new subsection 13031(b)(9)(D), which require the payment of $1 per Inbound EMS item and, for formally entered Inbound EMS items, an additional merchandise processing fee provided for under subsection (a)(9) of section 13031 of COBRA (19 U.S.C. 58c(a)(9)). Specifically, paragraph (l)(1)(i) requires the payment of $1 per Inbound EMS item, as adjusted in accordance with the terms of paragraph (1)(3), rather than the annual adjustment inflation provided for in 19 CFR 24.22(k). Next, paragraph (l)(1)(ii) requires that if an Inbound EMS item is formally entered, the merchandise processing fee provided in 19 CFR 24.23(b)(1) must be paid. 10

Paragraph (l)(2) specifies how the remittance of payments required by subsection 13031(b)(9)(D)(i)(I) of COBRA will occur between USPS and CBP. As required by new subsection 13031(b)(9)(D)(iii)(I)(aa) of COBRA, paragraph (l)(2) states that USPS will remit to CBP on a quarterly basis 50 percent of the payments required by paragraph (l)(1) to reimburse CBP for services provided in connection with the processing of Inbound EMS items. 11 Paragraph (l)(2)(i) describes the method of remittance, in which USPS must remit 50 percent of payments required in paragraph (l)(1)(i) for which settlement with foreign postal operators has occurred.

Paragraph (l)(2)(i) requires USPS to make such remittances on a quarterly basis to cover preceding calendar quarters, with the first remittance due no later than July 31, 2020 to cover, at minimum, the first calendar quarter of 2020. Paragraph (l)(2)(ii) requires USPS to maintain documentation necessary for CBP to verify the accuracy of the fee calculations and to provide supporting documentation with its quarterly remittances, which shows: (1) The total quantity of Inbound EMS items for which 50 percent of the payments required by paragraph (l)(1)(i) of this section are being remitted; (2) the receiving international mail facility location of each Inbound EMS item for which 50 percent of the payments required by paragraph (l)(1)(i) of this section are being remitted; (3) the total amount of payments required by paragraph (l)(1)(i) of this section for which settlement with foreign postal operators has occurred; and (4) for any Inbound EMS items sent to the United States through the international postal network in preceding calendar quarters for which settlement with foreign postal operators concerning the payments required by paragraph (l)(1)(i) of this section has not occurred, the receiving international mail facility location of each such Inbound EMS item and the total quantity of any such Inbound EMS items received at each affected international mail facility location. The above requirements ensure that CBP has the supporting documentation necessary to track USPS's remittances to CBP to ensure that the statutory requirements are met.

Paragraph (l)(3) provides that beginning in fiscal year 2021, the Secretary of the Treasury may adjust by regulation the payments required in (l)(1)(i) after consultation with the Postmaster General. It further provides that such adjustments may be made not more frequently than once per fiscal year, and only to an amount that does not exceed the costs of services provided in connection with the processing of Inbound EMS items and consistent with the obligations of the United States under international agreements.

Finally, with respect to fees, CBP amends § 24.23(c) that pertains to exemptions from the merchandise processing fee. Section 24.23(c) provides exemptions and limitations to when the merchandise processing fee, surcharge, or specific fees provided under section 24.23 will not apply. Among other exemptions, § 24.23(c)(1)(v) currently exempts merchandise imported by mail from the fees in § 24.23. However, pursuant to the newly amended subsection 13031(b)(9)(D)(i)(II) of COBRA, Inbound EMS items that are formally entered are subject to a merchandise processing fee. Thus, CBP is amending § 24.23(c)(1)(v) to exclude formally entered Inbound EMS items from this exemption.

To effectuate the new subsection 13031(b)(9)(D)(i) of COBRA, CBP is also amending § 24.22 to exclude the $1 fee per Inbound EMS item from the annual adjustment inflation mechanism provided in § 24.22(k) and exclude Inbound EMS items from the dutiable mail fee in § 24.22(f).

Specifically, CBP is amending the introductory paragraph of § 24.22 to exclude the $1 processing fee contained in the newly added subparagraph (l) from the annual adjustment for inflation provision contained in § 24.22(k) (19 CFR 24.22(k)). 12

CBP is amending § 24.22(f) to exclude Inbound EMS items from the dutiable mail fee. Current § 24.22(f) provides that the addressee of each item of dutiable mail for which a CBP officer prepares documentation will be assessed a processing fee. 13 This fee is authorized by subsection 13031(a)(6) of COBRA and current section 24.22(f) and is referred to as the dutiable mail fee. CBP is amending § 24.22(f) to conform with the amendment made by section 8002(b) of the STOP Act to subsection 13031(a)(6) of COBRA that specifically excludes Inbound EMS items from the dutiable mail fee. CBP is also amending Appendix A to Part 24 to reflect the numbering change in the dutiable mail fee provision from 24.22(f) to 24.22(f)(1).

The Administrative Procedure Act (APA) generally requires agencies to publish a notice of proposed rulemaking in the Federal Register (5 U.S.C. 553(b)) and provide interested persons the opportunity to submit comments (5 U.S.C. 553(c)). However, the APA provides an exception to these requirements “when the agency for good cause finds (and incorporates the finding and a brief statement of reasons therefor in the rules issued) that notice and public comment thereon are impracticable, unnecessary, or contrary to the public interest.” 5 U.S.C. 553(b)(B). For the reasons specified below, CBP has determined that there is good cause to publish this rule without prior notice and comment procedures.

This rule implements the amendments made to subsection 13031(b)(9) of COBRA by section 8002 of the STOP Act. The new subsection 13031(b)(9)(D) of COBRA prescribes the relevant requirements for the new fees for processing Inbound EMS items. Subsection 13031(b)(9)(D) of COBRA establishes the fee amount (initially $1 per item plus the merchandise processing fee if the item is formally entered), what the fees cover (reimbursement for costs incurred in providing services in connection with the processing of Inbound EMS items), the percentage of the fee to be remitted to CBP from USPS (50 percent of the $1 per Inbound EMS item), how often USPS must remit such amounts to CBP (on a quarterly basis), the account in which such payments to CBP are to be deposited (Customs User Fee Account), how often the $1 fee may be adjusted by the Secretary of the Treasury in consultation with the Postmaster General (beginning in fiscal year 2021, and not more frequently than once each fiscal year) and considerations for how such adjustments are to be made (not to exceed the costs of services provided in connection with the processing of Inbound EMS items, consistent with obligations of the United States under international agreements).

As described above, this rule implements the amendments made to subsection 13031(b)(9) of COBRA by section 8002 of the STOP Act, which establish nondiscretionary requirements with respect to payments for the processing of Inbound EMS items at international mail facilities. Virtually all of the substantive provisions regarding the new fees are specifically provided by statute. This rule simply implements those requirements and makes necessary conforming amendments to CBP regulations. 14 The only discretionary matter that was left for regulations was the specific method by which USPS must remit payments to CBP. Since CBP was given very little discretion regarding the implementation of new subsection 13031(b)(9)(D), CBP believes that prior notice and public comment procedure would be impracticable, unnecessary, and contrary to the public interest. Accordingly, CBP finds that there is good cause to issue this rule without prior notice and comment.

CBP has also concluded that this rule is exempt from the prior notice and comment rulemaking procedures under 5 U.S.C. 553(b)(A), which states that such procedures do not apply to “rules of agency organization, procedure, or practice.” 5 U.S.C. 553(b)(A). CBP considers this rule to fall within that exemption, as the rule adopts and implements the substantive requirements under the newly amended subsection 13031(b)(9) of COBRA, as amended by section 8002 of the STOP Act, and simply sets forth the procedures that will apply with regard to certain remittances from USPS to CBP. As discussed above, Congress established the substantive provisions of the fees for processing Inbound EMS items, including the fee amount, method of remittances, authorized uses upon receipt of payment, and discretion to adjust the $1 fee once implemented after a year.

These regulations set forth the statutory requirements and the agency procedures for remitting the payments required under new subsection 13031(b)(9)(D) of COBRA. Specifically, the regulations detail the procedures regarding how USPS will remit the payments required by new subsection 13031(b)(9)(D) of COBRA. These regulations do not impose any obligations or costs to the public, and are procedural in nature.

Although this rule is exempt from the prior notice and comment procedure, CBP is requesting public comments on this interim final rule and will take into account public comments received before issuing a final rule.

Executive Orders 12866 (“Regulatory Planning and Review”) and 13563 (“Improving Regulation and Regulatory Review”) direct agencies to assess the 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). Executive Order 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. Executive Order 13771 (“Reducing Regulation and Controlling Regulatory Costs”) directs agencies to reduce regulation and control regulatory costs and provides that “for every one new regulation issued, at least two prior regulations be identified for elimination, and that the cost of planned regulations be prudently managed and controlled through a budgeting process.”

This rule is a “significant regulatory action,” although not an economically significant regulatory action, under section 3(f) of Executive Order 12866. Accordingly, the Office of Management and Budget (OMB) has reviewed this rule. Federal spending regulatory actions that cause only income transfers between taxpayers and program beneficiaries are not covered by Executive Order 13771. However, such regulatory actions may impose requirements apart from transfers and, in those cases, the actions would need to be offset to the extent they impose more than de minimis costs. 15 This rule is not expected to be subject to the requirements of Executive Order 13771 because this rule is expected to result in no more than de minimis costs. CBP has prepared a regulatory impact analysis of this rule in accordance with Executive Orders 12866 and 13563. CBP is unable to publish the full analysis because it uses proprietary, non-public USPS data. As such, CBP has included the following summary of the analysis to help inform stakeholders of this rule's impacts.

As mentioned above, the STOP Act amends the Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1985, 19 U.S.C. 58c(b)(9), to create new subsection 13031(b)(9)(D), which requires certain fees for the screening and processing of Inbound Express Mail Service (Inbound EMS) items at international mail facilities. Express Mail Service refers to the optional express delivery service for international postal items that provides reliable and high-speed service for sending postal items to other countries. USPS is responsible for processing and delivering these items in the United States, while CBP is responsible for screening such items and removing packages with illicit goods from the mail stream before delivery to intended recipients in the United States.

New subsection 13031(b)(9)(D) of COBRA requires a payment of $1 per Inbound EMS item (“Inbound EMS item fee”), subject to annual adjustment, for services rendered in the screening and processing of Inbound EMS items. Under this new subsection, USPS must pay 50 percent of the designated $1 fee per Inbound EMS item that it collects to CBP on a quarterly basis as reimbursement to CBP for processing of Inbound EMS items and retain the other 50 percent to cover its processing of these items. Depending on postal procedures, the $1 Inbound EMS item fee may ultimately be paid by foreign postal operators, shippers, or other entities. New subsection 13031(b)(9)(D) of COBRA also specifies that the ad valorem merchandise processing fee (MPF) currently under subsection 13031(a)(9) of COBRA shall be required if applicable to Inbound EMS items that are formally entered; these new implementing regulations will make the MPF applicable to formally entered Inbound EMS items prospectively by removing the current regulatory exemption. 16 With this change, importers of record, who are addressees or addressees' brokers in the inbound mail environment, will be required to now pay an ad valorem MPF on any formally entered Inbound EMS items directly to CBP, consistent with current entry and entry summary procedures for other mail fees. For fiscal year (FY) 2020, this ad valorem MPF is 0.3464 percent, though it cannot exceed $519.76 and cannot be less than $26.79. 17 These maximum and minimum fee values are determined each fiscal year and published via Federal Register notice.

Under existing regulations, CBP also assesses duties, taxes, and fees on applicable Inbound EMS items, including a dutiable mail fee. Currently, all dutiable mail items for which a CBP officer prepared documentation ( i.e., formal entries and informal entries subject to duties) are subject to a dutiable mail fee. This dutiable mail fee, which is currently $5.89 and is subject to annual adjustment for inflation, is generally paid by addressees of dutiable Inbound EMS items and other dutiable mail items. 18 When the mail item is delivered by USPS generally for informal entries, the dutiable mail fee generally is collected at the time of delivery of the merchandise, along with any duties and taxes due. CBP may also collect the fee directly from an addressee. The amendments made to COBRA by the STOP Act exclude Inbound EMS items from this dutiable mail fee.

As provided in the STOP Act, the aforementioned amendments to the COBRA fees took effect on January 1, 2020, though not all changes have been implemented. Through this rule, CBP is amending its regulations to implement all of the STOP Act's COBRA amendments that pertain to Inbound EMS items, including statutorily-prescribed fees, adjustments to fees, fee revenue remittances from USPS to CBP, and the elimination of the dutiable mail fee for Inbound EMS items. CBP is also requiring USPS to maintain and provide supporting documentation to the agency to ensure the accuracy of the fee remittances with this rule. Table 1 summarizes the COBRA user fees applicable to Inbound EMS items with and without the COBRA amendments and this rule.

The final regulations (TD 9896) that are the subject of this correction are issued under section 267A of the Code.

As published April 8, 2020, the final regulations (TD 9896) contained an error that need to be corrected.

Accordingly, the final regulations (TD 9896), that are the subject of FR Doc. 2020-05924, are corrected as follows:

Throughout this document, “we,” “us,” and “our” refer to the EPA.

Persons potentially affected by this action include those who seek or might seek permits or approval to dispose of dredged material into ocean waters pursuant to the MPRSA, 33 U.S.C. 1401 to 1445. The EPA's action would be relevant to persons, including organizations and government bodies, seeking to dispose of dredged material in ocean waters offshore of Mobile, Alabama. Currently, the U.S. Army Corps of Engineers (USACE) would be most affected by this action. Potentially affected categories and persons include:

This table is not intended to be exhaustive, but rather provides a guide for readers regarding persons likely to be affected by this action. For any questions regarding the applicability of this action to a particular person, please refer to the contact person listed in the preceding FOR FURTHER INFORMATION CONTACT section.

The Mobile ODMDS is located between two and six miles south of Dauphin Island in the Gulf of Mexico and is 4.75 square nautical miles (nmi 2 ) in size. The Mobile ODMDS received interim site designation status in 1977 and final designation in 1988.

The USACE Mobile District and the EPA Region 4 have identified a need to either designate a new ODMDS or modify the existing Mobile ODMDS. The need for modifying the ocean disposal capacity is based on future capacity requirements, historical dredging volumes, estimates of dredging volumes for future proposed projects, and limited capacity of upland confined disposal facilities (CDFs) in the area.

The EPA is modifying the existing Mobile ODMDS rather than designate a new site off the coast of Mobile for ocean disposal of dredged material. The modification of the existing Mobile ODMDS for dredged material does not mean that the USACE or the EPA has approved the use of the Mobile ODMDS for open water disposal of dredged material from any specific project. Before any person can ocean dump dredged material at the Mobile ODMDS, the EPA and the USACE must evaluate the project according to the ocean dumping regulatory criteria (40 CFR, part 227) and the USACE must authorize the disposal. The EPA independently evaluates proposed dumping and has the right to restrict and/or disapprove of the actual disposal of dredged material if the EPA determines that environmental requirements under the MPRSA have not been met. This action is supported by an Environmental Assessment, which was established in accordance with the National Environmental Policy Act.

The modified ODMDS is in approximately 34 to 57 feet of water and is located between 2.0 and 6.0 nautical miles south of Dauphin Island, Alabama. The modified ODMDS would expand the existing Mobile ODMDS from a size of approximately 4.75 nmi 2 to approximately 23.8 nmi 2 in size. The location of the modified ODMDS is bounded by the coordinates listed below. The coordinates for the site are in North American Datum 83 (NAD 83):

The modification of the existing ODMDS will allow the EPA to adaptively manage the site to maximize its capacity, minimize the potential for mounding and associated safety concerns, and minimize the potential for any long-term adverse effects to the marine environment.

The modified ODMDS is expected to receive dredged material from the federally authorized navigation project at Mobile Harbor, Alabama, and dredged material from other applicants who have obtained a MPRSA permit for the ocean disposal of dredged material. All persons using the site will be required to follow the Site Management and Monitoring Plan (SMMP) for the ODMDS that is specifically developed for the modified ODMDS. The SMMP includes management and monitoring measures to ensure that dredged materials disposed at the modified ODMDS are suitable for disposal in the ocean and that adverse impacts of disposal, if any, are addressed to the maximum extent practicable. This includes provisions to avoid and minimize potential impacts to artificial reefs and cultural resources. The SMMP for the modified ODMDS also addresses management of the site to ensure adverse mounding does not occur and ensures that disposal events minimize interference with other uses of ocean waters near the modified ODMDS. Future transportation to the ODMDS and disposal of dredged material at the ODMDS will be governed by the currently approved version of the SMMP.

In evaluating the modified ODMDS, the EPA assessed the site according to the criteria set forth in the MPRSA, with emphasis on the general and specific regulatory criteria of 40 CFR part 228, to determine whether the site designation satisfies those criteria. The EPA's Final Environmental Assessment for Modification of the Ocean Dredged Material Disposal Site Mobile, Alabama, May 2020 (FEA), provides an extensive evaluation of the criteria and other related factors for the modification of the existing ODMDS.

(1) Sites must be selected to minimize interference with other activities in the marine environment, particularly avoiding areas of existing fisheries or shellfisheries, and regions of heavy commercial or recreational navigation (40 CFR 228.5(a)).

The location of the modified ODMDS was screened in 1982 by the USACE as part of their evaluation of the area for selection of a location for ocean dumping of dredged material under Section 103 of the MPRSA, as there was no EPA-designated ODMDS at the time. That evaluation included considerations of potential interference with other activities in the marine environment including avoiding areas of existing critical fisheries or shellfisheries, regions of heavy commercial or recreational navigation, and potential historic properties. These evaluations were re-considered from 2002 through to the present time, as the modified ODMDS continued to be assessed.

(2) Sites must be situated such that temporary perturbations to water quality or other environmental conditions during initial mixing caused by disposal operations would be reduced to normal ambient levels or undetectable contaminant concentrations or effects before reaching any beach, shoreline, marine sanctuary, or known geographically limited fishery or shellfishery (40 CFR 228.5(b)).

The modified ODMDS will only be used for disposal of suitable dredged material as determined by Section 103 of the MPRSA. Based on the USACE and the EPA's sediment testing and evaluation of dredged material, disposal is not expected to have any long-term impact on water quality. The modified ODMDS is located sufficiently far from shore (two to six miles) and fisheries resources to allow temporary water quality disturbances caused by ocean disposal of dredged material to be reduced to ambient conditions before reaching any environmentally sensitive areas.

(3) This criterion has been removed from the regulations and no longer applies.

(4) The sizes of disposal sites will be limited in order to localize for identification and control any immediate adverse impacts, and to permit the implementation of effective monitoring and surveillance to prevent adverse long-range impacts. Size, configuration, and location are to be determined as part of the disposal site evaluation (40 CFR 228.5(d)).

The location, size, and configuration of the modified ODMDS will provide long-term capacity, while also allowing effective site management, site monitoring, and limiting environmental impacts to the surrounding area to the greatest extent practicable.

Based on 25 years of projected new work and maintenance dredging, and permitted dredged material disposal needs, it is estimated that the modified ODMDS should be approximately 24 nmi 2 in size to meet the anticipated long-term disposal needs of the area. This would provide the modified ODMDS with an estimated capacity of approximately 260 million cubic yards, which is sufficient to manage risk, account for future unknown disposal operations from private entities, and provide a margin of navigation safety.

By adding approximately 19 nmi 2 to the existing Mobile ODMDS, the total area of the modified Mobile ODMDS is 23.8 nmi 2 . An ODMDS of this size and capacity will provide a long-term ocean disposal option for the Mobile Bay area.

When determining the size of the proposed site, the ability to implement effective monitoring and surveillance programs was considered to ensure that the environment of the site could be protected, and that navigational safety would not be compromised by the mounding of dredged material, which could result in adverse wave conditions. A SMMP has been developed and will be implemented to determine if disposal at the site is significantly affecting adjacent areas and to detect the presence of adverse effects. At a minimum, the monitoring program will consist of bathymetric surveys, sediment grain size analysis, chemical analysis of constituents of concern in the sediments, and a health assessment of the benthic community.

(5) EPA will, wherever feasible, designate ocean dumping sites beyond the edge of the continental shelf and other such sites where historical disposal has occurred (40 CFR 228.5(e)).

Locating the disposal site near the continental shelf is not feasible and would be cost prohibitive. Transporting material to and performing long-term monitoring of a site located off the continental shelf is not economically or operationally feasible.

(1) Geographical Position, Depth of Water, Bottom Topography and Distance from Coast (40 CFR 228.6(a)(1)).

The modified ODMDS is in the Gulf of Mexico, between two and six miles offshore of Dauphin Island, Alabama. Water depths range from -34 to -57 feet (10.4 to 17.4 meters) with an overall average depth of -45 feet (13.7 meters). Sediments consist of sands to clays, with various mixtures of sand, silts, and clays. Most areas in the modified ODMDS have a higher percentage of silt/clay than sand. There tends to be more fine material in the northern portion of the site, and more fine sand on the southern portion of the modified ODMDS. There is a shallower mound (approximately -18 feet MLLW) located in the southeastern portion of the site, where material was historically placed for disposal. There are numerous oil and gas wells located throughout the proposed expansion area. Disposal shall not occur closer than 1,300 feet to any oil or gas rig that may be present within the site boundaries. The FEA contains a map of the ODMDS modification.

(2) Location in Relation to Breeding, Spawning, Nursery, Feeding, or Passage Areas of Living Resources in Adult or Juvenile Phases (40 CFR 228.6(a)(2)).

The modified ODMDS has been selected to avoid the presence of any exclusive breeding, spawning, nursery, feeding, or passage areas for adult or juvenile phases of living resources.

(3) Location in Relation to Beaches and Other Amenity Areas (40 CFR 228.6(a)(3)) .

The center of the modified ODMDS is several miles from any beaches or amenity areas. No significant impacts to beaches or amenity areas associated with the existing Mobile ODMDS have been detected.

(4) Types and Quantities of Wastes Proposed to be Disposed of, and Proposed Methods of Release, including Methods of Packing the Waste, if any (40 CFR 228.6(a)(4)).

Only dredged material that meets the EPA Ocean Dumping Criteria in 40 CFR 220-228 and has been deemed suitable can be disposed of in the ODMDS. Dredged materials dumped in this area will primarily be silts and clays with some sands that originate from Mobile Bay including the Federal Channel and areas of the Port. Average yearly disposal of dredged material into the modified ODMDS is expected to be approximately 2.9 million cubic yards of maintenance and new work dredged material. Hopper dredge, barge, and scow combinations are the usual vehicles of transport for the dredged material, resulting in release of dredged material closer to the bottom of the site which reduces resultant turbidity. None of the dredged material is packaged in any manner.

Under section 103 of the MPRSA, the USACE is the federal agency that decides whether to issue a permit authorizing the ocean disposal of dredged materials. In the case of federal navigation projects involving ocean disposal of dredged materials, transportation to and disposal in ocean waters for disposal by the USACE is subject to the MPRSA, but not to a USACE permit. The USACE relies on the EPA's ocean dumping criteria when evaluating permit requests for (and implementing federal projects involving) the transportation of dredged material for the purpose of dumping it into ocean waters. MPRSA permits and federal projects involving ocean dumping of dredged material are subject to the EPA's review and concurrence. The EPA may concur with or without conditions or decline to concur on the permit or federal project, i.e., non-concur. If the EPA concurs with conditions, the final permit or federal project authorization must include those conditions. If the EPA declines to concur (non-concurs) on an ocean dumping permit for dredged material, the USACE cannot issue the permit or authorize the transportation to and disposal of dredged material in the ocean associated with the federal project.

(5) Feasibility of Surveillance and Monitoring (40 CFR 228.6(a)(5)).

The EPA expects monitoring and surveillance at the modified ODMDS to be feasible and readily performed from ocean or regional class research vessels. The entire area of the modified ODMDS has been surveyed and sampled in 2009 and 2017. The EPA will monitor the site for physical, biological, and chemical attributes as well as for potential impacts. Bathymetric surveys will be conducted routinely, and benthic infauna and epibenthic organisms will be monitored, as described in the SMMP for the site.

(6) Dispersal, Horizontal Transport and Vertical Mixing Characteristics of the Area, including Prevailing Current Direction and Velocity, if any (40 CFR 228.6(a)(6)).

Current velocities are greatest at the water's surface due to wind and wave action. Intermediate and bottom layer currents are driven by thermohaline and tidal circulations. Currents measured at gauge stations surrounding the ODMDS are predominantly to the west or southwest on the order of 10-30 centimeters per second.

(7) Existence and Effects of Current and Previous Discharges and Dumping in the Area (including Cumulative Effects) (40 CFR 228.6(a)(7)).

Previous disposal of dredged material in the existing Mobile ODMDS has resulted in temporary increases in suspended sediment concentrations during disposal operations, localized mounding within the site, burial of benthic organisms within the site, slight changes in the abundance and composition of benthic assemblages, and changes in the sediment composition from sandy sediments to finer-grained silts. Short-term, long-term, and cumulative effects of dredged material disposal in the modified ODMDS would be similar to those for the previously designated Mobile ODMDS.

(8) Interference with Shipping, Fishing, Recreation, Mineral Extraction, Desalination, Fish and Shellfish Culture, Areas of Special Scientific Importance and Other Legitimate Uses of the Ocean (40 CFR 228.6(a)(8)).

There will be minor, short-term interferences with commercial and recreational boat traffic during the transport of dredged material to the modified ODMDS. There are several oil and gas extraction platforms in the existing and modified Mobile ODMDS. The site has not been identified as an area of special scientific importance. There are no aquaculture areas near the site. There may be recreational fishing in the area. The likelihood of direct interference with these activities is low, provided there is close communication and coordination among users of the ocean resources. There is one artificial reef site located approximately a quarter mile south of the modified ODMDS. The SMMP for the modified ODMDS contains provisions for corrective measures if impacts to the artificial reef related to dredged material disposal are identified.

(9) The Existing Water Quality and Ecology of the Sites as Determined by Available Data or Trend Assessment of Baseline Surveys (40 CFR 228.6(a)(9)).

Water quality of the existing site is typical of the Gulf of Mexico. Water and sediment quality analyses conducted in the vicinity of the modified ODMDS and experience with past disposals in the previously designated Mobile ODMDS have not identified any adverse water quality impacts from ocean disposal of dredged material. The site supports benthic and epibenthic fauna characteristic of the shallow Gulf of Mexico and are widespread off the Gulf coast.

(10) Potentiality for the Development or Recruitment of Nuisance Species in the Disposal Site (40 CFR 228.6(a)(10)).

Nuisance species, considered as any undesirable organism not previously existing at a location, have not been observed at, or in the vicinity of, the modified ODMDS. Disposal of dredged material, as well as monitoring, has been ongoing for the past 40 to 50 years. Nuisance species have not been found. The dredged material to be disposed of at the ODMDS is expected to be from similar locations to those dredged previously, therefore it expected that any benthic organisms transported to the site would be relatively similar in nature to those already there.

(11) Existence at or in Close Proximity to the Site of any Significant Natural or Cultural Feature of Historical Importance (40 CFR 228.6(a)(11)).

A maritime investigation of this site was conducted in 1982 to identify areas of high and low probability of submerged resources. Past efforts showed the presence of magnetic anomalies that may be indicative of potential resources. Until further analysis is conducted, these anomalies should be avoided in the modified Mobile ODMDS.

The SMMP for the ODMDS contains measures to ensure that resources identified in up-to-date maritime investigations are avoided and are not adversely affected by dredged material disposal.

Section 102 of the National Environmental Policy Act of 1969, as amended (NEPA), 42 U.S.C. 4321 to 4370, requires Federal agencies to prepare an Environmental Impact Statement (EIS) for major federal actions significantly affecting the quality of the human environment. NEPA does not apply to EPA designations of ocean disposal sites under the MPRSA because the courts have exempted the EPA's actions under the MPRSA from the procedural requirements of NEPA through the functional equivalence doctrine. The EPA has, by policy, determined that the preparation of NEPA documents for certain EPA regulatory actions, including actions under the MPRSA, is appropriate. The EPA's “Notice of Policy and Procedures for Voluntary Preparation of NEPA Documents,” (Voluntary NEPA Policy), 63 FR 58045, (October 29, 1998), sets out both the policy and procedures the EPA uses when preparing such environmental review documents.

A Draft Environmental Assessment (DEA) for the modification of the Mobile ODMDS was released for public review and comment for a 35-day period on September 26, 2018. The EPA re-noticed the DEA for public review and comment for a 34-day period on October 17, 2019. In addition, the EPA issued a preliminary Finding of No Significant Impact for public review and comment for a 30-day period on June 2, 2020.

The DEA presented the analysis and alternatives considered for the permanent designation of a modified ODMDS offshore Mobile, Alabama, for the purpose of providing an environmentally acceptable option for the ocean disposal of dredged material. The alternatives included: (1) No action/continued use of the previously designated ODMDS; (2) modification of the previously designated Mobile ODMDS to encompass a larger area capable of meeting the capacity needs during the next 25 years; (3) modification of the previously designated Mobile ODMDS to encompass a much larger area capable of meeting the capacity needs during the next 50 years; and (4) designation of a new site. The second alternative was presented as the selected alternative in the EA.

The EPA received comments on the DEA regarding issues that included: (1) Potential movement of disposed material impacting nearby artificial reefs; (2) consideration of impacts to the giant manta ray, a newly listed threatened species; (3) the age of the existing cultural resource surveys; and (4) a request for additional opportunity for public review and comment. A detailed responsiveness summary is included in the appendices in the FEA. In addition, a summary of the EPA's consideration of comments received regarding the proposal to modify the Mobile ODMDS is included below.

Following the consideration of comments received, the EPA has issued a Finding of No Significant Impact and the FEA. These documents are included in the docket for this action and may be accessed from http://www.regulations.gov.

The FEA includes a description of the history during the past 18 years of consultation with the National Marine Fisheries Service (NMFS) regarding the assessment of essential fish habitat (EFH), pursuant to Section 305(b), 16 U.S.C. 1855(b)(2), of the MSA with respect to the Mobile ODMDS. On July 24, 2018, the USACE issued a Draft Integrated General Reevaluation Report with Supplemental Environmental Impact Statement on the Mobile Harbor Navigation Project, which included an assessment of EFH regarding the disposal of dredged material to the Mobile ODMDS. On September 7, 2018, NMFS issued a letter to the USACE that stated its agreement with the USACE's determination that the project will not adversely affect EFH. The EPA notified NMFS by letter dated September 25, 2018, of the proposed action to modify the Mobile ODMDS and provided the EPA's assessment that this action would not likely adversely affect EFH. On May 13, 2020, NMFS notified the EPA by email that the required EFH consultation under the MSA has been successfully concluded.

Pursuant to an Office of Water policy memorandum dated October 23, 1989, the EPA has evaluated the proposed site designations for consistency with the State of Alabama's approved coastal zone management program. On September 25, 2018, the EPA notified the Alabama Department of Environmental Management of the proposed modification of the Mobile ODMDS and provided them with the EPA's assessment that the proposed action was consistent with Alabama's coastal zone management program to the maximum extent practicable. On April 10, 2020, ADEM notified the EPA by email that the Alabama Coastal Area Management Program does not object to the proposal to expand the ODMDS on the basis that all placed material is required to meet the EPA's environmental criteria and it keeps the mineral resource within the system.

The ESA, as amended, 16 U.S.C. 1531 to 1544, requires Federal agencies to consult with NMFS and the U.S. Fish and Wildlife Service (USFWS) to ensure that any action authorized, funded, or carried out by the Federal agency is not likely to jeopardize the continued existence of any federally listed endangered or threatened species or result in the destruction or adverse modification of any critical habitat. The EPA notified NMFS and USFWS respectively by letters dated September 25, 2018, of the proposed action to modify the Mobile ODMDS and provided the EPA's assessment that this action would not likely adversely affect federally listed species or their critical habitat.

In a letter dated October 8, 2018, the USFWS concurred with the EPA's determination that the proposed action is not likely to adversely affect federally listed species under the jurisdiction of the USFWS. The USFWS further stated that no further endangered species consultation will be required unless: The proposed action is subsequently modified in a manner that causes an effect on listed species or their critical habitat; new information reveals that the proposed action may affect listed species or their critical habitat in a manner or to an extent not previously considered, or a new species is listed or critical habitat is designated under the ESA that may be affected by the proposed action. As of the date of this action, there are no new federally listed species under jurisdiction of the USFWS in the project area. There are also no new information or changes to the project that may affect species or their critical habitat in a manner or extent not previously considered.

Following the issuance of the EPA's letter dated September 25, 2018, the EPA learned of additional federally listed species under the jurisdiction of NMFS including the giant manta ray ( Manta birostris ) and the Bryde's whale ( Balaenoptera edeni brydei ). In addition, NMFS is in the process of developing a Gulf of Mexico Regional Biological Opinion, which is expected to address all federally listed species that may be affected by the modification of the Mobile ODMDS. Based on the EPA's May 8, 2020 communication with NMFS, the EPA is deferring completion of consultation with respect to the modification of the Mobile ODMDS pursuant to ESA Section 7(d).

The USACE and the EPA initiated consultation with the State of Alabama's Historic Preservation Officer (SHPO) on September 25, 2018, to address the NHPA, 16 U.S.C. 470 to 470a-2, which requires Federal agencies to consider the effect of their actions on districts, sites, buildings, structures, or objects, included in, or eligible for inclusion in the National Register of Historic Places. In a letter dated October 13, 2018, the Alabama Historical Commission (AHC) recommended more up to date maritime surveys in the proposed action area.

During the public comment period for the draft rule to modify the Mobile ODMDS, the EPA received an email from the Choctaw Nation of Oklahoma (CNO) dated July 30, 2019 that notified the EPA that the proposed modification of the Mobile ODMDS lies within the CNO's area of historic interest and that unidentified cultural resources may be located in this area. The CNO also issued an email to the EPA dated November 18, 2019 that requested that they be a consulting party on the modification to the ODMDS pursuant to the NHPA. Following discussions with the AHC and the CNO, the EPA issued letters to the AHC and CNO dated January 24, 2020 that presented language that set forth management provisions to be included in the SMMP to ensure protection of historic and cultural archaeological resources and address the interests expressed by the AHC and the CNO. The EPA specifically proposed language in the SMMP that references a Programmatic Agreement between the USACE and the AHC regarding the Mobile Harbor General Reevaluation Study (Programmatic Agreement), which was signed on July 26, 2019, and sets forth surveys and other activities that would need to be conducted prior to the disposal of dredged material to unused portions of the expanded Mobile ODMDS. On February 25, 2020, the AHC responded by letter and informed the EPA of its agreement with the proposed language. During subsequent communications with the EPA through email and teleconference on February 24, and March 23, 2020, the CNO stated that they had no objections to the proposed language and had no further comments on the EPA's proposed modification of the Mobile ODMDS.

On June 25, 2019, the EPA published a proposed rule (docket number EPA-R04-OW-2016-0356) to modify the site for public review and comment for a 45-day period. During that time, the EPA received comments from government agencies including the CNO, the National Oceanic and Atmospheric Administration (NOAA), and the U.S. Department of Interior (DOI). The EPA also received comments from two members of the public during this time. The specific comments received on the proposed rule and the EPA's responses to such comments are included in the Responsiveness Summary of Appendix C of the FEA, which may be accessed at http://www.regulations.gov. Below is a summary of the EPA's consideration of the comments received regarding the proposed rule.

The comments from the CNO and the EPA's consideration of such comments are described above in Section III.e.

NOAA issued a comment from its Marine Chart Division requesting clarity regarding the boundaries of the modified ODMDS and the boundaries that are currently defined on marine charts. The boundaries of the modified ODMDS were established to ensure protection of human health and the marine environment pursuant to the requirements of MPRSA. The boundaries are set forth by the coordinates of this regulation and are also presented in tables ES-3 and ES-4 of the FEA.

The DOI recommended that the modified ODMDS be re-surveyed prior to the deposition of dredged material using more modern equipment than what was available nearly 40 years ago. The SMMP for the Mobile ODMDS includes language that references a Programmatic Agreement that specifies work, including modern surveys, to be conducted prior to the disposal of dredged material for unused portions of the ODMDS.

The comments received from members of the public included concerns about the adequacy of the opportunity to provide comments on the DEA. The EPA subsequently reopened the public comment period for the DEA for a 34-day period on October 17, 2019. The public comments also referenced the DEA and expressed concerns about the description of the respective roles of the EPA and the USACE regarding the modification of the Mobile ODMDS. The FEA includes updated language from the language included in the DEA to ensure clarity regarding the responsibilities of the EPA under the MPRSA, including coordination with the USACE, with respect to the modification of the Mobile ODMDS. The public also provided recommended revisions to some of the language in the DEA, which are addressed in the FEA as described in more detail in the responsiveness summary in Appendix C of the FEA.

A member of the public requested that the rule be clarified to define the changes that would be expected to occur within the modified ODMDS that demonstrate that the capacity has been exhausted. The member of the public further requested that the rule explain how the USACE would be prevented from exceeding this capacity. The exhaustion of the capacity of the ODMDS will ultimately be evaluated based on monitoring data obtained from the ODMDS. The requirements for monitoring and management of the ODMDS, including the monitoring of changes in bathymetry, are set forth in the SMMP. The EPA and the USACE will utilize the monitoring data collected as the basis for understanding the changes in available capacity over time for the Mobile ODMDS. In addition, no material can be disposed of in the ODMDS without the EPA's review and concurrence in accordance with MPRSA Section 103. The EPA will consider all available data and information, including monitoring data from the site, prior to taking management action pursuant to MPRSA for the Mobile ODMDS.

A member of the public stated that the rule and the DEA should be revised to reflect a modification to the Mobile ODMDS that would accommodate the disposal needs during the next 50 years, instead of 25 years. A Memorandum of Understanding between the USACE South Atlantic Division and EPA Region 4 specifically identifies a period of 10 to 25 years for considering the long-term use for designation or modification of an ODMDS. Basing the size of an ODMDS on a longer planning period, such as 50 years, would significantly increase the necessary resources to manage and monitor the ODMDS. The decision to utilize a 25-year time frame for disposal was made by the USACE and the EPA in consideration of the agreed-upon provisions of the 2017 MOU. If it is found that material is accumulating in the site to a degree at which there are concerns (biological, chemical, physical), modeling will be undertaken to reassess the capacity as specified in the SMMP.

A member of the public expressed that the rule fails to address some key provisions to protect the water from contamination and illegal dumping. In accordance with the MPRSA and the criteria set forth by its implementing regulations, as described in Section II above, contaminated material cannot not be disposed in the Mobile ODMDS. Any unauthorized dumping of material to the Mobile ODMDS is not allowed by the rule that is being issued today and is subject to enforcement for illegal dumping.

This rule modifies the Mobile ODMDS pursuant to Section 102 of the MPRSA. This action complies with applicable executive orders and statutory provisions as follows:

This action is not a “significant regulatory action” under the terms of Executive Order 12866 (58 FR 51735, October 4, 1993) and is therefore not subject to review under Executive Orders 12866 and 13563 (76 FR 3821, January 21, 2011).

This action does not impose an information collection burden under the provisions of the Paperwork Reduction Act, 44 U.S.C. 3501 et seq. Burden is defined at 5 CFR 1320.3(b). This site designation, does not require persons to obtain, maintain, retain, report, or publicly disclose information to or for a Federal agency.

The Regulatory Flexibility Act (RFA) generally requires Federal agencies to prepare a regulatory flexibility analysis of any rule subject to notice and comment rulemaking requirements under the Administrative Procedure Act or any other statute unless the agency certifies that the rule will not have a significant economic impact on a substantial number of small entities. Small entities include small businesses, small organizations, and small governmental jurisdictions. For purposes of assessing the impacts of this rule on small entities, small entity is defined as: (1) A small business defined by the Small Business Administration's size regulations at 13 CFR 121.201; (2) a small governmental jurisdiction that is a government of a city, county, town, school district, or special district with a population of less than 50,000; and (3) a small organization that is any not-for-profit enterprise which is independently owned and operated and is not dominant in its field. After considering the economic impacts of this rule, the EPA certifies that this action will not have a significant economic impact on a substantial number of small entities.

This action contains no Federal mandates under the provisions of Title II of the Unfunded Mandates Reform Act (UMRA) of 1995, 2 U.S.C. 1531 to 1538, for State, local, or tribal governments or the private sector. This action imposes no new enforceable duty on any State, local or tribal governments or the private sector. Therefore, this action is not subject to the requirements of sections 202 or 205 of the UMRA. This action is also not subject to the requirements of section 203 of the UMRA because it contains no regulatory requirements that might significantly or uniquely affect small government entities. Those entities are already subject to existing permitting requirements for the disposal of dredged material in ocean waters.

This action does not have federalism implications. It does not have substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among various levels of government, as specified in Executive Order 13132. Thus, Executive Order 13132 does not apply to this action. In the spirit of Executive Order 13132, and consistent with the EPA policy to promote communications between the EPA and State and local governments, the EPA specifically solicited comments on this action from State and local officials.

As described in Section III.e. above, the CNO notified the EPA that the proposed modification of the Mobile ODMDS lies within the CNO's area of historic interest and requested to be a consulting party on the modification to the ODMDS pursuant to the NHPA. The EPA conducted a teleconference with the CNO on January 13, 2020 and discussed the CNO's interests regarding the EPA's proposed action. The EPA issued a letter to the CNO on January 24, 2020, that presented language that set forth management provisions to be included in the SMMP to ensure protection of historic and cultural archaeological resources and address the interests expressed by the CNO. During subsequent communications with the EPA through email and teleconference, the CNO stated that they had no objections to the proposed language and had no further comments on the EPA's proposed modification of the Mobile ODMDS.

The EPA interprets Executive Order 13045 as applying only to those regulatory actions that concern health or safety risks, such that the analysis required under Section 5-501 of the Executive Order has the potential to influence the regulation. This action is not subject to Executive Order 13045 because it does not establish an environmental standard intended to mitigate health or safety risks. The action concerns the modification of the existing Mobile ODMDS and only has the effect of providing a designated location for ocean disposal of dredged material pursuant to Section 102 (c) of the MPRSA.

This action is not subject to Executive Order 13211, “Actions Concerning Regulations that Significantly Affect Energy Supply, Distribution, or Use” (66 FR 28355) because it is not a “significant regulatory action” as defined under Executive Order 12866.

Section 12(d) of the National Technology Transfer and Advancement Act of 1995 (“NTTAA”), Public Law 104-113, 12(d) (15 U.S.C. 272), directs the EPA to use voluntary consensus standards in its regulatory activities unless to do so would be inconsistent with applicable law or otherwise impractical. Voluntary consensus standards are technical standards ( e.g., materials specifications, test methods, sampling procedures, and business practices) that are developed or adopted by voluntary consensus bodies. The NTTAA directs the EPA to provide Congress, through Office of Management and Budget, explanations when the Agency decides not to use available and applicable voluntary consensus standards. This action includes environmental monitoring and measurement as described in the SMMP. The EPA will not require the use of specific, prescribed analytic methods for monitoring and managing the modified ODMDS. The Agency plans to allow the use of any method, whether it constitutes a voluntary consensus standard or not, that meets the monitoring and measurement criteria discussed in the SMMP.

Executive Order 12898 (59 FR 7629) establishes federal executive policy on environmental justice. Its main provision directs federal agencies, to the greatest extent practicable and permitted by law, to make environmental justice part of their mission by identifying and addressing, as appropriate, disproportionately high and adverse human health or environmental effects of their programs, policies, and activities on minority populations and low-income populations in the United States. The EPA determined that this rule will not have disproportionately high and adverse human health or environmental effects on minority or low-income populations because it does not affect the level of protection provided to human health or the environment. The EPA has assessed the overall protectiveness of modifying the existing Mobile ODMDS against the criteria established pursuant to the MPRSA to ensure that any adverse impact to the environment will be mitigated to the greatest extent practicable.

For the reasons set out in the preamble, the EPA amends chapter I, title 40 of the Code of Federal Register as follows:

Addendum A to this final rule summarizes the FY 2021 IPF PPS payment rates, outlier threshold, cost of living adjustment factors for Alaska and Hawaii, national and upper limit cost-to-charge ratios, and adjustment factors. In addition, the B Addenda to this final rule shows the complete listing of International Classification of Diseases (ICD-10) Clinical Modification (CM) and Procedure Coding System codes underlying the Code First table, the FY 2021 IPF PPS comorbidity adjustment, and electroconvulsive therapy (ECT) procedure codes. The A and B Addenda are available online at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientPsychFacilPPS/tools.html.

Tables setting forth the FY 2021 Wage Index for Urban Areas Based on Core-Based Statistical Area (CBSA) Labor Market Areas and the FY 2021 Wage Index Based on CBSA Labor Market Areas for Rural Areas are available exclusively through the internet, on the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/IPFPPS/WageIndex.html.

This final rule updates the prospective payment rates, the outlier threshold, and the wage index for Medicare inpatient hospital services provided by Inpatient Psychiatric Facilities (IPFs) for discharges occurring during the Fiscal Year (FY) beginning October 1, 2020 through September 30, 2021. In addition, this final rule updates the IPF wage index, adopts more recent Office of Management and Budget (OMB) statistical area delineations, and applies a 2-year transition for all providers negatively impacted by wage index changes.

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”. 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 IPF PPS final rule was not 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. The IPF PPS final rule is necessary to annually review and update the payment system, and it is critical to ensure that the payment policies for this payment system 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 IPF PPS final rule; it would be contrary to the public interest for CMS to do otherwise. However, we are providing 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.

In this final rule we:

• Adjust the 2016-based IPF market basket update (2.2 percent) for economy-wide productivity (0 percentage point) as required by section 1886(s)(2)(A)(i) of the Social Security Act (the Act), resulting in a final IPF payment rate update of 2.2 percent for FY 2021.

• Made technical rate setting changes: The IPF PPS payment rates will be adjusted annually for inflation, as well as statutory and other policy factors. This rule updates:

++ The IPF PPS federal per diem base rate from $798.55 to $815.22.

++ The IPF PPS federal per diem base rate for providers who failed to report quality data to $799.27.

++ The Electroconvulsive therapy (ECT) payment per treatment from $343.79 to $350.97.

++ The ECT payment per treatment for providers who failed to report quality data to $344.10.

++ The labor-related share from 76.9 percent to 77.3 percent.

++ The wage index budget-neutrality factor to 0.9989.

++ The fixed dollar loss threshold amount from $14,960 to $14,630 to maintain estimated outlier payments at 2 percent of total estimated aggregate IPF PPS payments.

• Adopt more recent OMB core-based statistical area (CBSA) delineations and apply a 2-year transition for all providers negatively impacted by wage index changes.

We did not propose any changes to the IPFQR Program for FY 2021 or subsequent years; therefore, we are not finalizing any changes to the IPFQR Program. However, we received a comment requesting that CMS except IPFs from reporting IPFQR data during July 1, 2020 to December 31, 2020 under the IPFQR Program's Extraordinary Circumstances Exception (ECE) policy. We also received many comments requesting that we add a patient experience of care measure to the IPFQR Program. We appreciate these comments but note that they fall outside the scope of this rulemaking. We are evaluating options for potentially proposing to adopt a patient experience of care measure into the IPFQR Program in the future.

Section 124 of the Medicare, Medicaid, and State Children's Health Insurance Program Balanced Budget Refinement Act of 1999 (BBRA) (Pub. L. 106-113) required the establishment and implementation of an IPF PPS. Specifically, section 124 of the BBRA mandated that the Secretary of the Department of Health and Human Services (the Secretary) develop a per diem Prospective Payment System (PPS) for inpatient hospital services furnished in psychiatric hospitals and excluded psychiatric units including an adequate patient classification system that reflects the differences in patient resource use and costs among psychiatric hospitals and excluded psychiatric units. “Excluded psychiatric unit” means a psychiatric unit in an inpatient prospective payment system (IPPS) hospital that is excluded from the IPPS, or a psychiatric unit in a Critical Access Hospital (CAH) that is excluded from the CAH payment system. These excluded psychiatric units will be paid under the IPF PPS.

Section 405(g)(2) of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) (Pub. L. 108-173) extended the IPF PPS to psychiatric distinct part units of CAHs.

Sections 3401(f) and 10322 of the Patient Protection and Affordable Care Act (Pub. L. 111-148) as amended by section 10319(e) of that Act and by section 1105(d) of the Health Care and Education Reconciliation Act of 2010 (Pub. L. 111-152) (hereafter referred to jointly as “the Affordable Care Act”) added subsection (s) to section 1886 of the Act.

Section 1886(s)(1) of the Act titled “Reference to Establishment and Implementation of System,” refers to section 124 of the BBRA, which relates to the establishment of the IPF PPS.

Section 1886(s)(2)(A)(i) of the Act requires the application of the productivity adjustment described in section 1886(b)(3)(B)(xi)(II) of the Act to the IPF PPS for the rate year (RY) beginning in 2012 (that is, a RY that coincides with a FY) and each subsequent RY.

Section 1886(s)(2)(A)(ii) of the Act required the application of an “other adjustment” that reduced any update to an IPF PPS base rate by a percentage point amount specified in section 1886(s)(3) of the Act for the RY beginning in 2010 through the RY beginning in 2019. As noted in the FY 2020 IPF PPS final rule, for the RY beginning in 2019, section 1886(s)(3)(E) of the Act required that the other adjustment reduction be equal to 0.75 percentage point. FY 2021 is the first year since the enactment of section 1886(s)(2)(A)(ii) that the “other adjustment” does not apply.

Sections 1886(s)(4)(A) through (D) of the Act require that for RY 2014 and each subsequent RY, IPFs that fail to report required quality data with respect to such a RY will have their annual update to a standard federal rate for discharges reduced by 2.0 percentage points. This may result in an annual update being less than 0.0 for a RY, and may result in payment rates for the upcoming RY being less than such payment rates for the preceding RY. Any reduction for failure to report required quality data will apply only to the RY involved, and the Secretary will not take into account such reduction in computing the payment amount for a subsequent RY. More information about the specifics of the current Inpatient Psychiatric Facilities Quality Reporting (IPFQR) Program is available in the FY 2020 IPF PPS final rule (84 FR 38459 through 38468).

To implement and periodically update these provisions, we have published various proposed rules, final rules and notices in the Federal Register . For more information regarding these documents, see the Center for Medicare & Medicaid (CMS) website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientPsychFacilPPS/index.html?redirect=/InpatientPsychFacilPPS/.

The November 2004 IPF PPS final rule (69 FR 66922) established the IPF PPS, as required by section 124 of the BBRA and codified at 42 CFR part 412, subpart N. The November 2004 IPF PPS final rule set forth the federal per diem base rate for the implementation year (the 18-month period from January 1, 2005 through June 30, 2006), and provided payment for the inpatient operating and capital costs to IPFs for covered psychiatric services they furnish (that is, routine, ancillary, and capital costs, but not costs of approved educational activities, bad debts, and other services or items that are outside the scope of the IPF PPS). Covered psychiatric services include services for which benefits are provided under the fee-for-service Part A (Hospital Insurance Program) of the Medicare program.

The IPF PPS established the federal per diem base rate for each patient day in an IPF derived from the national average daily routine operating, ancillary, and capital costs in IPFs in FY 2002. The average per diem cost was updated to the midpoint of the first year under the IPF PPS, standardized to account for the overall positive effects of the IPF PPS payment adjustments, and adjusted for budget-neutrality.

The federal per diem payment under the IPF PPS is comprised of the federal per diem base rate described previously and certain patient-and facility-level payment adjustments for characteristics that were found in the regression analysis to be associated with statistically significant per diem cost differences with statistical significance defined as p less than 0.05. A complete discussion of the regression analysis that established the IPF PPS adjustment factors can be found in the November 2004 IPF PPS final rule (69 FR 66933 through 66936).

The patient-level adjustments include age, Diagnosis-Related Group (DRG) assignment, and comorbidities; additionally, there are adjustments to reflect higher per diem costs at the beginning of a patient's IPF stay and lower costs for later days of the stay. Facility-level adjustments include adjustments for the IPF's wage index, rural location, teaching status, a cost-of-living adjustment for IPFs located in Alaska and Hawaii, and an adjustment for the presence of a qualifying emergency department (ED).

The IPF PPS provides additional payment policies for outlier cases, interrupted stays, and a per treatment payment for patients who undergo electroconvulsive therapy (ECT). During the IPF PPS mandatory 3-year transition period, stop-loss payments were also provided; however, since the transition ended as of January 1, 2008, these payments are no longer available.

Section 124 of the BBRA did not specify an annual rate update strategy for the IPF PPS and was broadly written to give the Secretary discretion in establishing an update methodology. Therefore, in the November 2004 IPF PPS final rule, we implemented the IPF PPS using the following update strategy:

• Calculate the final federal per diem base rate to be budget-neutral for the 18-month period of January 1, 2005 through June 30, 2006.

• Use a July 1 through June 30 annual update cycle.

• Allow the IPF PPS first update to be effective for discharges on or after July 1, 2006 through June 30, 2007.

In RY 2012, we proposed and finalized switching the IPF PPS payment rate update from a RY that begins on July 1 and ends on June 30, to one that coincides with the federal FY that begins October 1 and ends on September 30. In order to transition from one timeframe to another, the RY 2012 IPF PPS covered a 15-month period from July 1, 2011 through September 30, 2012. Therefore, the IPF RY has been equivalent to the October 1 through September 30 federal FY since RY 2013. For further discussion of the 15-month market basket update for RY 2012 and changing the payment rate update period to coincide with a FY period, we refer readers to the RY 2012 IPF PPS proposed rule (76 FR 4998) and the RY 2012 IPF PPS final rule (76 FR 26432).

In November 2004, we implemented the IPF PPS in a final rule that published on November 15, 2004 in the Federal Register (69 FR 66922). In developing the IPF PPS, and to ensure that the IPF PPS is able to account adequately for each IPF's case-mix, we performed an extensive regression analysis of the relationship between the per diem costs and certain patient and facility characteristics to determine those characteristics associated with statistically significant cost differences on a per diem basis. That regression analysis is described in detail in our November 28, 2003 IPF proposed rule (68 FR 66923; 66928 through 66933) and our November 15, 2004 IPF final rule (69 FR 66933 through 66960). For characteristics with statistically significant cost differences, we used the regression coefficients of those variables to determine the size of the corresponding payment adjustments.

In the November 15, 2004 final rule, we explained the reasons for delaying an update to the adjustment factors, derived from the regression analysis, including waiting until we have IPF PPS data that yields as much information as possible regarding the patient-level characteristics of the population that each IPF serves. We indicated that we did not intend to update the regression analysis and the patient-level and facility-level adjustments until we complete that analysis. Until that analysis is complete, we stated our intention to publish a notice in the Federal Register each spring to update the IPF PPS (69 FR 66966).

On May 6, 2011, we published a final rule in the Federal Register titled, “Inpatient Psychiatric Facilities Prospective Payment System—Update for Rate Year Beginning July 1, 2011 (RY 2012)” (76 FR 26432), which changed the payment rate update period to a RY that coincides with a FY update. Therefore, final rules are now published in the Federal Register in the summer to be effective on October 1. When proposing changes in IPF payment policy, a proposed rule will be issued in the spring, and the final rule in the summer to be effective on October 1. For a detailed list of updates to the IPF PPS, we refer readers to our regulations at 42 CFR 412.428.

The most recent IPF PPS annual update was published in a final rule on August 6, 2019 in the Federal Register titled, “Medicare Program; FY 2020 Inpatient Psychiatric Facilities Prospective Payment System and Quality Reporting Updates for Fiscal Year Beginning October 1, 2019 (FY 2020)” (84 FR 38424), which updated the IPF PPS payment rates for FY 2020. That final rule updated the IPF PPS federal per diem base rates that were published in the FY 2019 IPF PPS final rule (83 FR 38576) in accordance with our established policies.

On April 14, 2020, we published the FY 2021 IPF PPS proposed rule (85 FR 20625). We received 462 comments on the FY 2021 IPF PPS proposed rule from various stakeholders, including patients, providers, national organizations, and the Medicare Payment Advisory Commission (MedPAC). We received 6 comments on payment policy issues, and 456 comments that were outside of the scope of the proposed rule or focused on quality reporting.

Originally, the input price index that was used to develop the IPF PPS was the “Excluded Hospital with Capital” market basket. This market basket was based on 1997 Medicare cost reports for Medicare participating inpatient rehabilitation facilities (IRFs), IPFs, long-term care hospitals (LTCHs), cancer hospitals, and children's hospitals. Although “market basket” technically describes the mix of goods and services used in providing health care at a given point in time, this term is also commonly used to denote the input price index (that is, cost category weights and price proxies) derived from that market basket. Accordingly, the term market basket as used in this document, refers to an input price index.

Since the IPF PPS inception, the market basket used to update IPF PPS payments has been rebased and revised to reflect more recent data on IPF cost structures. We last rebased and revised the IPF market basket in the FY 2020 IPF PPS rule, where we adopted a 2016-based IPF market basket, using Medicare cost report data for both Medicare participating freestanding psychiatric hospitals and psychiatric units. We refer readers to the FY 2020 IPF PPS final rule for a detailed discussion of the 2016-based IPF PPS market basket and its development (84 FR 38426 through 38447). References to the historical market baskets used to update IPF PPS payments are listed in the FY 2016 IPF PPS final rule (80 FR 46656).

For FY 2021 (beginning October 1, 2020 and ending September 30, 2021), we are finalizing our proposal to use an estimate of the 2016-based IPF market basket increase factor to update the IPF PPS base payment rate. Consistent with historical practice, we are finalizing the market basket update for the IPF PPS based on the most recent IHS Global Inc.'s (IGI) forecast. IGI is a nationally recognized economic and financial forecasting firm that contracts with the CMS to forecast the components of the market baskets and multifactor productivity (MFP).

In the FY 2021 IPF PPS proposed rule (85 FR 20628), we proposed a FY 2021 IPF market basket percentage increase of 3.0 percent based on IGI's fourth quarter 2019 forecast of the 2016-based IPF market basket with historical data through third quarter 2019. We also proposed that if more recent data subsequently became available (for example, a more recent estimate of the market basket and/or the MFP), we would use such data, if appropriate, to determine the FY 2021 market basket update and the MFP adjustment in the final rule.

For this final rule, based on IGI's second quarter 2020 forecast with historical data through the first quarter of 2020, the 2016-based IPF market basket percentage increase for FY 2021 is 2.2 percent. Therefore, we are finalizing the 2016-based IPF market basket percentage increase for FY 2021 of 2.2 percent. We note that the fourth quarter 2019 forecast used for the proposed market basket update was developed prior to the economic impacts of the COVID-19 pandemic. This lower update (2.2 percent) for FY 2021 relative to the proposed rule (3.0 percent) is primarily driven by slower anticipated compensation growth for both health-related and other occupations as labor markets are expected to be significantly impacted during the recession that started in February 2020 and throughout the anticipated recovery.

Section 1886(s)(2)(A)(i) of the Act requires the application of the productivity adjustment described in section 1886(b)(3)(B)(xi)(II) of the Act to the IPF PPS for the RY beginning in 2012 (a RY that coincides with a FY) and each subsequent RY. In the FY 2021 IPF PPS proposed rule (85 FR 20628), we proposed a MFP adjustment of 0.4 percentage point based on IGI's fourth quarter 2019 forecast. Based on the more recent data available for this FY 2021 IPF PPS final rule, the current estimate of the 10-year moving average growth of MFP for FY 2021 is projected to be −0.1 percentage point. This MFP estimate is based on the most recent macroeconomic outlook from IGI at the time of rulemaking (released June 2020) in order to reflect more current historical economic data. IGI produces monthly macroeconomic forecasts, which include projections of all of the economic series used to derive MFP. In contrast, IGI only produces forecasts of the more detailed price proxies used in the 2016-based IPF market basket on a quarterly basis. Therefore, IGI's second quarter 2020 forecast is the most recent forecast of the 2016-based IPF market basket increase factor.

We note that it has typically been our practice to base the projection of the market basket price proxies and MFP in the final rule on the second quarter IGI forecast. For this FY 2021 IPF PPS final rule, we are using the IGI June macroeconomic forecast for MFP because it is a more recent forecast, and it is important to use more recent data during this period when economic trends, particularly employment and labor productivity, are notably uncertain because of the COVID-19 pandemic. Historically, the MFP adjustment based on the second quarter IGI forecast has been very similar to the MFP adjustment derived with IGI's June macroeconomic forecast. Substantial changes in the macroeconomic indicators in between monthly forecasts is atypical.

Given the unprecedented economic uncertainty as a result of the COVID-19 pandemic, the changes in the IGI macroeconomic series used to derive MFP between the second quarter 2020 IGI forecast and the IGI June 2020 macroeconomic forecast is significant. Therefore, we believe it is technically appropriate to use IGI's more recent June 2020 macroeconomic forecast to determine the MFP adjustment for the final rule as it reflects more recent historical data. For comparison purposes, the 10-year moving average growth of MFP for FY 2021 is projected to be −0.1 percentage point based on IGI's June 2020 macroeconomic forecast compared to a FY 2021 projected 10-year moving average growth of MFP of 0.7 percentage point based on IGI's second quarter 2020 forecast. Mechanically subtracting the negative 10-year moving average growth of MFP from the IPF market basket percentage increase using the data from the IGI June 2020 macroeconomic forecast would have resulted in a 0.1 percentage point increase in the FY 2021 IPF payment update percentage. However, under section 1886(s)(2)(A) of the Act, the Secretary is required to reduce (not increase) the IPF market basket percentage by changes in economy-wide productivity. Accordingly, we will be applying a 0.0 percentage point MFP adjustment to the IPF market basket percentage. Therefore, the final FY 2021 IPF PPS payment rate update is 2.2 percent. For more information on the productivity adjustment, we refer readers to the discussion in the FY 2016 IPF PPS final rule (80 FR 46675).

Due to variations in geographic wage levels and other labor-related costs, payment rates under the IPF PPS will continue to be adjusted by a geographic wage index, which will apply to the labor-related portion of the federal per diem base rate (hereafter referred to as the labor-related share).

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. We will continue to classify a cost category as labor-related if the costs are labor-intensive and vary with the local labor market.

Based on our definition of the labor-related share and the cost categories in the 2016-based IPF market basket, we are finalizing our proposal to continue 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; All Other: Labor-related Services; and a portion of the Capital-Related cost weight (46 percent) from the 2016-based IPF market basket. The relative importance reflects the different rates of price change for these cost categories between the base year (FY 2016) and FY 2021. For more information on the labor-related share cost weights and its calculation, we refer readers to the FY 2020 IPF PPS final rule (84 FR 38445 through 38447). Based on IGI's fourth quarter 2019 forecast of the 2016-based IPF market basket, we proposed a total labor-related share for FY 2021 of 77.2 percent (the sum of 74.1 percent for the operating costs and 3.1 percent for the labor-related share of Capital). As stated in the FY 2021 IPF PPS proposed rule (85 FR 20629), we also proposed that if more recent data become available, we would use such data, if appropriate, to determine the FY 2021 labor-related share for the final rule.

Comment: One commenter opposed the increase in the labor-related share from 76.9 percent to 77.2 percent stating it would negatively impact any facility with a wage index below 1.0. This commenter was concerned that the growing disparity in wage index values places facilities in low wage areas at a significant disadvantage, and this proposal would further increase that disparity. The commenter encouraged CMS to maintain the FY 2020 labor-related share in FY 2021.

Response: We appreciate the commenter's concern over the increase in the labor-related share; however, we believe it is technically appropriate to use the sum of the FY 2021 relative importance values for the labor-related cost categories based on the most recent forecast of the 2016-based IPF market basket in order to determine the labor-related share for FY 2021, as it accounts for more recent data regarding price pressures and cost structure of IPFs. Our policy to use the most recent market basket to determine the labor-related share is a policy we have consistently applied for the IPF PPS (such as for the FY 2020 IPF PPS final rule (84 FR 38446)) as well as for other PPSs, including, but not limited to, the IRF PPS (84 FR 39089) and the LTCH PPS (84 FR 42642).

Final Decision: After careful consideration of the comment, we are finalizing the use of the sum of the FY 2021 relative importance for the labor-related cost categories based on the most recent forecast (IGI's second quarter 2020 forecast) of the 2016-based IPF market basket.

Based on IGI's second quarter 2020 forecast of the 2016-based IPF 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 74.2 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 2012-based IPF market basket. Since the relative importance for Capital is 6.8 percent of the 2016-based IPF market basket in FY 2021, we took 46 percent of 6.8 percent to determine the labor-related share of Capital for FY 2021 of 3.1 percent. Therefore, we are finalizing a total labor-related share for FY 2021 of 77.3 percent (the sum of 74.2 percent for the operating costs and 3.1 percent for the labor-related share of Capital). Table 1 shows the FY 2021 labor-related share and the FY 2020 labor-related share using the relative importance of the 2016-based IPF market basket.

The IPF PPS is based on a standardized federal per diem base rate calculated from the IPF average per diem costs and adjusted for budget-neutrality in the implementation year. The federal per diem base rate is used as the standard payment per day under the IPF PPS and is adjusted by the patient-level and facility-level adjustments that are applicable to the IPF stay. A detailed explanation of how we calculated the average per diem cost appears in the November 2004 IPF PPS final rule (69 FR 66926).

Section 124(a)(1) of the BBRA required that we implement the IPF PPS in a budget-neutral manner. In other words, the amount of total payments under the IPF PPS, including any payment adjustments, must be projected to be equal to the amount of total payments that would have been made if the IPF PPS were not implemented. Therefore, we calculated the budget-neutrality factor by setting the total estimated IPF PPS payments to be equal to the total estimated payments that would have been made under the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) (Pub. L. 97-248) methodology had the IPF PPS not been implemented. A step-by-step description of the methodology used to estimate payments under the TEFRA payment system appears in the November 2004 IPF PPS final rule (69 FR 66926).

Under the IPF PPS methodology, we calculated the final federal per diem base rate to be budget-neutral during the IPF PPS implementation period (that is, the 18-month period from January 1, 2005 through June 30, 2006) using a July 1 update cycle. We updated the average cost per day to the midpoint of the IPF PPS implementation period (October 1, 2005), and this amount was used in the payment model to establish the budget-neutrality adjustment.

Next, we standardized the IPF PPS federal per diem base rate to account for the overall positive effects of the IPF PPS payment adjustment factors by dividing total estimated payments under the TEFRA payment system by estimated payments under the IPF PPS. Information concerning this standardization can be found in the November 2004 IPF PPS final rule (69 FR 66932) and the RY 2006 IPF PPS final rule (71 FR 27045). We then reduced the standardized federal per diem base rate to account for the outlier policy, the stop loss provision, and anticipated behavioral changes. A complete discussion of how we calculated each component of the budget-neutrality adjustment appears in the November 2004 IPF PPS final rule (69 FR 66932 through 66933) and in the RY 2007 IPF PPS final rule (71 FR 27044 through 27046). The final standardized budget-neutral federal per diem base rate established for cost reporting periods beginning on or after January 1, 2005 was calculated to be $575.95.

The federal per diem base rate has been updated in accordance with applicable statutory requirements and § 412.428 through publication of annual notices or proposed and final rules. A detailed discussion on the standardized budget-neutral federal per diem base rate and the electroconvulsive therapy (ECT) payment per treatment appears in the FY 2014 IPF PPS update notice (78 FR 46738 through 46740). These documents are available on the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientPsychFacilPPS/index.html.

IPFs must include a valid procedure code for ECT services provided to IPF beneficiaries in order to bill for ECT services, as described in our Medicare Claims Processing Manual, Chapter 3, Section 190.7.3 (available at https:// www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/clm104c03.pdf. ) There were no changes to the ECT procedure codes used on IPF claims as a result of the proposed update to the ICD-10-PCS code set for FY 2021. Addendum B to this final rule shows the ECT procedure codes for FY 2021 and is available on our website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientPsychFacilPPS/tools.html.

The current (FY 2020) federal per diem base rate is $798.55 and the ECT payment per treatment is $343.79. For the final FY 2021 federal per diem base rate, we applied the payment rate update of 2.2 percent that is, the 2016-based IPF market basket increase for FY 2021 of 2.2 percent less the productivity adjustment of 0 percentage point and the wage index budget-neutrality factor of 0.9989 (as discussed in section III.D.1 of this final rule) to the FY 2020 federal per diem base rate of $798.55, yielding a final federal per diem base rate of $815.22 for FY 2021. Similarly, we applied the 2.2 percent payment rate update and the 0.9989 wage index budget-neutrality factor to the FY 2020 ECT payment per treatment of $343.79, yielding a final ECT payment per treatment of $350.97 for FY 2021.

Section 1886(s)(4)(A)(i) of the Act requires that for RY 2014 and each subsequent RY, in the case of an IPF that fails to report required quality data with respect to such RY, the Secretary will reduce any annual update to a standard federal rate for discharges during the RY by 2.0 percentage points. Therefore, we are applying a 2.0 percentage point reduction to the federal per diem base rate and the ECT payment per treatment as follows:

• For IPFs that fail to meet IPFQR Program requirements, we applied a 0.2 percent payment rate update (that is, the IPF market basket increase for FY 2021 of 2.2 percent less the productivity adjustment of 0 percentage point for an update of 2.2 percent, and further reduced by 2 percentage points in accordance with section 1886(s)(4)(A)(i) of the Act), and the wage index budget-neutrality factor of 0.9989 to the FY 2020 federal per diem base rate of $798.55, yielding a federal per diem base rate of $799.27 for FY 2021.

• For IPFs that fail to meet IPFQR Program requirements, we applied the 0.2 percent annual payment rate update and the 0.9989 wage index budget-neutrality factor to the FY 2020 ECT payment per treatment of $343.79, yielding an ECT payment per treatment of $344.10 for FY 2021.

The IPF PPS payment adjustments were derived from a regression analysis of 100 percent of the FY 2002 Medicare Provider and Analysis Review (MedPAR) data file, which contained 483,038 cases. For a more detailed description of the data file used for the regression analysis, see the November 2004 IPF PPS final rule (69 FR 66935 through 66936). We continue to use the existing regression-derived adjustment factors established in 2005 for FY 2021. However, we have used more recent claims data to simulate payments to finalize the outlier fixed dollar loss threshold amount and to assess the impact of the IPF PPS updates.

The IPF PPS includes payment adjustments for the following patient-level characteristics: Medicare Severity Diagnosis Related Groups (MS-DRGs) assignment of the patient's principal diagnosis, selected comorbidities, patient age, and the variable per diem adjustments.

We believe it is important to maintain for IPFs the same diagnostic coding and Diagnosis Related Group (DRG) classification used under the (IPPS) for providing psychiatric care. For this reason, when the IPF PPS was implemented for cost reporting periods beginning on or after January 1, 2005, we adopted the same diagnostic code set (ICD-9-CM) and DRG patient classification system (MS-DRGs) that were utilized at the time under the IPPS. In the RY 2009 IPF PPS notice (73 FR 25709), we discussed CMS' effort to better recognize resource use and the severity of illness among patients. CMS adopted the new MS-DRGs for the IPPS in the FY 2008 IPPS final rule with comment period (72 FR 47130). In the RY 2009 IPF PPS notice (73 FR 25716), we provided a crosswalk to reflect changes that were made under the IPF PPS to adopt the new MS-DRGs. For a detailed description of the mapping changes from the original DRG adjustment categories to the current MS-DRG adjustment categories, we refer readers to the RY 2009 IPF PPS notice (73 FR 25714).

The IPF PPS includes payment adjustments for designated psychiatric DRGs assigned to the claim based on the patient's principal diagnosis. The DRG adjustment factors were expressed relative to the most frequently reported psychiatric DRG in FY 2002, that is, DRG 430 (psychoses). The coefficient values and adjustment factors were derived from the regression analysis discussed in detail in the November 28, 2003 IPF proposed rule (68 FR 66923; 66928 through 66933) and the November 15, 2004 IPF final rule (69 FR 66933 through 66960). Mapping the DRGs to the MS-DRGs resulted in the current 17 IPF MS-DRGs, instead of the original 15 DRGs, for which the IPF PPS provides an adjustment. For FY 2021, we did not propose any changes to the IPF MS-DRG adjustment factors.

In the FY 2015 IPF PPS final rule published August 6, 2014 in the Federal Register titled, “Inpatient Psychiatric Facilities Prospective Payment System—Update for FY Beginning October 1, 2014 (FY 2015)” (79 FR 45945 through 45947), we finalized conversions of the ICD-9-CM-based MS-DRGs to ICD-10-CM/PCS-based MS-DRGs, which were implemented on October 1, 2015. Further information on the ICD-10-CM/PCS MS-DRG conversion project can be found on the CMS ICD-10-CM website at https://www.cms.gov/Medicare/Coding/ICD10/ICD-10-MS-DRG-Conversion-Project.html.

For FY 2021, we are finalizing our proposal to continue to make the existing payment adjustment for psychiatric diagnoses that group to one of the existing 17 IPF MS-DRGs listed in Addendum A. Addendum A is available on our website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientPsychFacilPPS/tools.html. Psychiatric principal diagnoses that do not group to one of the 17 designated MS-DRGs will still receive the federal per diem base rate and all other applicable adjustments, but the payment will not include an MS-DRG adjustment.

The diagnoses for each IPF MS-DRG will be updated as of October 1, 2020, using the final IPPS FY 2021 ICD-10-CM/PCS code sets. The FY 2021 IPPS final rule includes tables of the changes to the ICD-10-CM/PCS code sets, which underlie the FY 2021 IPF MS-DRGs. Both the FY 2021 IPPS final rule and the tables of changes to the ICD-10-CM/PCS code sets, which underlie the FY 2021 MS-DRGs are available on the IPPS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html.

As discussed in the ICD-10-CM Official Guidelines for Coding and Reporting, certain conditions have both an underlying etiology and multiple body system manifestations due to the underlying etiology. For such conditions, the ICD-10-CM has a coding convention that requires the underlying condition be sequenced first followed by the manifestation. Wherever such a combination exists, there is a “use additional code” note at the etiology code, and a “code first” note at the manifestation code. These instructional notes indicate the proper sequencing order of the codes (etiology followed by manifestation). In accordance with the ICD-10-CM Official Guidelines for Coding and Reporting, when a primary (psychiatric) diagnosis code has a “code first,” the provider would follow the instructions in the ICD-10-CM text. The submitted claim goes through the CMS processing system, which will identify the primary diagnosis code as non-psychiatric and search the secondary codes for a psychiatric code to assign a DRG code for adjustment. The system will continue to search the secondary codes for those that are appropriate for comorbidity adjustment.

For more information on the code first policy, we refer readers to the November 2004 IPF PPS final rule (69 FR 66945) and sections I.A.13 and I.B.7 of the FY 2020 ICD-10-CM Coding Guidelines, which is available at https://www.cdc.gov/nchs/icd/data/10cmguidelines-FY2019-final.pdf. In the FY 2015 IPF PPS final rule, we provided a code first table for reference that highlights the same or similar manifestation codes where the code first instructions apply in ICD-10-CM that were present in ICD-9-CM (79 FR 46009). In FY 2018, FY 2019 and FY 2020, there were no changes to the final ICD-10-CM/PCS codes in the IPF Code First table. For FY 2021, there were 18 ICD-10-PCS codes deleted from the final IPF Code First table. The final FY 2021 Code First table is shown in Addendum B on our website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientPsychFacilPPS/tools.html.

The intent of the comorbidity adjustments is to recognize the increased costs associated with comorbid conditions by providing additional payments for certain existing medical or psychiatric conditions that are expensive to treat. In our RY 2012 IPF PPS final rule (76 FR 26451 through 26452), we explained that the IPF PPS includes 17 comorbidity categories and identified the new, revised, and deleted ICD-9-CM diagnosis codes that generate a comorbid condition payment adjustment under the IPF PPS for RY 2012 (76 FR 26451).

Comorbidities are specific patient conditions that are secondary to the patient's principal diagnosis and that require treatment during the stay. Diagnoses that relate to an earlier episode of care and have no bearing on the current hospital stay are excluded and must not be reported on IPF claims. Comorbid conditions must exist at the time of admission or develop subsequently, and affect the treatment received, length of stay (LOS), or both treatment and LOS.

For each claim, an IPF may receive only one comorbidity adjustment within a comorbidity category, but it may receive an adjustment for more than one comorbidity category. Current billing instructions for discharge claims, on or after October 1, 2015, require IPFs to enter the complete ICD-10-CM codes for up to 24 additional diagnoses if they co-exist at the time of admission, or develop subsequently and impact the treatment provided.

The comorbidity adjustments were determined based on the regression analysis using the diagnoses reported by IPFs in FY 2002. The principal diagnoses were used to establish the DRG adjustments and were not accounted for in establishing the comorbidity category adjustments, except where ICD-9-CM code first instructions applied. In a code first situation, the submitted claim goes through the CMS processing system, which will identify the principal diagnosis code as non-psychiatric and search the secondary codes for a psychiatric code to assign an MS-DRG code for adjustment. The system will continue to search the secondary codes for those that are appropriate for comorbidity adjustment.

As noted previously, it is our policy to maintain the same diagnostic coding set for IPFs that is used under the IPPS for providing the same psychiatric care. The 17 comorbidity categories formerly defined using ICD-9-CM codes were converted to ICD-10-CM/PCS in our FY 2015 IPF PPS final rule (79 FR 45947 through 45955). The goal for converting the comorbidity categories is referred to as replication, meaning that the payment adjustment for a given patient encounter is the same after ICD-10-CM implementation as it would be if the same record had been coded in ICD-9-CM and submitted prior to ICD-10-CM/PCS implementation on October 1, 2015. All conversion efforts were made with the intent of achieving this goal. For FY 2021, we are finalizing our proposal to continue to use the same comorbidity adjustment factors in effect in FY 2020, which are found in Addendum A and available on our website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientPsychFacilPPS/tools.html.

We have updated the ICD-10-CM/PCS codes which are associated with the existing IPF PPS comorbidity categories, based upon the final FY 2021 update to the ICD-10-CM/PCS code set. The final FY 2021 ICD-10-CM/PCS updates include 12 ICD10-CM diagnosis codes added to the Poisoning comorbidity category and 223 ICD-10-PCS codes added to the Oncology Procedures comorbidity category. In addition, 4 ICD10-PCS codes were deleted from the Poisoning comorbidity category. These updates are detailed in Addenda B-2 and B-3 of this final rule, which are available on our website at https://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/InpatientPsychFacilPPS/tools.html.

In accordance with the policy established in the FY 2015 IPF PPS final rule (79 FR 45949 through 45952), we reviewed all new FY 2021 ICD-10-CM codes to remove codes that were site “unspecified” in terms of laterality from the FY 2020 ICD-10-CM/PCS codes in instances where more specific codes are available. As we stated in the FY 2015 IPF PPS final rule, we believe that specific diagnosis codes that narrowly identify anatomical sites where disease, injury, or a condition exists should be used when coding patients' diagnoses whenever these codes are available. We finalized in the FY 2015 IPF PPS rule, that we would remove site “unspecified” codes from the IPF PPS ICD-10-CM/PCS codes in instances when laterality codes (site specified codes) are available, as the clinician should be able to identify a more specific diagnosis based on clinical assessment at the medical encounter. We note that none of the final additions to the FY 2021 ICD-10-CM/PCS codes were site “unspecified” by laterality; therefore, we are not removing any of the new codes.

As explained in the November 2004 IPF PPS final rule (69 FR 66922), we analyzed the impact of age on per diem cost by examining the age variable (range of ages) for payment adjustments. In general, we found that the cost per day increases with age. The older age groups are costlier than the under 45 age group, the differences in per diem cost increase for each successive age group, and the differences are statistically significant. For FY 2021, we are finalizing our proposal to continue to use the patient age adjustments currently in effect in FY 2020, as shown in Addendum A of this rule (see https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientPsychFacilPPS/tools.html ).

We explained in the November 2004 IPF PPS final rule (69 FR 66946) that the regression analysis indicated that per diem cost declines as the LOS increases. The variable per diem adjustments to the federal per diem base rate account for ancillary and administrative costs that occur disproportionately in the first days after admission to an IPF. As discussed in the November 2004 IPF PPS final rule, we used a regression analysis to estimate the average differences in per diem cost among stays of different lengths (69 FR 66947 through 66950). As a result of this analysis, we established variable per diem adjustments that begin on day 1 and decline gradually until day 21 of a patient's stay. For day 22 and thereafter, the variable per diem adjustment remains the same each day for the remainder of the stay. However, the adjustment applied to day 1 depends upon whether the IPF has a qualifying ED. If an IPF has a qualifying ED, it receives a 1.31 adjustment factor for day 1 of each stay. If an IPF does not have a qualifying ED, it receives a 1.19 adjustment factor for day 1 of the stay. The ED adjustment is explained in more detail in section III.D.4 of this rule.

For FY 2021, we are finalizing our proposal to continue to use the variable per diem adjustment factors currently in effect, as shown in Addendum A of this rule (available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientPsychFacilPPS/tools.html ). A complete discussion of the variable per diem adjustments appears in the November 2004 IPF PPS final rule (69 FR 66946).

The IPF PPS includes facility-level adjustments for the wage index, IPFs located in rural areas, teaching IPFs, cost of living adjustments for IPFs located in Alaska and Hawaii, and IPFs with a qualifying ED.

As discussed in the RY 2007 IPF PPS final rule (71 FR 27061), RY 2009 IPF PPS (73 FR 25719) and the RY 2010 IPF PPS notices (74 FR 20373), in order to provide an adjustment for geographic wage levels, the labor-related portion of an IPF's payment is adjusted using an appropriate wage index. Currently, an IPF's geographic wage index value is determined based on the actual location of the IPF in an urban or rural area, as defined in § 412.64(b)(1)(ii)(A) and (C).

Due to the variation in costs and because of the differences in geographic wage levels, in the November 15, 2004 IPF PPS final rule, we required that payment rates under the IPF PPS be adjusted by a geographic wage index. We proposed and finalized a policy to use the unadjusted, pre-floor, pre-reclassified IPPS hospital wage index to account for geographic differences in IPF labor costs. We implemented use of the pre-floor, pre-reclassified IPPS hospital wage data to compute the IPF wage index since there was not an IPF-specific wage index available. We believe that IPFs generally compete in the same labor market as IPPS hospitals so the pre-floor, pre-reclassified IPPS hospital wage data should be reflective of labor costs of IPFs. We believe this pre-floor, pre-reclassified IPPS hospital wage index to be the best available data to use as proxy for an IPF specific wage index. As discussed in the RY 2007 IPF PPS final rule (71 FR 27061 through 27067), under the IPF PPS, the wage index is calculated using the IPPS wage index for the labor market area in which the IPF is located, without taking into account geographic reclassifications, floors, and other adjustments made to the wage index under the IPPS. For a complete description of these IPPS wage index adjustments, we refer readers to the FY 2019 IPPS/LTCH PPS final rule (83 FR 41362 through 41390). Our wage index policy at § 412.424(a)(2), requires us to use the best Medicare data available to estimate costs per day, including an appropriate wage index to adjust for wage differences.

When the IPF PPS was implemented in the November 15, 2004 IPF PPS final rule, with an effective date of January 1, 2005, the pre-floor, pre-reclassified IPPS hospital wage index that was available at the time was the FY 2005 pre-floor, pre-reclassified IPPS hospital wage index. Historically, the IPF wage index for a given RY has used the pre-floor, pre-reclassified IPPS hospital wage index from the prior FY as its basis. This has been due in part to the pre-floor, pre-reclassified IPPS hospital wage index data that were available during the IPF rulemaking cycle, where an annual IPF notice or IPF final rule was usually published in early May. This publication timeframe was relatively early compared to other Medicare payment rules because the IPF PPS follows a RY, which was defined in the implementation of the IPF PPS as the 12-month period from July 1 to June 30 (69 FR 66927). Therefore, the best available data at the time the IPF PPS was implemented was the pre-floor, pre-reclassified IPPS hospital wage index from the prior FY (for example, the RY 2006 IPF wage index was based on the FY 2005 pre-floor, pre-reclassified IPPS hospital wage index).

In the RY 2012 IPF PPS final rule, we changed the reporting year timeframe for IPFs from a RY to the FY, which begins October 1 and ends September 30 (76 FR 26434 through 26435). In that FY 2012 IPF PPS final rule, we continued our established policy of using the pre-floor, pre-reclassified IPPS hospital wage index from the prior year (that is, from FY 2011) as the basis for the FY 2012 IPF wage index. This policy of basing a wage index on the prior year's pre-floor, pre-reclassified IPPS hospital wage index has been followed by other Medicare payment systems, such as hospice and IRF. By continuing with our established policy, we remained consistent with other Medicare payment systems.

In FY 2020, we finalized the IPF wage index methodology to align the IPF PPS wage index with the same wage data timeframe used by the IPPS for FY 2020 and subsequent years. Specifically, we finalized to use the pre-floor, pre-reclassified IPPS hospital wage index from the FY concurrent with the IPF FY as the basis for the IPF wage index. For example, the FY 2020 IPF wage index would be based on the FY 2020 pre-floor, pre-reclassified IPPS hospital wage index rather than on the FY 2019 pre-floor, pre-reclassified IPPS hospital wage index.

We explained in the FY 2020 proposed rule (84 FR 16973), that using the concurrent pre-floor, pre-reclassified IPPS hospital wage index would result in the most up-to-date wage data being the basis for the IPF wage index. In addition, it would result in more consistency and parity in the wage index methodology used by other Medicare payment systems. The Medicare SNF PPS already used the concurrent IPPS hospital wage index data as the basis for the SNF PPS wage index. Thus, the wage adjusted Medicare payments of various provider types would be based upon wage index data from the same timeframe. CMS proposed similar policies to use the concurrent pre-floor, pre-reclassified IPPS hospital wage index data in other Medicare payment systems, such as hospice facilities and IRFs. For FY 2021, we proposed to continue to use the concurrent pre-floor, pre-reclassified IPPS hospital wage index as the basis for the IPF wage index.

Comment: We received two comments agreeing with our longstanding belief that IPFs generally compete in the same labor market as IPPS hospitals; however, the commenters recommend that CMS incorporate a frontier state floor for the IPF wage index. In addition, we received a comment encouraging CMS to consider developing, as an alternative to the current hospital wage index, a market-level wage index that would use wage data from all employers and industry-specific occupational weights, adjust for geographic differences in the ratio of benefits to wages, adjust at the county level and smooth large differences between counties, and include a transition period to mitigate large changes in wage index values.

Response: We appreciate these commenters' suggestions regarding opportunities to improve the accuracy of the IPF wage index. We did not propose the specific policies suggested by commenters, but we will take them into consideration to potentially inform future rulemaking.

Final Decision: For FY 2021, we are finalizing our proposal to continue to use the concurrent pre-floor, pre-reclassified IPPS hospital wage index as the basis for the IPF wage index.

We will apply the IPF wage index adjustment to the labor-related share of the national base rate and ECT payment per treatment. The labor-related share of the national rate and ECT payment per treatment will change from 76.9 percent in FY 2020 to 77.3 percent in FY 2021. This percentage reflects the labor-related share of the 2016-based IPF market basket for FY 2021 (see section III.A of this rule).

The wage index used for the IPF PPS is calculated using the unadjusted, pre-reclassified and pre-floor inpatient PPS (IPPS) wage index data and is assigned to the IPF on the basis of the labor market area in which the IPF is geographically located. IPF labor market areas are delineated based on the CBSAs established by the 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 through OMB Bulletins. These bulletins contain information regarding CBSA changes, including changes to CBSA numbers and titles. OMB bulletins may be accessed online at https://www.whitehouse.gov/omb/information-for-agencies/bulletins/. In accordance with our established methodology, the IPF PPS has historically adopted any CBSA changes that are published in the OMB bulletin that corresponds with the IPPS hospital wage index used to determine the IPF wage index.

In the RY 2007 IPF PPS final rule (71 FR 27061 through 27067), we adopted the changes discussed in the OMB Bulletin No. 03-04 (June 6, 2003), which announced revised definitions for Metropolitan Statistical Areas and the creation of Micropolitan Statistical Areas and Combined Statistical Areas. In adopting the OMB CBSA geographic designations in RY 2007, we did not provide a separate transition for the CBSA-based wage index since the IPF PPS was already in a transition period from TEFRA payments to PPS payments.

In the RY 2009 IPF PPS notice, we incorporated the CBSA nomenclature changes published in the most recent OMB bulletin that applied to the IPPS hospital wage index used to determine the current IPF wage index and stated that we expected to continue to do the same for all the OMB CBSA nomenclature changes in future IPF PPS rules and notices, as necessary (73 FR 25721).

On February 28, 2013, OMB issued OMB Bulletin No. 13-01, which 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). These OMB Bulletin changes were reflected in the FY 2015 pre-floor, pre-reclassified IPPS hospital wage index, upon which the FY 2016 IPF wage index was based. We adopted these new OMB CBSA delineations in the FY 2016 IPF wage index and subsequent IPF wage indexes. We refer readers to the FY 2016 IPF PPS final rule (80 FR 46682 through 46689) for a full discussion of our implementation of the OMB labor market area delineations beginning with the FY 2016 wage index.

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. The complete list of statistical areas incorporating these changes is provided in OMB Bulletin No. 15-01. A copy of this bulletin may be obtained at https://www.whitehouse.gov/omb/information-for-agencies/bulletins/.

OMB Bulletin No. 15-01 established revised delineations for the Nation's Metropolitan Statistical Areas, Micropolitan Statistical Areas, and Combined Statistical Areas. The bulletin also provided delineations of Metropolitan Divisions as well as delineations of New England City and Town Areas. As discussed in the FY 2017 IPPS/LTCH PPS final rule (81 FR 56913), the updated labor market area definitions from OMB Bulletin 15-01 were implemented under the IPPS beginning on October 1, 2016 (FY 2017). Therefore, we implemented these revisions for the IPF PPS beginning October 1, 2017 (FY 2018), consistent with our historical practice of modeling IPF PPS adoption of the labor market area delineations after IPPS adoption of these delineations (historically the IPF wage index has been based upon the pre-floor, pre-reclassified IPPS hospital wage index from the prior year).

On August 15, 2017, OMB issued OMB Bulletin No. 17-01, which provided updates to and superseded OMB Bulletin No. 15-01 that was issued on July 15, 2015. The attachments to OMB Bulletin No. 17-01 provide detailed information on the update to statistical areas since July 15, 2015, and are based on the application of the 2010 Standards for Delineating Metropolitan and Micropolitan Statistical Areas to Census Bureau population estimates for July 1, 2014 and July 1, 2015. In the FY 2020 IPF PPS final rule (84 FR 38453 through 38454), we adopted the updates set forth in OMB Bulletin No. 17-01 effective October 1, 2019, beginning with the FY 2020 IPF wage index. Given that the loss of the rural adjustment was mitigated in part by the increase in wage index value, and that only a single IPF was affected by this change, we did not believe it was necessary to transition this provider from its rural to newly urban status. We refer readers to the FY 2020 IPF PPS final rule (84 FR 38453 through 38454) for a more detailed discussion about the decision to forego a transition plan in FY 2020.

On April 10, 2018, OMB issued OMB Bulletin No. 18-03, which superseded the August 15, 2017 OMB Bulletin No. 17-01, and 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. 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 on June 28, 2010, in the Federal Register [75 FR 37246], and Census Bureau data.” (We note that, 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 ) but it was not issued in time for development of this final 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 that are necessary to incorporate into the IPF PPS. These changes include some new CBSAs, urban counties that would become rural, rural counties that would become urban, and existing CBSAs that would be split apart. We discuss these changes in more detail in the sections below.

We believe it is important for the IPF PPS to use, as soon as is reasonably possible, the latest available labor market area delineations in order to maintain a more accurate and up-to-date payment system that reflects the reality of population shifts and labor market conditions. We believe that using the most current delineations will increase the integrity of the IPF PPS wage index system by creating a more accurate representation of geographic variations in wage levels. We explained in the proposed rule (85 FR 20633) that we carefully analyzed the impacts of adopting the new OMB delineations, and found no compelling reason to further delay implementation. Therefore, we proposed (85 FR 20633 through 20639) to implement the new OMB delineations as described in the September 14, 2018 OMB Bulletin No. 18-04, effective beginning with the FY 2021 IPF PPS wage index. We proposed to adopt the updates to the OMB delineations announced in OMB Bulletin No. 18-04 effective for FY 2021 under the IPF PPS. As noted above, the March 6, 2020 OMB Bulletin 20-01 was not issued in time for development of this final rule. We also proposed to implement a wage index transition policy that would be applicable to all IPFs that may experience negative impacts due to the implementation of the revised OMB delineations. This transition is discussed in more detail below in section III.D.1.b.iii of this final rule.

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 as Micropolitan Areas. After extensive impact analysis, consistent with the treatment of these areas under the IPPS as discussed in the FY 2005 IPPS final rule (69 FR 49029 through 49032), we determined the best course of action would be to treat Micropolitan Areas as “rural” and include them in the calculation of each state's IPF PPS rural wage index. We refer the reader to the FY 2007 IPF PPS final rule (71 FR 27064 through 27065) for a complete discussion regarding treating Micropolitan Areas as rural.

As previously discussed, in the FY 2021 proposed rule (85 FR 20633 through 20639), we proposed to implement the new OMB labor market 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 5 providers are located in areas that were previously considered part of an urban CBSA but would be considered rural beginning in FY 2021 under these revised OMB delineations. Table 2 lists the 34 urban counties that would be rural if we finalize our proposal to implement the revised OMB delineations.

We proposed that the wage data for all providers located in the counties listed above would now be considered rural, beginning in FY 2021, when calculating their respective state's rural wage index. This rural wage index value would also be used under the IPF PPS. We recognize that rural areas typically have lower area wage index values than urban areas, and providers located in these counties may experience a negative impact in their IPF payment due to the proposed adoption of the revised OMB delineations. We refer readers to section iii of this final rule for a discussion of the finalized wage index transition policy, particularly, the discussion of the finalized wage index transition policy regarding the 5-percent cap for providers that may experience a decrease in their wage index from the prior FY.

As previously discussed, we proposed to implement the new OMB labor market area delineations (based upon OMB Bulletin No. 18-04) beginning in FY 2021. Analysis of these OMB labor market area delineations shows that a total of 47 counties (and county equivalents) and 4 providers are located in areas that were previously considered rural but would now be considered urban under the revised OMB delineations. Table 3 lists the 47 rural counties that would be urban if we finalize our proposal to implement the revised OMB delineations.

When calculating the area wage index, beginning with FY 2021, the wage data for providers located in these counties would be included in their new respective urban CBSAs. Typically, providers located in an urban area receive a wage index value higher than or equal to providers located in their state's rural area. We refer readers to section iii of this final rule for a discussion of the finalized wage index transition policy.

In certain cases, adopting the new 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. Table 4 shows the current CBSA code and our proposed CBSA code where we have proposed to change either the name or CBSA number only. We are not discussing further in this section these changes because they are inconsequential changes with respect to the IPF PPS wage index.

In some cases, if we adopt the new OMB delineations, counties would shift between existing and new CBSAs, changing the constituent makeup of the CBSAs. We consider this type of change, where CBSAs are split into multiple new CBSAs, or a CBSA loses one or more counties to another urban CBSA to be significant modifications.

Table 5 lists the urban counties that will move from one urban CBSA to another newly created or modified CBSA if we adopt the new OMB delineations.

We have identified 49 IPF providers located in the affected counties listed in Table 5. If providers 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 received mixed comments on the proposal to adopt the revised CBSA delineations. Several commenters recognized the impact of these delineation changes, and some commenters were supportive of this action, while others voiced concerns.

Comment: One commenter recommended that CMS delay changes to the labor market delineations until FY 2022 to ensure that providers stay focused on the COVID-19 Public Health Emergency (PHE).

Response: The methodology for determining Medicare payments to providers uses the most recent data available. We recognize the impact that the COVID-19 PHE is having on all providers, which is why we have issued waivers and flexibilities to ease burden and allow providers to respond effectively during the COVID-19 PHE. As we have previously stated, implementing the updated wage index values along with the revised OMB delineations would result in wage index values being more representative of the actual costs of labor in a given area. Delaying the implementation of these provisions would mean delaying substantial wage index increases for some facilities whose wage index values have not been representative of actual costs of labor in that area. For those providers whose wage index would decrease as a result of the proposed changes, we have stated our belief that it is appropriate to provide a transition period to mitigate the resulting short-term instability and negative impacts on these providers, providing time for them to adjust to their new labor market area delineations and wage index values. This approach is discussed in further detail below in section III.D.1.b.iii of this final rule.

Comment: One commenter suggested that the adoption of the New Brunswick-Lakewood, New Jersey CBSA would result in a reduction in reimbursement for the four New Jersey counties that would make up the new CBSA and recommended that CMS delay finalizing the proposal to implement the new OMB delineations.

Response: We appreciate the detailed concerns sent in by the commenter regarding the impact of implementing the New Brunswick-Lakewood, NJ CBSA designation on their specific counties. We understand the commenter's concern regarding the potential financial impact; however, we believe that implementing the revised OMB delineations will create more accurate representations of labor market areas and result in IPF wage index values being more representative of the actual costs of labor in a given area. We note that there are many geographic locations and IPF providers that will experience positive impacts upon implementation of the revised CBSA designations. Therefore, we believe that the OMB standards for delineating Metropolitan and Micropolitan Statistical Areas are appropriate for determining wage area differences and that the values computed under the revised delineations will result in more appropriate payments to providers by more accurately accounting for and reflecting the differences in area wage levels.

We recognize that there are areas that will experience a decrease in their wage index. As such, it is our longstanding policy to provide a temporary transition to mitigate negative impacts from the adoption of new policies or procedures. In the FY 2021 IPF proposed rule, we proposed a two-year transition in order to mitigate the resulting short-term instability and negative impacts on certain providers and to provide time for providers to adjust to their new labor market delineations. We proposed that in the first year, FY 2021, a 5-percent cap on wage index decreases would be applied for all providers, and in the second year there would be no cap on decreases to a provider's wage index value. We continue to believe that the one-year 5-percent cap transitional policy provides an adequate safeguard against any significant payment reductions, allows for sufficient time to make operational changes for future FYs, and provides a reasonable balance between mitigating some short-term instability in IPF payments and improving the accuracy of the payment adjustment for differences in area wage levels. Therefore, we believe that it is appropriate to implement the new OMB delineations without delay.

Final Decision: For FY 2021, we are finalizing the proposal to adopt the revised CBSA delineations based on OMB Bulletin No. 18-04 in order to determine the wage index for all IPF providers.

Overall, we believe implementing updated wage index values along with the revised OMB delineations will result in wage index values being more representative of the actual costs of labor in a given area. However, we recognize that implementing these wage index changes will have distributional effects among IPF providers, and that some providers will experience decreases in wage index values as a result of our proposals. Therefore, we believe it would be appropriate to consider, as we have in the past, whether or not a transition period should be used to implement these finalized changes to the wage index.

We considered having no transition period and fully implementing the updated wage index values and new OMB delineations beginning in FY 2021. This would mean that we would adopt the updated wage index and revised OMB delineations for all providers on October 1, 2020. However, this would not provide any time for providers to adapt to the new OMB delineations or wage index values. As previously stated, some providers will experience a decrease in wage index due to implementation of the finalized new OMB delineations and wage index updates. Thus, we believe that it would be appropriate to provide for a transition period to mitigate the resulting short-term instability and negative impacts on these providers to provide time for them to adjust to their new labor market area delineations and wage index values. Furthermore, in light of the comments received during the RY 2007 and FY 2016 rulemaking cycles on our proposals to adopt revised CBSA definitions without a transition period, we believe that a transition period is appropriate for FY 2021.

We considered transitioning the finalized wage index changes over a number of years to minimize their impact in a given year. However, as discussed in the FY 2016 IPF PPS final rule (80 FR 46689), we continue to believe that a longer transition period would reduce the accuracy of the overall labor market area wage index system. The wage index is a relative measure of the value of labor in prescribed labor market areas; therefore, we believe it is important to implement the new delineations with as minimal a transition as is reasonably possible. As such, we believe that utilizing a 2-year (rather than a multiple year) transition period would strike the most appropriate balance between giving providers time to adapt to the new wage index changes while maintaining the accuracy of the overall labor market area wage index system.

We considered a transition methodology similar to that used to address past decreases in the wage index, as in FY 2016 (80 FR 46689) when major changes to CBSA delineations were introduced. Under that methodology, all IPF providers would receive a 1-year blended wage index using 50 percent of their FY 2021 wage index based on the proposed new OMB delineations and 50 percent of their FY 2021 wage index based on the OMB delineations used in FY 2020. However, if we were to propose a similar blended adjustment for FY 2021, we would have to calculate wage indexes for all providers using both old and new labor market definitions even though the blended wage index would only apply to providers that experienced a decrease in wage index values due to a change in labor market area definitions.

Because of the administrative complexity involved in implementing a blended adjustment, we decided to consider alternative transition methodologies that might provide greater transparency. Moreover, for FY 2021, we are not proposing the same transition policy we established in FY 2016 when we adopted new OMB delineations based on the decennial census data. However, consistent with our past practice of using transition policies to help mitigate negative impacts on hospitals of certain wage index proposals, we do believe it is appropriate to propose a transition policy for our proposed implementation of the revised OMB delineations.

In the proposed rule (85 FR 20638 through 20639) we stated that we believe adopting a transition of the 5-percent cap on a decrease in an IPFs wage index from the IPF's final wage index from the prior FY is an appropriate transition for FY 2021 for the revised OMB delineations as it provides greater transparency and consistency with other payment systems. We stated that this 2-year transition would allow the adoption of the revised CBSA delineations to be phased in over 2 years, where the estimated reduction in an IPF's wage index would be capped at 5 percent in FY 2021. We noted that this approach strikes an appropriate balance by providing for a transition period to mitigate the resulting short-term instability and negative impacts on these providers and provide time for them to adjust to their new labor market area delineations and wage index values. We indicated that no cap would be applied to the reduction in the wage index for the second year, that is, FY 2022.

Comment: MedPAC suggested alternatives to the 5-percent cap transition policy. MedPAC recommended that the 5-percent cap limit should apply to both increases and decreases in the wage index because they believe that no provider should have its wage index value increase or decrease by more than 5 percent for FY 2021.

Response: We appreciate MedPAC's suggestion that the cap on wage index movements of more than 5 percent should also be applied to increases in the wage index. We do not believe it would be appropriate to apply the 5-percent cap on wage index increases as well. As we discussed in the FY 2021 IPF PPS proposed rule (85 FR 20638), the purpose of the proposed transition policy, as well as those we have implemented in the past, is to help mitigate the significant negative impacts of certain wage index changes, not to curtail the positive impacts of such changes.

Final Decision: For FY 2021, we are finalizing the proposal to implement a 2-year transition to mitigate any negative effects of wage index changes by applying a 5-percent cap on any decrease in an IPF's wage index from the IPF's final wage index from the prior FY.

Following the rationale outlined in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42336), we continue to believe 5 percent is a reasonable level for the cap because it will effectively mitigate any significant decreases in the wage index for FY 2021. Therefore, for FY 2021, we are finalizing our proposal to provide for a transition of a 5-percent cap on any decrease in an IPF's wage index from the IPF's final wage index from the prior FY, which is FY 2020. Consistent with the application of the 5-percent cap transition provided in FY 2020 for the IPPS, this 5-percent cap on wage index decreases will be applied to all IPF providers that have any decrease in their wage indexes, regardless of the circumstance causing the decline, so that an IPF's final wage index for FY 2021 will not be less than 95 percent of its final wage index for FY 2020, regardless of whether the IPF is part of an updated CBSA.

In the November 2004 IPF PPS final rule, (69 FR 66954) we provided a 17 percent payment adjustment for IPFs located in a rural area. This adjustment was based on the regression analysis, which indicated that the per diem cost of rural facilities was 17 percent higher than that of urban facilities after accounting for the influence of the other variables included in the regression. This 17 percent adjustment has been part of the IPF PPS each year since the inception of the IPF PPS. For FY 2021, we are finalizing our proposal to continue to apply a 17 percent payment adjustment for IPFs located in a rural area as defined at § 412.64(b)(1)(ii)(C) (see 69 FR 66954) for a complete discussion of the adjustment for rural locations.

Changes to the wage index are made in a budget-neutral manner so that updates do not increase expenditures. Therefore, for FY 2021, we are continuing to apply a budget-neutrality adjustment in accordance with our existing budget-neutrality policy. This policy requires us to update the wage index in such a way that total estimated payments to IPFs for FY 2021 are the same with or without the changes (that is, in a budget-neutral manner) by applying a budget neutrality factor to the IPF PPS rates. We use the following steps to ensure that the rates reflect the update to the wage indexes (based on the FY 2016 hospital cost report data) and the labor-related share in a budget-neutral manner:

Step 1. Simulate estimated IPF PPS payments, using the FY 2020 IPF wage index values (available on the CMS website) and labor-related share (as published in the FY 2020 IPF PPS final rule (84 FR 38424)).

Step 2. Simulate estimated IPF PPS payments using the finalized FY 2021 IPF wage index values (available on the CMS website) and final FY 2021 labor-related share (based on the latest available data as discussed previously).

Step 3. Divide the amount calculated in step 1 by the amount calculated in step 2. The resulting quotient is the FY 2021 budget-neutral wage adjustment factor of 0.9989.

Step 4. Apply the FY 2021 budget-neutral wage adjustment factor from step 3 to the FY 2020 IPF PPS federal per diem base rate after the application of the market basket update described in section III.A of this rule, to determine the FY 2021 IPF PPS federal per diem base rate.

In the November 2004 IPF PPS final rule, we implemented regulations at § 412.424(d)(1)(iii) to establish a facility-level adjustment for IPFs that are, or are part of, teaching hospitals. The teaching adjustment accounts for the higher indirect operating costs experienced by hospitals that participate in graduate medical education (GME) programs. The payment adjustments are made based on the ratio of the number of full-time equivalent (FTE) interns and residents training in the IPF and the IPF's average daily census (ADC).

Medicare makes direct GME payments (for direct costs such as resident and teaching physician salaries, and other direct teaching costs) to all teaching hospitals including those paid under a PPS, and those paid under the TEFRA rate-of-increase limits. These direct GME payments are made separately from payments for hospital operating costs and are not part of the IPF PPS. The direct GME payments do not address the estimated higher indirect operating costs teaching hospitals may face.

The results of the regression analysis of FY 2002 IPF data established the basis for the payment adjustments included in the November 2004 IPF PPS final rule. The results showed that the indirect teaching cost variable is significant in explaining the higher costs of IPFs that have teaching programs. We calculated the teaching adjustment based on the IPF's “teaching variable,” which is (1 + (the number of FTE residents training in the IPF/the IPF's ADC)). The teaching variable is then raised to 0.5150 power to result in the teaching adjustment. This formula is subject to the limitations on the number of FTE residents, which are described in this section of this rule.

We established the teaching adjustment in a manner that limited the incentives for IPFs to add FTE residents for the purpose of increasing their teaching adjustment. We imposed a cap on the number of FTE residents that may be counted for purposes of calculating the teaching adjustment. The cap limits the number of FTE residents that teaching IPFs may count for the purpose of calculating the IPF PPS teaching adjustment, not the number of residents teaching institutions can hire or train. We calculated the number of FTE residents that trained in the IPF during a “base year” and used that FTE resident number as the cap. An IPF's FTE resident cap is ultimately determined based on the final settlement of the IPF's most recent cost report filed before November 15, 2004 (publication date of the IPF PPS final rule). A complete discussion of the temporary adjustment to the FTE cap to reflect residents due to hospital closure or residency program closure appears in the RY 2012 IPF PPS proposed rule (76 FR 5018 through 5020) and the RY 2012 IPF PPS final rule (76 FR 26453 through 26456).

In the regression analysis, the logarithm of the teaching variable had a coefficient value of 0.5150. We converted this cost effect to a teaching payment adjustment by treating the regression coefficient as an exponent and raising the teaching variable to a power equal to the coefficient value. We note that the coefficient value of 0.5150 was based on the regression analysis holding all other components of the payment system constant. A complete discussion of how the teaching adjustment was calculated appears in the November 2004 IPF PPS final rule (69 FR 66954 through 66957) and the RY 2009 IPF PPS notice (73 FR 25721). As with other adjustment factors derived through the regression analysis, we do not plan to rerun the teaching adjustment factors in the regression analysis until we more fully analyze IPF PPS data as part of the IPF PPS refinement we discuss in section IV of this rule. Therefore, in this FY 2021 final rule, we will continue to retain the coefficient value of 0.5150 for the teaching adjustment to the federal per diem base rate.

The IPF PPS includes a payment adjustment for IPFs located in Alaska and Hawaii based upon the area in which the IPF is located. As we explained in the November 2004 IPF PPS final rule, the FY 2002 data demonstrated that IPFs in Alaska and Hawaii had per diem costs that were disproportionately higher than other IPFs. Other Medicare prospective payment systems (for example: The IPPS and LTCH PPS) adopted a COLA to account for the cost differential of care furnished in Alaska and Hawaii.

We analyzed the effect of applying a COLA to payments for IPFs located in Alaska and Hawaii. The results of our analysis demonstrated that a COLA for IPFs located in Alaska and Hawaii would improve payment equity for these facilities. As a result of this analysis, we provided a COLA in the November 2004 IPF PPS final rule.

A COLA for IPFs located in Alaska and Hawaii is made by multiplying the non-labor-related portion of the federal per diem base rate by the applicable COLA factor based on the COLA area in which the IPF is located.

The COLA factors through 2009 were published by the Office of Personnel Management (OPM), and the OPM memo showing the 2009 COLA factors is available at https://www.chcoc.gov/content/nonforeign-area-retirement-equity-assurance-act.

We note that the COLA areas for Alaska are not defined by county as are the COLA areas for Hawaii. In 5 CFR 591.207, the OPM established the following COLA areas:

• City of Anchorage, and 80-kilometer (50-mile) radius by road, as measured from the federal courthouse.

• City of Fairbanks, and 80-kilometer (50-mile) radius by road, as measured from the federal courthouse.

• City of Juneau, and 80-kilometer (50-mile) radius by road, as measured from the federal courthouse.

• Rest of the state of Alaska.

As stated in the November 2004 IPF PPS final rule, we update the COLA factors according to updates established by the OPM. However, sections 1911 through 1919 of the Nonforeign Area Retirement Equity Assurance Act, as contained in subtitle B of title XIX of the National Defense Authorization Act (NDAA) for FY 2010 (Pub. L. 111-84, October 28, 2009), transitions the Alaska and Hawaii COLAs to locality pay. Under section 1914 of NDAA, locality pay was phased in over a 3-year period beginning in January 2010, with COLA rates frozen as of the date of enactment, October 28, 2009, and then proportionately reduced to reflect the phase-in of locality pay.

When we published the proposed COLA factors in the RY 2012 IPF PPS proposed rule (76 FR 4998), we inadvertently selected the FY 2010 COLA rates, which had been reduced to account for the phase-in of locality pay. We did not intend to propose the reduced COLA rates because that would have understated the adjustment. Since the 2009 COLA rates did not reflect the phase-in of locality pay, we finalized the FY 2009 COLA rates for RY 2010 through RY 2014.

In the FY 2013 IPPS/LTCH final rule (77 FR 53700 through 53701), we established a new methodology to update the COLA factors for Alaska and Hawaii, and adopted this methodology for the IPF PPS in the FY 2015 IPF final rule (79 FR 45958 through 45960). We adopted this new COLA methodology for the IPF PPS because IPFs are hospitals with a similar mix of commodities and services. We think it is appropriate to have a consistent policy approach with that of other hospitals in Alaska and Hawaii. Therefore, the IPF COLAs for FY 2015 through FY 2017 were the same as those applied under the IPPS in those years. As finalized in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53700 and 53701), the COLA updates are determined every 4 years, when the IPPS market basket labor-related share is updated. Because the labor-related share of the IPPS market basket was updated for FY 2018, the COLA factors were updated in FY 2018 IPPS/LTCH rulemaking (82 FR 38529). As such, we also updated the IPF PPS COLA factors for FY 2018 (82 FR 36780 through 36782) to reflect the updated COLA factors finalized in the FY 2018 IPPS/LTCH rulemaking. We are continuing to apply the same COLA factors in FY 2021 that were used in FY 2018 through FY 2020.

The final IPF PPS COLA factors for FY 2021 are also shown in Addendum A to this final rule, and are available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientPsychFacilPPS/tools.html.

The IPF PPS includes a facility-level adjustment for IPFs with qualifying EDs. We provide an adjustment to the federal per diem base rate to account for the costs associated with maintaining a full-service ED. The adjustment is intended to account for ED costs incurred by a psychiatric hospital with a qualifying ED or an excluded psychiatric unit of an IPPS hospital or a CAH, for preadmission services otherwise payable under the Medicare Hospital Outpatient Prospective Payment System (OPPS), furnished to a beneficiary on the date of the beneficiary's admission to the hospital and during the day immediately preceding the date of admission to the IPF (see § 413.40(c)(2)), and the overhead cost of maintaining the ED. This payment is a facility-level adjustment that applies to all IPF admissions (with one exception which we described), regardless of whether a particular patient receives preadmission services in the hospital's ED.

The ED adjustment is incorporated into the variable per diem adjustment for the first day of each stay for IPFs with a qualifying ED. Those IPFs with a qualifying ED receive an adjustment factor of 1.31 as the variable per diem adjustment for day 1 of each patient stay. If an IPF does not have a qualifying ED, it receives an adjustment factor of 1.19 as the variable per diem adjustment for day 1 of each patient stay.

The ED adjustment is made on every qualifying claim except as described in this section of the final rule. As specified in § 412.424(d)(1)(v)(B), the ED adjustment is not made when a patient is discharged from an IPPS hospital or CAH and admitted to the same IPPS hospital's or CAH's excluded psychiatric unit. We clarified in the November 2004 IPF PPS final rule (69 FR 66960) that an ED adjustment is not made in this case because the costs associated with ED services are reflected in the DRG payment to the IPPS hospital or through the reasonable cost payment made to the CAH.

Therefore, when patients are discharged from an IPPS hospital or CAH and admitted to the same hospital's or CAH's excluded psychiatric unit, the IPF receives the 1.19 adjustment factor as the variable per diem adjustment for the first day of the patient's stay in the IPF. For FY 2021, we are finalizing our proposal to continue to retain the 1.31 adjustment factor for IPFs with qualifying EDs. A complete discussion of the steps involved in the calculation of the ED adjustment factors are in the November 2004 IPF PPS final rule (69 FR 66959 through 66960) and the RY 2007 IPF PPS final rule (71 FR 27070 through 27072).

The IPF PPS includes an outlier adjustment to promote access to IPF care for those patients who require expensive care and to limit the financial risk of IPFs treating unusually costly patients. In the November 2004 IPF PPS final rule, we implemented regulations at § 412.424(d)(3)(i) to provide a per-case payment for IPF stays that are extraordinarily costly. Providing additional payments to IPFs for extremely costly cases strongly improves the accuracy of the IPF PPS in determining resource costs at the patient and facility level. These additional payments reduce the financial losses that would otherwise be incurred in treating patients who require costlier care, and therefore, reduce the incentives for IPFs to under-serve these patients. We make outlier payments for discharges in which an IPF's estimated total cost for a case (which is calculated by multiplying the IPF's overall cost-to-charge ratio (CCR) by the Medicare allowable covered charge) exceeds a fixed dollar loss threshold amount (multiplied by the IPF's facility-level adjustments) plus the federal per diem payment amount for the case.

In instances when the case qualifies for an outlier payment, we pay 80 percent of the difference between the estimated cost for the case and the adjusted threshold amount for days 1 through 9 of the stay (consistent with the median LOS for IPFs in FY 2002), and 60 percent of the difference for day 10 and thereafter. The adjusted threshold amount is equal to the outlier threshold amount adjusted for wage area, teaching status, rural area, and the COLA adjustment (if applicable), plus the amount of the Medicare IPF payment for the case. We established the 80 percent and 60 percent loss sharing ratios because we were concerned that a single ratio established at 80 percent (like other Medicare PPSs) might provide an incentive under the IPF per diem payment system to increase LOS in order to receive additional payments.

After establishing the loss sharing ratios, we determined the current fixed dollar loss threshold amount through payment simulations designed to compute a dollar loss beyond which payments are estimated to meet the 2 percent outlier spending target. Each year when we update the IPF PPS, we simulate payments using the latest available data to compute the fixed dollar loss threshold so that outlier payments represent 2 percent of total estimated IPF PPS payments.

In accordance with the update methodology described in § 412.428(d), we are updating the fixed dollar loss threshold amount used under the IPF PPS outlier policy. Based on the regression analysis and payment simulations used to develop the IPF PPS, we established a 2 percent outlier policy, which strikes an appropriate balance between protecting IPFs from extraordinarily costly cases while ensuring the adequacy of the federal per diem base rate for all other cases that are not outlier cases.

Based on an analysis of the latest available data (the March 2020 update of FY 2019 IPF claims and most recent CCRs from the CY 2020 Provider Specific File) and rate increases, we believe it is necessary to update the fixed dollar loss threshold amount to maintain an outlier percentage that equals 2 percent of total estimated IPF PPS payments. We are updating the IPF outlier threshold amount for FY 2021 using FY 2019 claims data and the same methodology that we used to set the initial outlier threshold amount in the RY 2007 IPF PPS final rule (71 FR 27072 and 27073), which is also the same methodology that we used to update the outlier threshold amounts for years 2008 through 2020. In the proposed rule (85 FR 20642), based on an analysis of the December 2019 update of these data, we originally estimated that IPF outlier payments as a percentage of total estimated payments are approximately 2.2 percent in FY 2020. Therefore, we proposed to update the outlier threshold amount to $16,520 to maintain estimated outlier payments at 2 percent of total estimated aggregate IPF payments for FY 2021.

Comment: We received one comment that opposed increasing the fixed dollar threshold amount for 2 years in a row in order to maintain the 2 percent outlier policy. The commenter also acknowledged that an increase in the threshold is necessary, but stated that it should be limited to no more than 5 percent in any given year.

Response: The outlier fixed dollar threshold amount is calculated by simulating aggregate payments and using an iterative process to determine a threshold that results in outlier payments being equal to 2 percent of total payments under the simulation. To determine the IPF outlier threshold amount for FY 2021, we estimated the FY 2021 IPF PPS aggregate and outlier payments using the most recent claims available (March 2020 update of the FY 2019 MedPAR claims), the latest CCRs from the Provider Specific File, and the FY 2021 final payment rates. The outlier threshold was varied in this simulation until estimated outlier payments equaled 2 percent of estimated aggregate payments. Based on the regression analysis and payment simulations used to develop the IPF PPS, we established a 2 percent outlier policy in our November 2004 IPF PPS final rule (69 FR 66960 through 66962), which strikes an appropriate balance between protecting IPFs from extraordinarily costly cases while ensuring the adequacy of the federal per diem base rate for all other cases that are not outlier cases. This outlier fixed dollar loss threshold update methodology is based on longstanding IPF payment policy and is described in detail in the RY 2007 IPF PPS final rule (71 FR 27072 and 27073).

Based on an analysis of the latest updated data, we estimate that IPF outlier payments as a percentage of total estimated payments are approximately 1.9 percent in FY 2020. Therefore, we are finalizing to update the outlier threshold amount to $14,630 to maintain estimated outlier payments at 2 percent of total estimated aggregate IPF payments for FY 2021. This final rule update is a decrease from the FY 2020 threshold of $14,960. To maintain this established 2 percent outlier policy, we must raise or lower the IPF PPS outlier fixed dollar threshold amount as indicated by the latest updated data. If the fixed dollar threshold amount increase were limited to 5 percent for any year, as suggested by the commenter, we would not meet the established 2 percent outlier policy if the data indicated that a greater increase to the fixed dollar loss threshold were required.

Final Decision: We are finalizing the annual updates in accordance with existing policy.

Under the IPF PPS, an outlier payment is made if an IPF's cost for a stay exceeds a fixed dollar loss threshold amount plus the IPF PPS amount. In order to establish an IPF's cost for a particular case, we multiply the IPF's reported charges on the discharge bill by its overall cost-to-charge ratio. This approach to determining an IPF's cost is consistent with the approach used under the IPPS and other PPSs. In the FY 2004 IPPS final rule (68 FR 34494), we implemented changes to the IPPS policy used to determine CCRs for IPPS hospitals, because we became aware that payment vulnerabilities resulted in inappropriate outlier payments. Under the IPPS, we established a statistical measure of accuracy for CCRs to ensure that aberrant CCR data did not result in inappropriate outlier payments.

As we indicated in the November 2004 IPF PPS final rule (69 FR 66961), we believe that the IPF outlier policy is susceptible to the same payment vulnerabilities as the IPPS; therefore, we adopted a method to ensure the statistical accuracy of CCRs under the IPF PPS. Specifically, we adopted the following procedure in the November 2004 IPF PPS final rule:

• Calculated two national ceilings, one for IPFs located in rural areas and one for IPFs located in urban areas.

• Computed the ceilings by first calculating the national average and the standard deviation of the CCR for both urban and rural IPFs using the most recent CCRs entered in the most recent Provider Specific File available.

For FY 2021, we are finalizing to continue to follow this methodology.

To determine the rural and urban ceilings, we multiplied each of the standard deviations by 3 and added the result to the appropriate national CCR average (either rural or urban). The upper threshold CCR for IPFs in FY 2021 is 2.0082 for rural IPFs, and 1.7131 for urban IPFs, based on CBSA-based geographic designations. If an IPF's CCR is above the applicable ceiling, the ratio is considered statistically inaccurate, and we assign the appropriate national (either rural or urban) median CCR to the IPF.

We apply the national median CCRs to the following situations:

• New IPFs that have not yet submitted their first Medicare cost report. We continue to use these national median CCRs until the facility's actual CCR can be computed using the first tentatively or final settled cost report.

• IPFs whose overall CCR is in excess of three standard deviations above the corresponding national geometric mean (that is, above the ceiling).

• Other IPFs for which the Medicare Administrative Contractor (MAC) obtains inaccurate or incomplete data with which to calculate a CCR.

We are continuing to update the FY 2021 national median and ceiling CCRs for urban and rural IPFs based on the CCRs entered in the latest available IPF PPS Provider Specific File. Specifically, for FY 2021, to be used in each of the three situations listed previously, using the most recent CCRs entered in the CY 2020 Provider Specific File, we provide an estimated national median CCR of 0.5720 for rural IPFs and a national median CCR of 0.4200 for urban IPFs. These calculations are based on the IPF's location (either urban or rural) using the CBSA-based geographic designations. A complete discussion regarding the national median CCRs appears in the November 2004 IPF PPS final rule (69 FR 66961 through 66964).

For RY 2012, we identified several areas of concern for future refinement, and we invited comments on these issues in the RY 2012 IPF PPS proposed and final rules. For further discussion of these issues and to review the public comments, we refer readers to the RY 2012 IPF PPS proposed rule (76 FR 4998) and final rule (76 FR 26432).

We have delayed making refinements to the IPF PPS until we have completed a thorough analysis of IPF PPS data on which to base those refinements. Specifically, we would delay updating the adjustment factors derived from the regression analysis until we have IPF PPS data that include as much information as possible regarding the patient-level characteristics of the population that each IPF serves. We have begun and will continue the necessary analysis to better understand IPF industry practices so that we may refine the IPF PPS in the future, as appropriate. Our preliminary analysis has also revealed variation in cost and claim data, particularly related to labor costs, drugs costs, and laboratory services. Some providers have very low labor costs, or very low or missing drug or laboratory costs or charges, relative to other providers. As we noted in the FY 2016 IPF PPS final rule (80 FR 46693 through 46694), our preliminary analysis of 2012 to 2013 IPF data found that over 20 percent of IPF stays reported no ancillary costs, such as laboratory and drug costs, in their cost reports, or laboratory or drug charges on their claims. Because we expect that most patients requiring hospitalization for active psychiatric treatment would need drugs and laboratory services, we again remind providers that the IPF PPS federal per diem base rate includes the cost of all ancillary services, including drugs and laboratory services.

On November 17, 2017, we issued Transmittal 12, which made changes to the hospital cost report form CMS-2552-10 (OMB No. 0938-0050), and included the requirement that cost reports from psychiatric hospitals include certain ancillary costs, or the cost report will be rejected. On January 30, 2018, we issued Transmittal 13, which changed the implementation date for Transmittal 12 to be for cost reporting periods ending on or after September 30, 2017. For details, we refer readers to see these Transmittals, which are available on the CMS website at https://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/index.html. CMS suspended the requirement that cost reports from psychiatric hospitals include certain ancillary costs effective April 27, 2018, in order to consider excluding all-inclusive rate providers from this requirement. CMS issued Transmittal 15 on October 19, 2018, reinstating the requirement that cost reports from psychiatric hospitals, except all-inclusive rate providers, include certain ancillary costs.

We only pay the IPF for services furnished to a Medicare beneficiary who is an inpatient of that IPF (except for certain professional services), and payments are considered to be payments in full for all inpatient hospital services provided directly or under arrangement (see 42 CFR 412.404(d)), as specified in 42 CFR 409.10.

In the CMS interim final rule with comment period, “Medicare and Medicaid Programs; Policy and Regulatory Revisions in Response to the COVID-19 Public Health Emergency” (85 FR 19230) (“IFC”), published on April 6, 2020, we revised the provision at § 482.61(d) in the “Special Medical Record Requirements for Psychiatric Hospitals” conditions of participation (CoP) by deleting an inappropriate reference to § 482.12(c), and deleting the modifier “independent” from the term “licensed independent practitioner(s).”

This and other revisions in the April 6, 2020 IFC reflect our belief that advanced practice providers (APPs), including physician assistants (PAs), nurse practitioners (NPs), psychologists, and clinical nurse specialists (CNSs) (as well as other qualified, licensed practitioners to whom this revision may also be applicable), when acting in accordance with state law, their scope of practice, and hospital policy, should have the authority to practice more broadly and to the highest level of their education, training, and qualifications as allowed under their respective state requirements and laws in this area. Additionally, non-physician practitioners practicing in the psychiatric hospital setting should be able to record progress notes of psychiatric patients for whom they are responsible. Therefore, we now allow the use of non-physician practitioners, or APPs, to document progress notes of patients receiving services in psychiatric hospitals, in addition to medical doctors, doctors of osteopathy (MDs)/(DOs) as is currently allowed.

Given the changes made to the requirements under § 482.13 regarding the removal of the word “independent” from the phrase “licensed independent practitioner” when referencing non-physician practitioners that we previously discussed in the final rule published on September 30, 2019 Federal Register (the “Medicare and Medicaid Programs; Hospital and Critical Access Hospital (CAH) Changes To Promote Innovation, Flexibility, and Improvement in Patient Care” final rule (84 FR 51775)), we have made the same change for this provision at § 482.61(d) in the April 6, 2020 IFC. We believe that the regulatory language should be as consistent as possible throughout the hospital CoPs and with the requirement under § 482.13. We also believe using the term “licensed independent practitioner” may inadvertently exacerbate workforce shortage concerns, and unnecessarily impose regulatory burden on hospitals by restricting a hospital's ability to allow APPs and other non-physician practitioners to operate within the scope of practice allowed by state law. In addition, we believe it does not recognize the benefits to patient care that might be derived from fully utilizing APPs and their clinical skills to the highest levels of their training, education, and experience, as allowed by hospital policy in accordance with state law.

In response to the April 6, 2020 IFC, we received several public comments from patient advocacy organizations as well as professional organizations and societies. The comments were generally supportive of the changes and are as follows:

Comment: Several commenters fully supported the changes made regarding APPs, expressed appreciation for CMS recognizing the changing dynamics of the healthcare system for both patients and for those practicing within it, and encouraged CMS to continue to evaluate other regulatory barriers limiting efficient practice by APPs. One commenter expressed appreciation for the clarification that now allows non-physician practitioners to practice to the full extent of their licenses and certifications in the psychiatric hospital setting. The commenter referenced evidence of the safe practice of nurse practitioners and other practitioners in other settings, which the commenter stated confirms that this change is appropriate to make for psychiatric hospitals. Another commenter expressed appreciation for this increased flexibility and asked CMS to consider other Medicare regulations for future revisions, particularly those that might limit other types of advanced practice nurses from practicing to the full extent of their licenses, such as those practicing in oncology.

Response: We thank the commenters for their support of these changes and agree that evidence supports allowing these practitioners to practice to full extent of their training, education, and qualifications. Since the revisions discussed here are limited in scope to the psychiatric hospital CoP, we can only address the requirements for APPs, which we note currently allow APPs, regardless of area of practice, to practice to the full extent of their respective state laws and licenses and as allowed by their respective hospitals. However, we will continue to review the CoPs for other provider-types.

Comment: A few commenters, while supportive of these changes, emphasized that APPs, while practicing in accordance with state scope-of-practice laws, must also continue to practice as part of physician-led teams and that CMS should reinstate general supervision of APPs by physicians after the expiration of the current PHE declaration period. These commenters also stated that they believe the current revisions to allow for APPs to document progress notes for patients in psychiatric hospitals for whom they are responsible should only be temporary for the duration of the PHE.

Response: We appreciate the qualified support expressed by commenters and agree that APPs should practice in accordance with their respective state laws with regard to their roles on physician-led teams. However, we respectfully disagree that the changes made in the April 6, 2020 IFC should only be temporary in nature. Further, with regard to the revisions to the hospital CoPs discussed here, we defer to state law and hospital policy regarding the requirement of general supervision of APPs by physicians.

Final Decision: After consideration of the public comments, we are confirming as final the revisions to the provision at § 482.61(d) in the “Special Medical Record Requirements for Psychiatric Hospitals” CoP published in the April 6, 2020 IFC (85 FR 19230), without change.

This rule finalizes proposed updates to the prospective payment rates, outlier threshold, and wage index for Medicare inpatient hospital services provided by IPFs. It also finalizes our proposal to expand the IPPS wage index disparities policy and revise CBSA delineations. While discussed in section IV (Update on IPF PPS Refinements) of this preamble, the active requirements and burden associated with our hospital cost report form CMS-2552-10 (OMB control number 0938-0050) are unaffected by this rule. At § 482.61(d), this rule will allow licensed non-physician practitioners (specifically PAs, NPs, and CNSs) to document progress notes in accordance with state laws and scope-of-practice requirements. The recording of progress notes is not new as it is currently allowed by medical doctors and doctors of osteopathy. We believe that the recording of progress notes is a usual and customary practice that would be performed in the absence of federal regulation. In that regard it is not subject (see 5 CFR 1320.3(b)(2)) to the requirements of the Paperwork Reduction Act of 1995 (PRA; 44 U.S.C. 3501 et seq. ).

Since this rule does not impose any new or revised collection of information requirements/burden, the rule is not subject to the requirements of the PRA. With respect to this section of the preamble, “collection of information” is defined under 5 CFR 1320.3(c) of OMB's implementing regulations.

This rule finalizes updates to the prospective payment rates for Medicare inpatient hospital services provided by IPFs for discharges occurring during FY 2021 (October 1, 2020 through September 30, 2021). We are finalizing our proposal to apply the 2016-based IPF market basket increase of 2.2 percent, less the productivity adjustment of 0 percentage point as required by 1886(s)(2)(A)(i) of the Act resulting in a final FY 2021 IPF payment rate update of 2.2 percent. In this final rule, we are updating the IPF labor-related share and the IPF wage index to reflect the FY 2021 hospital inpatient wage index, and adopting more recent Office of Management and Budget (OMB) statistical area delineations.

We have examined the impacts of this final rule as required by Executive Order 12866 on Regulatory Planning and Review (September 30, 1993), Executive Order 13563 on Improving Regulation and Regulatory Review (January 18, 2011), the Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96 354), section 1102(b) of the Social Security Act (the 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), 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. In accordance with the provisions of Executive Order 12866, this regulation was reviewed by the Office of Management and Budget.

We estimate that this rulemaking is not economically significant as measured by the $100 million threshold, and hence not a major rule under the Congressional Review Act. Accordingly, we have prepared a Regulatory Impact Analysis that to the best of our ability presents the costs and benefits of the rulemaking.

We estimate that the total impact of these changes for FY 2021 payments compared to FY 2020 payments will be a net increase of approximately $95 million. This reflects a $90 million increase from the update to the payment rates ($90 million increase from the second quarter 2020 IGI forecast of the 2016-based IPF market basket of 2.2 percent, and a $0 reduction for the productivity adjustment of 0 percentage point), as well as a $5 million increase as a result of the update to the outlier threshold amount. Outlier payments are estimated to change from 1.9 percent in FY 2020 to 2.0 percent of total estimated IPF payments in FY 2021.

In this section, we discuss the historical background of the IPF PPS and the impact of this final rule on the Federal Medicare budget and on IPFs.

As discussed in the November 2004 and RY 2007 IPF PPS final rules, we applied a budget neutrality factor to the federal per diem base rate and ECT payment per treatment to ensure that total estimated payments under the IPF PPS in the implementation period would equal the amount that would have been paid if the IPF PPS had not been implemented. The budget neutrality factor includes the following components: Outlier adjustment, stop-loss adjustment, and the behavioral offset. As discussed in the RY 2009 IPF PPS notice (73 FR 25711), the stop-loss adjustment is no longer applicable under the IPF PPS.

As discussed in section III.D.1 of this final rule, we are updating the wage index and labor-related share in a budget neutral manner by applying a wage index budget neutrality factor to the federal per diem base rate and ECT payment per treatment. Therefore, the budgetary impact to the Medicare program of this final rule will be due to the market basket update for FY 2021 of 2.2 percent (see section III.A.4 of this final rule) less the productivity adjustment of 0 percentage point required by section 1886(s)(2)(A)(i) of the Act and the update to the outlier fixed dollar loss threshold amount.

We estimate that the FY 2021 impact will be a net increase of $95 million in payments to IPF providers. This reflects an estimated $90 million increase from the update to the payment rates and a $5 million increase due to the update to the outlier threshold amount to set total estimated outlier payments at 2.0 percent of total estimated payments in FY 2021. This estimate does not include the implementation of the required 2.0 percentage point reduction of the market basket increase factor for any IPF that fails to meet the IPF quality reporting requirements (as discussed in section V.A. of this final rule).

To show the impact on providers of the changes to the IPF PPS discussed in this final rule, we compare estimated payments under the IPF PPS rates and factors for FY 2021 versus those under FY 2020. We determined the percent change in the estimated FY 2021 IPF PPS payments compared to the estimated FY 2020 IPF PPS payments for each category of IPFs. In addition, for each category of IPFs, we have included the estimated percent change in payments resulting from the update to the outlier fixed dollar loss threshold amount; the updated wage index data including the updated labor-related share; the adoption of the revised CBSA delineations based on the OMB Bulletin No. 18-04 published September 14, 2018; the implementation of the 2 year transition with a 5-percent cap on decreases to providers' wage index values; and the market basket update for FY 2021, as adjusted by the productivity adjustment according to section 1886(s)(2)(A)(i) of the Act.

To illustrate the impacts of the FY 2021 changes in this final rule, our analysis begins with FY 2019 IPF PPS claims (based on the 2019 MedPAR claims, March 2020 update). We estimate FY 2020 IPF PPS payments using these 2019 claims and the finalized FY 2020 IPF PPS federal per diem base rates and the finalized FY 2020 IPF PPS patient and facility level adjustment factors (as published in the FY 2020 IPF PPS final rule (84 FR 38424 through 38482)). We then estimate the FY 2020 outlier payments based on these simulated FY 2020 IPF PPS payments using the same methodology as finalized in the FY 2020 IPF PPS final rule (84 FR 38457) where total outlier payments are maintained at 2 percent of total estimated FY 2020 IPF PPS payments.

Each of the following changes is added incrementally to this baseline model in order for us to isolate the effects of each change:

• The update to the outlier fixed dollar loss threshold amount.

• The FY 2021 IPF wage index and the FY 2021 labor-related share.

• The adoption of the revised CBSAs based on OMB Bulletin No. 18-04 and the 5-percent cap on decreases to the wage index for providers whose wage index decreases from FY 2020.

• The market basket update for FY 2021 of 2.2 percent less the productivity adjustment of 0 percentage point in accordance with section 1886(s)(2)(A)(i) of the Act for a payment rate update of 2.2 percent.

Our final column comparison in Table 7 illustrates the percent change in payments from FY 2020 (that is, October 1, 2019, to September 30, 2020) to FY 2021 (that is, October 1, 2020, to September 30, 2021) including all the payment policy changes in this final rule.

Table 7 displays the results of our analysis. The table groups IPFs into the categories listed here based on characteristics provided in the Provider of Services (POS) file, the IPF provider specific file, and cost report data from the Healthcare Cost Report Information System:

• Facility Type.

• Location.

• Teaching Status Adjustment.

• Census Region.

• Size.

The top row of the table shows the overall impact on the 1,550 IPFs included in this analysis. In column 3, we present the effects of the update to the outlier fixed dollar loss threshold amount. We estimate that IPF outlier payments as a percentage of total IPF payments are 1.9 percent in FY 2020. Thus, we are adjusting the outlier threshold amount in this final rule to set total estimated outlier payments equal to 2.0 percent of total payments in FY 2021. The estimated change in total IPF payments for FY 2021, therefore, includes an approximate 0.1 percent increase in payments because the outlier portion of total payments is expected to increase from approximately 1.9 percent to 2.0 percent.

The overall impact of this outlier adjustment update (as shown in column 3 of Table 7), across all hospital groups, is to increase total estimated payments to IPFs by 0.1 percent. The largest increase in payments due to this change is estimated to be 0.2 percent for teaching IPFs with more than 30 percent interns and residents to beds.

In column 4, we present the effects of the budget-neutral update to the IPF wage index and the Labor-Related Share (LRS). This represents the effect of using the concurrent hospital wage data without taking into account the updated OMB delineations, or the 5-percent cap on decreases to providers' wage index values for providers whose wage index decreases from FY 2020 as discussed in section III.D.1.b.iii of this final rule. That is, the impact represented in this column reflects the update from the FY 2020 IPF wage index to the final FY 2021 IPF wage index, which includes basing the FY 2021 IPF wage index on the FY 2021 pre-floor, pre-reclassified IPPS hospital wage index data and updating the LRS from 76.9 percent in FY 2020 to 77.3 percent in FY 2021. We note that there is no projected change in aggregate payments to IPFs, as indicated in the first row of column 4, however, there will be distributional effects among different categories of IPFs. For example, we estimate the largest increase in payments to be 0.7 percent for Mid-Atlantic IPFs, and the largest decrease in payments to be 0.9 percent for New England IPFs.

Next, column 5 shows the effect of the final update to the delineations used to identify providers as urban or rural providers and the CBSAs into which urban providers are classified. Additionally, column 5 shows the effect of the final five percent cap on wage index decreases in FY 2021 as discussed in section III.D.1.b.iii of this final rule. The new delineations will be based on the September 14, 2018 OMB Bulletin No. 18-04. In the aggregate, we do not estimate that these updates will affect overall estimated payments of IPFs since these changes will be implemented in a budget neutral manner. We observe that urban providers will experience no change in payments and rural providers will see a 0.1 percent decrease in payments.

Finally, column 6 compares the total changes reflected in this final rule for FY 2021 to the estimates for FY 2020 (without these changes). The average estimated increase for all IPFs is approximately 2.3 percent. This estimated net increase includes the effects of the 2016-based IPF market basket update of 2.2 percent reduced by the productivity adjustment of 0 percentage point, as required by section 1886(s)(2)(A)(i) of the Act. It also includes the overall estimated 0.1 percent increase in estimated IPF outlier payments as a percent of total payments from the update to the outlier fixed dollar loss threshold amount. Column 6 also includes the distributional effects of the updates to the IPF wage index and the labor-related share whose impacts are displayed in columns 4 and 5.

IPF payments are estimated to increase by 2.3 percent in urban areas and 2.0 percent in rural areas. Overall, IPFs are estimated to experience a net increase in payments as a result of the updates in this final rule. The largest payment increase is estimated at 3.5 percent for IPFs in the Mid-Atlantic region.

Under the IPF PPS, IPFs will receive payment based on the average resources consumed by patients for each day. We do not expect changes in the quality of care or access to services for Medicare beneficiaries under the FY 2021 IPF PPS, but we continue to expect that paying prospectively for IPF services will enhance the efficiency of the Medicare program.

If regulations impose administrative costs on private entities, such as the time needed to read and interpret this final rule, we should estimate the cost associated with regulatory review. Due to the uncertainty involved with accurately quantifying the number of entities that will be directly impacted and will review this final rule, we assume that the total number of unique commenters on the most recent IPF proposed rule from FY 2021 (85 FR 20625) will be the number of reviewers of this final rule. We acknowledge that this assumption may understate or overstate the costs of reviewing this final rule. It is possible that not all commenters reviewed the FY 2021 IPF proposed rule in detail, and it is also possible that some reviewers chose not to comment on that proposed rule. For these reasons, we thought that the number of commenters would be a fair estimate of the number of reviewers who are directly impacted by this final rule. We did not receive any comments on this assumption.

We also recognize that different types of entities are in many cases affected by mutually exclusive sections of this final rule; therefore, for the purposes of our estimate, we assume that each reviewer reads approximately 50 percent of this final rule.

Using the May, 2019 mean (average) wage information from the Bureau of Labor Statistics (BLS) for medical and health service managers (Code 11-9111), we estimate that the cost of reviewing this final rule is $110.74 per hour, including overhead and fringe benefits ( https://www.bls.gov/oes/current/oes119111.htm ). Assuming an average reading speed of 250 words per minute, we estimate that it would take approximately 49 minutes (0.82 hours) for the staff to review half of this final rule, given that there is a total of 24,480 words. For each IPF that reviews the final rule, the estimated cost is (0.82 hours × $110.74) or $90.36. Therefore, we estimate that the total cost of reviewing this final rule is $41,748.09 ($90.36 × 462 reviewers).

In section V. of this final rule, we note that the existing requirements (prior to publication of the April 6, 2020 IFC) for psychiatric hospitals specified that progress notes must be recorded by the physicians(s), psychologists, or other “licensed independent practitioner(s)” responsible for the care of the patient. We believe that this provision required clarification and revision since the regulatory language was inconsistent with other recent changes finalized throughout the hospital CoPs as this provision applies to APPs, including PAs, NPs, clinical psychologists, and CNSs.

Continued use of this outdated term (“licensed independent practitioner(s)”) may inadvertently exacerbate workforce shortage concerns, and also might unnecessarily impose regulatory burden on hospitals, especially psychiatric hospitals, by restricting a hospital's ability to allow APPs to operate within the scope of practice allowed by state law. We believe that the previous regulation failed to recognize the benefits to patient care that might be derived from fully utilizing APPs and their clinical skills to the highest levels of their training, education, and experience as allowed by hospital policy in accordance with state law.

Therefore, we have removed the term “licensed independent practitioner(s)” (along with an inappropriate reference to § 482.12(c)) from the regulations. We believe that this revision is non-controversial, and that the public interest will be served by permitting a greater scope of practice for professionals in the psychiatric hospital context and further believe that these trained and qualified practitioners, when acting in accordance with state law, their scope of practice, and hospital policy, should have the authority to record progress notes of psychiatric patients for whose care they are responsible.

At § 482.61(d), we now allow non-physician practitioners, or APPs, to document progress notes in accordance with state laws and scope-of-practice requirements. We believe that clarification of the intent of the regulation is necessary and will result in non-physician practitioners (specifically PAs, NPs, and CNSs) documenting in the progress notes for patients receiving services in psychiatric hospitals.

We estimate that MDs/DOs currently spend approximately 30 minutes documenting progress notes in psychiatric hospitals, and that 33 percent of this time would be covered by non-physician practitioners. Of the 4,823 Medicare participating hospitals, approximately 620 (or 13 percent) are psychiatric hospitals. According to the American Hospital Association (AHA), there were 36,510,207 inpatient hospital stays in 2017, and therefore, an estimated 13 percent of these stays were at psychiatric hospitals.

Using May 2019 BLS data, we have obtained estimates of the national average hourly wage for Nurse Practitioners (29-1171), Physician Assistants (29-1071), Family Medicine Physicians (29-1215), General Internal Medicine Physicians (29-1216), and Psychiatrists (29-1223) in Psychiatric and Substance Abuse Hospitals (NAICS 622200). Using BLS employment numbers, we calculated a weighted average hourly wage for physicians/psychiatrists and for non-physician practitioners (NPs and PAs). We have adjusted these rates by adding 100 percent to the hourly wage to account for overhead costs and fringe benefit costs.

We estimate that this change in behavior will result in an annual savings of $176.8 million (4,746,327 psychiatric hospital stays × 2 progress notes per stay × 0.5 hours of physician/psychiatrist time × $112.88 per hourly wage difference between physicians/psychiatrists ($218.22) and non-physician practitioners ($105.34) × 33 percent of physician time spent writing progress notes covered by non-physician practitioners, or APPs), as shown in the Accounting Statement, Table 8, below. We note that there is some ambiguity in attributing these savings across the several rulemakings—Regulatory Provisions to Promote Program Efficiency, Transparency, and Burden Reduction (CoPs), (83 FR 47686); the April 6, 2020 IFC; and this final rule—that all address the progress note recording requirement.

The statute does not specify an update strategy for the IPF PPS and is broadly written to give the Secretary discretion in establishing an update methodology. Therefore, we are updating the IPF PPS using the methodology published in the November 2004 IPF PPS final rule; applying the 2016-based IPF PPS market basket update for FY 2021 of 2.2 percent, reduced by the statutorily required multifactor productivity adjustment of 0 percentage point along with the wage index budget neutrality adjustment to update the payment rates; finalizing a FY 2021 IPF wage index which is fully based upon the OMB CBSA designations from Bulletin 18-04 and which uses the FY 2021 pre-floor, pre-reclassified IPPS hospital wage index as its basis.

As required by OMB Circular A-4 (available at www.whitehouse.gov/sites/whitehouse.gov/files/omb/circulars/A4/a-4.pdf ), in Table 8, we have prepared an accounting statement showing the classification of the expenditures associated with the updates to the IPF wage index and payment rates in this final rule. Table 8 provides our best estimates of the cost savings outlined in section VII.C.6 above, with high and low estimates generated at 25 percent above and below the primary estimate of $176.8 million as calculated in section VII.C.6. Table 8 also includes our best estimate of the increase in Medicare payments under the IPF PPS as a result of the changes presented in this final rule and based on the data for 1,550 IPFs in our database.

The RFA requires agencies to analyze options for regulatory relief of small entities if a rule has a significant impact on a substantial number of small entities. For purposes of the RFA, small entities include small businesses, nonprofit organizations, and small governmental jurisdictions. Most IPFs and most other providers and suppliers are small entities, either by nonprofit status or by having revenues of $8 million to $41.5 million or less in any 1 year. Individuals and states are not included in the definition of a small entity.

Because we lack data on individual hospital receipts, we cannot determine the number of small proprietary IPFs or the proportion of IPFs' revenue derived from Medicare payments. Therefore, we assume that all IPFs are considered small entities.

The Department of Health and Human Services generally uses a revenue impact of 3 to 5 percent as a significance threshold under the RFA. As shown in Table 7, we estimate that the overall revenue impact of this final rule on all IPFs is to increase estimated Medicare payments by approximately 2.3 percent. As a result, since the estimated impact of this final rule is a net increase in revenue across almost all categories of IPFs, the Secretary has determined that this final rule will have a positive revenue impact on a substantial number of small entities.

In addition, section 1102(b) of the Act requires us to prepare a regulatory impact analysis if a rule may have a significant impact on the operations of a substantial number of small rural hospitals. This analysis must conform to the provisions of section 604 of the RFA. For purposes of section 1102(b) of the Act, we define a small rural hospital as a hospital that is located outside of a metropolitan statistical area and has fewer than 100 beds. As discussed in section V.C.1 of this final rule, the rates and policies set forth in this final rule will not have an adverse impact on the rural hospitals based on the data of the 248 rural excluded psychiatric units and 61 rural psychiatric hospitals in our database of 1,550 IPFs for which data were available. Therefore, the Secretary has determined that this final rule will not have a significant impact on the operations of a substantial number of small rural hospitals.

Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) also requires that agencies assess anticipated costs and benefits before issuing any rule whose mandates require spending in any 1 year of $100 million in 1995 dollars, updated annually for inflation. In 2020, that threshold is approximately $156 million. This final rule does not mandate any requirements for state, local, or tribal governments, or for the private sector. This final rule would not impose a mandate that will result in the expenditure by state, local, and Tribal Governments, in the aggregate, or by the private sector, of more than $156 million in any one year.

Executive Order 13132 establishes certain requirements that an agency must meet when it promulgates a proposed rule that imposes substantial direct requirement costs on state and local governments, preempts state law, or otherwise has Federalism implications. This final rule does not impose substantial direct costs on state or local governments or preempt state law.

Executive Order 13771, titled Reducing Regulation and Controlling Regulatory Costs, was issued on January 30, 2017 and requires that the costs associated with significant new regulations “shall, to the extent permitted by law, be offset by the elimination of existing costs associated with at least two prior regulations.” Though this final rule may contribute to the generation of $132.45 million in annualized cost savings (that is, $176.8 million as calculated in section VII.C.6 above, discounted at 7 percent relative to year 2016), this cost savings was accounted for in Regulatory Provisions to Promote Program Efficiency, Transparency, and Burden Reduction (CoPs) (83 FR 47686) and was associated with the special requirements for psychiatric hospitals in the April 6, 2020 IFC. As a result, it has been determined that this final rule is an action that primarily results in transfers and does not impose more than de minimis costs as described above and thus is not a regulatory or deregulatory action for the purposes of Executive Order 13771.

For the reasons set forth in the preamble, this rule is adopted as final and the amendment to § 482.61 (amendatory instruction number 48) in the interim final rule published on April 6, 2020 (85 FR 19292) is adopted as final without change.

Hospice care is a comprehensive, holistic approach to treatment that recognizes the impending death of a terminally ill individual and warrants a change in the focus from curative care to palliative care for relief of pain and for symptom management. Medicare regulations define “palliative care” as patient and family-centered care that optimizes quality of life by anticipating, preventing, and treating suffering. Palliative care throughout the continuum of illness involves addressing physical, intellectual, emotional, social, and spiritual needs and to facilitate patient autonomy, access to information, and choice (42 CFR 418.3). Palliative care is at the core of hospice philosophy and care practices, and is a critical component of the Medicare hospice benefit.

The goal of hospice care is to help terminally ill individuals continue life with minimal disruption to normal activities while remaining primarily in the home environment. A hospice uses an interdisciplinary approach to deliver medical, nursing, social, psychological, emotional, and spiritual services through a collaboration of professionals and other caregivers, with the goal of making the beneficiary as physically and emotionally comfortable as possible. Hospice is compassionate beneficiary and family/caregiver-centered care for those who are terminally ill.

As referenced in our regulations at § 418.22(b)(1), to be eligible for Medicare hospice services, the patient's attending physician (if any) and the hospice medical director must certify that the individual is “terminally ill,” as defined in section 1861(dd)(3)(A) of the Act and our regulations at § 418.3; that is, the individual's prognosis is for a life expectancy of 6 months or less if the terminal illness runs its normal course. The regulations at § 418.22(b)(3) require that the certification and recertification forms include a brief narrative explanation of the clinical findings that support a life expectancy of 6 months or less.

Under the Medicare hospice benefit, the election of hospice care is a patient choice and once a terminally ill patient elects to receive hospice care, a hospice interdisciplinary group is essential in the seamless provision of services. These hospice services are provided primarily in the individual's home. The hospice interdisciplinary group works with the beneficiary, family, and caregivers to develop a coordinated, comprehensive care plan; reduce unnecessary diagnostics or ineffective therapies; and maintain ongoing communication with individuals and their families about changes in their condition. The beneficiary's care plan will shift over time to meet the changing needs of the individual, family, and caregiver(s) as the individual approaches the end of life.

If, in the judgment of the hospice interdisciplinary team, which includes the hospice physician, the patient's symptoms cannot be effectively managed at home, then the patient is eligible for general inpatient care (GIP), a more medically intense level of care. GIP must be provided in a Medicare-certified hospice freestanding facility, skilled nursing facility, or hospital. GIP is provided to ensure that any new or worsening symptoms are intensively addressed so that the beneficiary can return to his or her home and continue to receive routine home care. Limited, short-term, intermittent, inpatient respite care (IRC) is also available because of the absence or need for relief of the family or other caregivers. Additionally, an individual can receive continuous home care (CHC) during a period of crisis in which an individual requires continuous care to achieve palliation or management of acute medical symptoms so that the individual can remain at home. Continuous home care may be covered for as much as 24 hours a day, and these periods must be predominantly nursing care, in accordance with our regulations at § 418.204. A minimum of 8 hours of nursing care, or nursing and aide care, must be furnished on a particular day to qualify for the continuous home care rate (§ 418.302(e)(4)).

Hospices must comply with applicable civil rights laws, 1 including section 504 of the Rehabilitation Act of 1973 and the Americans with Disabilities Act, under which covered entities must take appropriate steps to ensure effective communication with patients and patient care representatives with disabilities, including the provisions of auxiliary aids and services. Additionally, they must take reasonable steps to ensure meaningful access for individuals with limited English proficiency, consistent with Title VI of the Civil Rights Act of 1964. Further information about these requirements may be found at: http://www.hhs.gov/ocr/civilrights.

Coverage under the Medicare Hospice benefit requires that hospice services must be reasonable and necessary for the palliation and management of the terminal illness and related conditions. Section 1861(dd)(1) of the Act establishes the services that are to be rendered by a Medicare-certified hospice program. These covered services include: nursing care; physical therapy; occupational therapy; speech-language pathology therapy; medical social services; home health aide services (here called hospice aide services); physician services; homemaker services; medical supplies (including drugs and biologicals); medical appliances; counseling services (including dietary counseling); short-term inpatient care in a hospital, nursing facility, or hospice inpatient facility (including both respite care and procedures necessary for pain control and acute or chronic symptom management); continuous home care during periods of crisis, and only as necessary to maintain the terminally ill individual at home; and any other item or service which is specified in the plan of care and for which payment may otherwise be made under Medicare, in accordance with Title XVIII of the Act.

Section 1814(a)(7)(B) of the Act requires that a written plan for providing hospice care to a beneficiary who is a hospice patient be established before care is provided by, or under arrangements made by, that hospice program; and that the written plan be periodically reviewed by the beneficiary's attending physician (if any), the hospice medical director, and an interdisciplinary group (described in section 1861(dd)(2)(B) of the Act). The services offered under the Medicare hospice benefit must be available to beneficiaries as needed, 24 hours a day, 7 days a week (section 1861(dd)(2)(A)(i) of the Act).

Upon the implementation of the hospice benefit, the Congress also expected hospices to continue to use volunteer services, though these services are not reimbursed by Medicare (see section 1861(dd)(2)(E) of the Act). As stated in the FY 1983 Hospice Wage Index and Rate Update proposed rule (48 FR 38149), the hospice interdisciplinary group should comprise paid hospice employees as well as hospice volunteers, and that “the hospice benefit and the resulting Medicare reimbursement is not intended to diminish the voluntary spirit of hospices.” This expectation supports the hospice philosophy of community-based, holistic, comprehensive, and compassionate end of life care.

Sections 1812(d), 1813(a)(4), 1814(a)(7), 1814(i), and 1861(dd) of the Act, and our regulations in 42 CFR part 418, establish eligibility requirements, payment standards and procedures; define covered services; and delineate the conditions a hospice must meet to be approved for participation in the Medicare program. Part 418, subpart G, provides for a per diem payment in one of four prospectively-determined rate categories of hospice care (routine home care (RHC), CHC, IRC, and GIP), based on each day a qualified Medicare beneficiary is under hospice care (once the individual has elected). This per diem payment is to include all of the hospice services and items needed to manage the beneficiary's care, as required by section 1861(dd)(1) of the Act.

While payment is made to hospices is to cover all items, services, and drugs for the palliation and management of the terminal illness and related conditions, federal funds cannot be used for prohibited activities, even in the context of a per diem payment. Recent news reports  2 have brought to light the potential role hospices could play in medical aid in dying (MAID) where such practices have been legalized in certain states. We wish to remind hospices that The Assisted Suicide Funding Restriction Act of 1997 (ASFRA) (Pub. L. 105-12) prohibits the use of federal funds to provide or pay for any health care item or service or health benefit coverage for the purpose of causing, or assisting to cause, the death of any individual including mercy killing, euthanasia, or assisted suicide. However, pursuant to section 3(b)(4) of ASFRA, the prohibition does not apply to the provision of an item or service for the purpose of alleviating pain or discomfort, even if such use may increase the risk of death, so long as the item or service is not furnished for the specific purpose of causing or accelerating death.

Section 6005(a) of the Omnibus Budget Reconciliation Act of 1989 (Pub. L. 101-239) amended section 1814(i)(1)(C) of the Act and provided changes in the methodology concerning updating the daily payment rates based on the hospital market basket percentage increase applied to the payment rates in effect during the previous federal FY.

Section 4441(a) of the Balanced Budget Act of 1997 (BBA) (Pub. L. 105-33) established that updates to the hospice payment rates beginning FY 2002 and subsequent FYs be the hospital market basket percentage increase for the FY.

The FY 1998 Hospice Wage Index final rule (62 FR 42860), implemented a new methodology for calculating the hospice wage index and instituted an annual Budget Neutrality Adjustment Factor (BNAF) so aggregate Medicare payments to hospices would remain budget neutral to payments calculated using the 1983 wage index.

The FY 2010 Hospice Wage Index and Rate Update final rule (74 FR 39384) instituted an incremental 7-year phase-out of the BNAF beginning in FY 2010 through FY 2016. The BNAF phase-out reduced the amount of the BNAF increase applied to the hospice wage index value, but was not a reduction in the hospice wage index value itself or in the hospice payment rates.

Starting with FY 2013 (and in subsequent FYs), the market basket percentage update under the hospice payment system referenced in sections 1814(i)(1)(C)(ii)(VII) and 1814(i)(1)(C)(iii) of the Act is subject to annual reductions related to changes in economy-wide productivity, as specified in section 1814(i)(1)(C)(iv) of the Act.

In addition, sections 1814(i)(5)(A) through (C) of the Act, as added by section 3132(a) of the Patient Protection and Affordable Care Act (PPACA) (Pub. L. 111-148), required hospices to begin submitting quality data, based on measures specified by the Secretary of the Department of Health and Human Services (the Secretary), for FY 2014 and subsequent FYs. Beginning in FY 2014, hospices that fail to report quality data have their market basket percentage increase reduced by 2 percentage points.

Section 1814(a)(7)(D)(i) of the Act, as added by section 3132(b)(2) of the PPACA, required, effective January 1, 2011, that a hospice physician or nurse practitioner have a face-to-face encounter with the beneficiary to determine continued eligibility of the beneficiary's hospice care prior to the 180th day recertification and each subsequent recertification, and to attest that such visit took place. When implementing this provision, we finalized in the FY 2011 Hospice Wage Index final rule (75 FR 70435) that the 180th day recertification and subsequent recertifications would correspond to the beneficiary's third or subsequent benefit periods. Further, section 1814(i)(6) of the Act, as added by section 3132(a)(1)(B) of the PPACA, authorized the Secretary to collect additional data and information determined appropriate to revise payments for hospice care and other purposes. The types of data and information suggested in the PPACA could capture accurate resource utilization, which could be collected on claims, cost reports, and possibly other mechanisms, as the Secretary determined to be appropriate. The data collected could be used to revise the methodology for determining the payment rates for RHC and other services included in hospice care, no earlier than October 1, 2013, as described in section 1814(i)(6)(D) of the Act. In addition, we were required to consult with hospice programs and the Medicare Payment Advisory Commission (MedPAC) regarding additional data collection and payment revision options.

In the FY 2012 Hospice Wage Index final rule (76 FR 47308 through 47314) we announced that beginning in 2012, the hospice aggregate cap would be calculated using the patient-by-patient proportional methodology, within certain limits. We allowed existing hospices the option of having their cap calculated through the original streamlined methodology, also within certain limits. As of FY 2012, new hospices have their cap determinations calculated using the patient-by-patient proportional methodology. If a hospice's total Medicare payments for the cap year exceed the hospice aggregate cap, then the hospice must repay the excess back to Medicare.

The Improving Medicare Post-Acute Care Transformation Act of 2014 (IMPACT Act) (Pub. L. 113-185) became law on October 6, 2014. Section 3(a) of the IMPACT Act mandated that all Medicare certified hospices be surveyed every 3 years beginning April 6, 2015 and ending September 30, 2025. In addition, section 3(c) of the IMPACT Act requires medical review of hospice cases involving beneficiaries receiving more than 180 days of care in select hospices that show a preponderance of such patients; section 3(d) of the IMPACT Act contains a new provision mandating that the cap amount for accounting years that end after September 30, 2016, and before October 1, 2025 be updated by the hospice payment update rather than using the consumer price index for urban consumers (CPI-U) for medical care expenditures.

The FY 2015 Hospice Wage Index and Rate Update final rule (79 FR 50452) finalized a requirement that the Notice of Election (NOE) be filed within 5 calendar days after the effective date of hospice election. If the NOE is filed beyond this 5-day period, hospice providers are liable for the services furnished during the days from the effective date of hospice election to the date of NOE filing (79 FR 50474). Similar to the NOE, the claims processing system must be notified of a beneficiary's discharge from hospice or hospice benefit revocation within 5 calendar days after the effective date of the discharge/revocation (unless the hospice has already filed a final claim) through the submission of a final claim or a Notice of Termination or Revocation (NOTR).

The FY 2015 Hospice Wage Index and Rate Update final rule (79 FR 50479) also finalized a requirement that the election form include the beneficiary's choice of attending physician and that the beneficiary provide the hospice with a signed document when he or she chooses to change attending physicians.

In addition, the FY 2015 Hospice Wage Index and Rate Update final rule (79 FR 50496) provided background, eligibility criteria, survey respondents, and implementation of the Hospice Experience of Care Survey for informal caregivers. Hospice providers were required to begin using this survey for hospice patients as of 2015.

Finally, the FY 2015 Hospice Wage Index and Rate Update final rule required providers to complete their aggregate cap determination not sooner than 3 months after the end of the cap year, and not later than 5 months after, and remit any overpayments. Those hospices that fail to submit their aggregate cap determinations on a timely basis will have their payments suspended until the determination is completed and received by the Medicare contractor (79 FR 50503).

In the FY 2016 Hospice Wage Index and Rate Update final rule (80 FR 47172), we created two different payment rates for RHC that resulted in a higher base payment rate for the first 60 days of hospice care and a reduced base payment rate for subsequent days of hospice care. We also created a service intensity add-on payment payable for services during the last 7 days of the beneficiary's life, equal to the CHC hourly payment rate multiplied by the amount of direct patient care provided by a registered nurse (RN) or social worker that occurs during the last 7 days (80 FR 47177).

In addition to the hospice payment reform changes discussed, the FY 2016 Hospice Wage Index and Rate Update final rule (80 FR 47185) implemented changes mandated by the IMPACT Act, in which the cap amount for accounting years that end after September 30, 2016 and before October 1, 2025 would be updated by the hospice payment update percentage rather than using the CPI-U. This was applied to the 2016 cap year, starting on November 1, 2015 and ending on October 31, 2016. In addition, we finalized a provision to align the cap accounting year for both the inpatient cap and the hospice aggregate cap with the fiscal year for FY 2017 and thereafter. Finally, the FY 2016 Hospice Wage Index and Rate Update final rule (80 FR 47144) clarified that hospices would have to report all diagnoses of the beneficiary on the hospice claim as a part of the ongoing data collection efforts for possible future hospice payment refinements.

In the FY 2017 Hospice Wage Index and Rate Update final rule (81 FR 52160), we finalized several new policies and requirements related to the Hospice Quality Reporting Program (HQRP). First, we codified our policy that if the National Quality Forum (NQF) made non-substantive changes to specifications for HQRP measures as part of the NQF's re-endorsement process, we would continue to utilize the measure in its new endorsed status, without going through new notice-and-comment rulemaking. We would continue to use rulemaking to adopt substantive updates made by the NQF to the endorsed measures we have adopted for the HQRP; determinations about what constitutes a substantive versus non-substantive change would be made on a measure-by-measure basis. Second, we finalized two new quality measures for the HQRP for the FY 2019 payment determination and subsequent years: Hospice Visits when Death is Imminent Measure Pair and Hospice and Palliative Care Composite Process Measure-Comprehensive Assessment at Admission (81 FR 52173). The data collection mechanism for both of these measures is the HIS, and the measures were effective April 1, 2017. Regarding the CAHPS® Hospice Survey, we finalized a policy that hospices that receive their CMS Certification Number (CCN) after January 1, 2017 for the FY 2019 Annual Payment Update (APU) and January 1, 2018 for the FY 2020 APU will be exempted from the Hospice Consumer Assessment of Healthcare Providers and Systems (CAHPS®) requirements due to newness (81 FR 52182). The exemption is determined by CMS and is for 1 year only.

In the FY 2020 Hospice Wage Index and Rate Update final rule (84 FR 38487), we rebased the payment rates for CHC and GIP and set those rates equal to their average estimated FY 2019 costs per day. We also rebased IRC per diem rates equal to the estimated FY 2019 average costs per day, with a reduction of 5 percent to the FY 2019 average cost per day to account for coinsurance. We finalized the FY 2020 proposal to reduce the RHC payment rates by 2.72 percent to offset the increases to CHC, IRC, and GIP payment rates to implement this policy in a budget-neutral manner in accordance with section 1814(i)(6) of the Act (84 FR 38496). We also finalized a policy to use the current year's pre-floor, pre-reclassified hospital inpatient wage index as the wage adjustment to the labor portion of the hospice rates. Finally, in the FY 2020 Hospice Wage Index and Rate Update final rule (84 FR 38505) we finalized modifications to the hospice election statement content requirements at § 418.24(b) by requiring hospices, upon request, to furnish an election statement addendum effective beginning in FY 2021. The addendum must list those items, services, and drugs the hospice has determined to be unrelated to the terminal illness and related conditions, increasing coverage transparency for beneficiaries under a hospice election.

In general, the Office of Management and Budget (OMB) issues major revisions to statistical areas every 10 years, based on the results of the decennial census. However, OMB occasionally issues minor updates and revisions to statistical areas in the years between the decennial censuses. On 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 made revisions to the delineations of Metropolitan Statistical Areas (MSAs), Micropolitan Statistical Areas, and Combined Statistical Areas, and guidance on uses of the delineation in these areas. A copy of the September 14, 2018 bulletin is available online at: https://www.whitehouse.gov/wp-content/uploads/2018/09/Bulletin-18-04.pdf. This bulletin states it “provides the delineations of all MSAs, 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 on June 28, 2010, in the Federal Register (75 FR 37246 through 37252), and Census Bureau data.” On March 6, 2020 OMB issued Bulletin No. 20-01 (available at: https://www.whitehouse.gov/wp-content/uploads/2020/03/Bulletin-20-01.pdf ), and, as discussed below, was not issued in time for development of the FY 2021 Hospice Wage Index and Rate Update proposed rule.

While the revisions OMB published on September 14, 2018, are not as sweeping as the changes made when we adopted the Core-Based Statistical Area (CBSA) geographic designations for FY 2006, the September 14, 2018 bulletin does contain a number of significant changes. For example, there are new CBSAs, urban counties that have become rural, rural counties that have become urban, and existing CBSAs that have been split apart. We believe it is important for the hospice wage index to use the latest OMB delineations available in order to maintain an accurate and up-to-date payment system that reflects the reality of population shifts and labor market conditions. Using the most current OMB delineations creates a more accurate representation of geographic variation in wage levels. In the FY 2021 Hospice Wage Index and Payment Rate Update proposed rule (85 FR 20953), we proposed to implement the new OMB delineations as described in the September 14, 2018 OMB Bulletin No. 18-04 for the hospice wage index effective beginning in FY 2021. As noted above, the March 6, 2020 OMB Bulletin No. 20-01 was not issued in time for development of the proposed rule. As we stated in the proposed rule, we do not believe that the minor updates included in OMB Bulletin No. 20-01 would impact our proposed updates to the CBSA-based labor market area delineations. However, if needed, we would include any updates from this bulletin in future rulemaking.

As discussed in the FY 2006 Hospice Wage Index and Payment Rate Update proposed rule (70 FR 22397) and final rule (70 FR 45132), CMS considered how to use the Micropolitan Statistical Area definitions in the calculation of the wage index. 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 as Micropolitan Areas. After extensive impact analysis, consistent with the treatment of these areas under the IPPS as discussed in the FY 2005 IPPS final rule (69 FR 49029 through 49032), CMS determined the best course of action would be to treat Micropolitan Areas as “rural” and include them in the calculation of each state's Hospice rural wage index (70 FR 22397 and 70 FR 45132). Thus, the hospice statewide rural wage index is determined using IPPS hospital data from hospitals located in non-MSAs.

Based upon the 2010 Decennial Census data, a number of urban counties have switched status and have joined or became Micropolitan Areas, and some counties that once were part of a Micropolitan Area, have become urban. Overall, there are fewer Micropolitan Areas (542) under the new OMB delineations based on the 2010 Census than existed under the latest data from the 2000 Census (581). We believe that the best course of action would be to continue the policy established in the FY 2006 Hospice Wage Index and Payment Rate Update final rule and include Micropolitan Areas in each state's rural wage index. These areas continue to be defined as having relatively small urban cores (populations of 10,000 to 49,999). Therefore, in conjunction with our proposal to implement the new OMB labor market delineations beginning in FY 2021 and consistent with the treatment of Micropolitan Areas under the IPPS, we proposed to continue to treat Micropolitan Areas as “rural” and to include Micropolitan Areas in the calculation of each state's rural wage index.

Under the new OMB delineations (based upon the 2010 decennial Census data), a total of 34 counties (and county equivalents) that are currently considered urban would be considered rural beginning in FY 2021. Table 1 lists the 34 counties that would change to rural status with the implementation of the new OMB delineations.

Under the new OMB delineations (based upon the 2010 decennial Census data), a total of 47 counties (and county equivalents) that are currently designated rural would be considered urban beginning in FY 2021. Table 2 lists the 47 counties that would change to urban status.

In addition to rural counties becoming urban and urban counties becoming rural, several urban counties would shift from one urban CBSA to another urban CBSA under the new OMB delineations. In other cases, applying the new OMB delineations would involve a change only in CBSA name 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. Table 3 lists CBSAs that would change the name and/or CBSA number only.

Upon adoption of the new OMB delineations, counties would shift between existing and new CBSAs, changing the constituent makeup of the CBSAs. In another type of change, some CBSAs have counties that would split off to become part of or to form entirely new labor market areas. Finally, in some cases, a CBSA would lose counties to another existing CBSA. Table 4 lists the urban counties that would move from one urban CBSA to a newly or modified CBSA under the new OMB delineations.

As discussed previously, overall, we believe that our proposal to adopt the revised OMB delineations for FY 2021 would result in hospice wage index values being more representative of the actual costs of labor in a given area. However, we also recognize that some hospices would experience decreases in their area wage index values as a result of our proposal. We also realize that many hospices would have higher area wage index values under our proposal.

To mitigate the potential impacts of adopting new OMB delineations on hospices, 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 hospices following the adoption of the new CBSA delineations based on the 2010 decennial census data in the FY 2016 Hospice Wage Index and Payment Rate Update final rule (80 FR 47142). Specifically, we applied a blended wage index for 1 year (FY 2016) for all geographic areas that would consist of a 50/50 blend of the wage index values using OMB's old area delineations and the wage index values using OMB's new area delineations. That is, for each county, a blended wage index was calculated equal to 50 percent of the FY 2016 wage index using the old labor market area delineation and 50 percent of the FY 2016 wage index using the new labor market area delineation, which resulted in an average of the two values. While we believed that using the new OMB delineations would 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 hospice payments, in particular for hospices that would be negatively impacted by the proposed adoption of the updates to the OMB delineations. Therefore, we also proposed a transition policy to help mitigate any significant negative impacts that hospices may experience due to our proposal to adopt the revised OMB delineations. For FY 2021 as a transition, we proposed to apply a 5 percent cap on any decrease in a geographic area's wage index value from the wage index value from the prior FY. 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 a geographic area'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)). We believe a 5 percent cap on the overall decrease in a geographic area's wage index value would be appropriate for FY 2021, as it provides predictability in payment levels from FY 2020 to the upcoming FY 2021 and additional transparency because it is administratively simpler than our prior 1-year 50/50 blended wage index approach. We believe 5 percent is a reasonable level for the cap because it would effectively mitigate any significant decreases in a geographic area's wage index value for FY 2021. Because we believe that using the new OMB delineations would create a more accurate payment adjustment for differences in area wage levels we proposed to include a cap on the overall decrease in a geographic area's wage index value.

Overall, the impact between the FY 2021 wage index using the old OMB delineations and the proposed FY 2021 wage index using the new OMB delineations would be 0.0 percent due to the wage index standardization factor, which ensures that wage index updates and revisions are implemented in a budget-neutral manner. We solicited comments on this proposed transition methodology.

We received approximately 12 comments on the FY 2021 hospice wage index proposals from various stakeholders including hospices, national industry associations and MedPAC. A summary of these comments and our responses to those comments appear below:

Comment: Nearly all commenters stated that they support the adoption of the revised OMB delineations from the September 14, 2018 Bulletin No. 18-04 and the proposed transition methodology that would apply a 5 percent cap on decreases to a geographic area's wage index value relative to the wage index value from the prior fiscal year.

Response: We appreciate the commenters' support of the adoption of the new OMB delineations and a 5 percent cap on wage index decreases for FY 2021 as an appropriate transition policy.

Comment: A few commenters stated that the adoption of the New Brunswick-Lakewood, NJ CBSA would result in a reduction in reimbursement for the four New Jersey counties that would make up the new CBSA. One commenter recommended that CMS delay finalizing the proposal to implement the new OMB delineations. While another commenter suggested that the transition policy is critical to offset economic losses for hospices like those in the impacted New Jersey counties throughout the country.

Response: We appreciate the concerns sent in by the commenters regarding the impact of implementing the New Brunswick-Lakewood, NJ CBSA designation on their specific counties. While, we understand the commenters' concern regarding the potential financial impact, we believe that implementing the revised OMB delineations will create more accurate representations of labor market areas nationally and result in hospice wage index values being more representative of the actual costs of labor in a given area. Although this comment only addressed the negative impact on the commenter's geographic area, we believe it is important to note that there are many geographic locations and hospice providers that will experience positive impacts upon implementation of the revised CBSA designations. We believe that the OMB delineations for Metropolitan and Micropolitan Statistical Areas are appropriate for use in accounting for wage area differences and that the values computed under the revised delineations will result in more appropriate payments to providers by more accurately accounting for and reflecting the differences in area wage levels.

We recognize that there are areas which will experience a decrease in their wage index. As such, it is our longstanding policy to provide temporary adjustments to mitigate negative impacts from the adoption of new policies or procedures. In the FY 2021 Hospice Wage Index and Payment Rate Update proposed rule, we proposed a transition in order to mitigate the resulting short-term instability and negative impacts on certain providers and to provide time for providers to adjust to their new labor market delineations. We continue to believe that the 1-year 5 percent cap transitional policy provides an adequate safeguard against any significant payment reductions, allows for sufficient time to make operational changes for future fiscal years, and provides a reasonable balance between mitigating some short-term instability in hospice payments and improving the accuracy of the payment adjustment for differences in area wage levels. Therefore, we believe that it is appropriate to implement the new OMB delineations without delay.

Comment: A few commenters including MedPAC suggested alternatives to the 5 percent cap transition policy. MedPAC suggested that the 5 percent cap limit should apply to both increases and decreases in the wage index so that no provider would have its wage index value increase or decrease by more than 5 percent for FY 2021. One commenter suggested that wage index decreases should be capped at 3 percent instead of 5 percent. Finally, several commenters recommended that CMS consider implementing a 5 percent cap, similar to that which we proposed for FY 2021, for years beyond the implementation of the revised OMB delineations.

Response: We appreciate MedPAC's suggestion that the cap on wage index movements of more than 5 percent should also be applied to increases in the wage index. However, as we discussed in the proposed rule, the purpose of the proposed transition policy is to help mitigate the significant negative impacts of certain wage index changes. Additionally, we believe that the 5 percent cap on wage index decreases is an adequate safeguard against any significant payment reductions and do not believe that capping wage index decreases at 3 percent instead of 5 percent is appropriate. We believe that 5 percent is a reasonable level for the cap rather than 3 percent because it would more effectively mitigate any significant decreases in a hospice's wage index for FY 2021, while still balancing the importance of ensuring that area wage index values accurately reflect relative differences in area wage levels. Furthermore, a 5 percent cap on wage index decreases in FY 2021 provides a degree of predictability in payment changes for providers and allows providers time to adjust to any significant decreases they may face in FY 2022, after the transition period has ended. Finally, with regards to the comments recommending that CMS consider implementing this type of transition in future years, we believe that this would be counter to the purpose of the wage index, which is used to adjust payments to account for local differences in area wage levels. While we believe that a transition is necessary to help mitigate the negative impact from the revised OMB delineations in the first year of implementation, this transition must be balanced against the importance of ensuring accurate payments.

Final Decision: We are finalizing our proposal to adopt the revised OMB delineations from the September 14, 2018 OMB Bulletin 18-04 and apply a 1-year 5 percent cap on wage index decreases as proposed, meaning the counties impacted will receive a 5 percent cap on any decrease in a geographic area's wage index value from the wage index value from the prior fiscal year for FY 2021 effective October 1, 2020.

The final wage index applicable to FY 2021 can be found on our website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/Hospice. The final hospice wage index for FY 2021 is effective October 1, 2020 through September 30, 2021.

The wage index file also provides a crosswalk between the FY 2021 wage index using the current OMB delineations and the FY 2021 wage index using the revised OMB delineations that will be in effect in FY 2021. This file shows each state and county and its corresponding wage index along with the previous CBSA number, the new CBSA number or alternate identification number, and the new CBSA name.

The hospice wage index is used to adjust payment rates for hospice agencies under the Medicare program to reflect local differences in area wage levels, based on the location where services are furnished. The hospice wage index utilizes the wage adjustment factors used by the Secretary for purposes of section 1886(d)(3)(E) of the Act for hospital wage adjustments. Our regulations at § 418.306(c) require each labor market to be established using the most current hospital wage data available, including any changes made by OMB to the MSAs.

In the FY 2020 Hospice Wage Index and Payment Rate Update final rule (84 FR 38484), we finalized the proposal to use the current FY's hospital wage index data to calculate the hospice wage index values. In the FY 2021 Hospice Wage Index and Payment Rate Update proposed rule (85 FR 20957) we discussed our proposal to use the FY 2021 pre-floor, pre-reclassified hospital wage index data to calculate the hospice wage index values with a 5 percent cap on wage index decreases. This means that the hospital wage data used for the hospice wage index would reflect the new OMB delineations but would not take into account any geographic reclassification of hospitals including those in accordance with section 1886(d)(8)(B) or 1886(d)(10) of the Act. The appropriate wage index value is applied to the labor portion of the hospice payment rate based on the geographic area in which the beneficiary resides when receiving RHC or CHC. The appropriate wage index value is applied to the labor portion of the payment rate based on the geographic location of the facility for beneficiaries receiving GIP or IRC.

In the FY 2006 Hospice Wage Index and Payment Rate Update final rule (70 FR 45135), we adopted the policy that, for urban labor markets without a hospital from which hospital wage index data could be derived, all of the CBSAs within the state would be used to calculate a statewide urban average pre-floor, pre-reclassified hospital wage index value to use as a reasonable proxy for these areas. For FY 2021, the only CBSA without a hospital from which hospital wage data can be derived is 25980, Hinesville-Fort Stewart, Georgia. The FY 2021 adjusted wage index value for Hinesville-Fort Stewart, Georgia is 0.8527.

There exist some geographic areas where there were no hospitals, and thus, no hospital wage data on which to base the calculation of the hospice wage index. In the FY 2008 Hospice Wage Index and Payment Rate Update final rule (72 FR 50217 through 50218), we implemented a methodology to update the hospice wage index for rural areas without hospital wage data. In cases where there was a rural area without rural hospital wage data, we use the average pre-floor, pre-reclassified hospital wage index data from all contiguous CBSAs, to represent a reasonable proxy for the rural area. The term “contiguous” means sharing a border (72 FR 50217). Currently, the only rural area without a hospital from which hospital wage data could be derived is Puerto Rico. However, for rural Puerto Rico, we would not apply this methodology due to the distinct economic circumstances that exist there (for example, due to the close proximity to one another of almost all of Puerto Rico's various urban and non-urban areas, this methodology would produce a wage index for rural Puerto Rico that is higher than that in half of its urban areas); instead, we would continue to use the most recent wage index previously available for that area. For FY 2021, we will continue to use the most recent pre-floor, pre-reclassified hospital wage index value available for Puerto Rico, which is 0.4047, subsequently adjusted by the hospice floor.

As described in the August 8, 1997 Hospice Wage Index final rule (62 FR 42860), the pre-floor and pre-reclassified hospital wage index is used as the raw wage index for the hospice benefit. These raw wage index values are subject to application of the hospice floor to compute the hospice wage index used to determine payments to hospices. As discussed above the pre-floor, pre-reclassified hospital wage index values below 0.8 will be adjusted by a 15 percent increase subject to a maximum wage index value of 0.8. For example, if County A has a pre-floor, pre-reclassified hospital wage index value of 0.3994, we would multiply 0.3994 by 1.15, which equals 0.4593. Since 0.4593 is not greater than 0.8, then County A's hospice wage index would be 0.4593. In another example, if County B has a pre-floor, pre-reclassified hospital wage index value of 0.7440, we would multiply 0.7440 by 1.15 which equals 0.8556. Because 0.8556 is greater than 0.8, County B's hospice wage index would be 0.8.

The final hospice wage index applicable for FY 2021 (October 1, 2020 through September 30, 2021) is available on our website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/Hospice/Hospice-Wage-Index .

A summary of the general comments on the hospice wage index and our responses to those comments appear below:

Comment: One commenter expressed concern that hospices in Montgomery County, Maryland are at a long-term competitive disadvantage due to a Medicare hospice federal payment inequity involving CBSAs. This commenter suggested that since CMS began using CBSAs to determine payment, hospices in Montgomery County have received lower payments than hospices in adjacent counties due to Montgomery County being carved out of Washington DC. The commenter recommended two options to resolve this issue: allow hospices serving patients in MSAs that are large enough to be subdivided into metropolitan divisions to opt for the higher wage index valuation within the MSA's respective CBSAs or assigning the highest wage index valuation from among the MSA's metropolitan divisions for the purpose of hospice Medicare reimbursement.

Response: We thank the commenter for the recommendation. However, we continue to believe that the OMB's geographic area delineations represent a useful proxy for differentiating between labor markets and that the geographic area delineations are appropriate for use in determining Medicare hospice payments. The general concept of the CBSAs is that of an area containing a recognized population nucleus and adjacent communities that have a high degree of integration with that nucleus. The purpose of the standards is to provide nationally consistent definitions for collecting, tabulating, and publishing federal statistics for a set of geographic areas. CBSAs include adjacent counties that have a minimum of 25 percent commuting to the central counties of the area. This is an increase over the minimum commuting threshold for outlying counties applied in the previous definition of MSAs of 15 percent. Based on the OMB's current delineations, Montgomery County belongs in a separate CBSA from the areas defined in the Washington-Arlington-Alexandria, DCVA CBSA. Unlike inpatient prospective payment system (IPPS) hospitals, inpatient rehabilitation facilities (IRFs), and skilled nursing facilities (SNFs), where each provider uses a single CBSA, hospice agencies may be reimbursed based on more than one wage index. Payments are based upon the location of the beneficiary for routine and continuous home care or the location of the facility for respite and general inpatient care. Hospices in Montgomery County, Maryland may provide RHC and CHC to patients in the “Washington Arlington-Alexandria, DC-VA” CBSA and to patients in the “Baltimore-Columbia-Towson, Maryland” CBSA. We have used CBSAs for determining hospice payments since FY 2006. Additionally, other provider types, such as IPPS hospitals, home health agencies (HHAs), SNFs, IRFs, and the dialysis facilities all used CBSAs to define their labor market areas. We believe that using the most current OMB delineations provides a more accurate representation of geographic variation in wage levels and do not believe it would be appropriate to allow hospices to opt for or be assigned a higher CBSA designation.

Comment: Many commenters recommended more far-reaching revisions and reforms to the wage index methodology used under Medicare fee-for-service. MedPAC recommended that Congress repeal the existing hospital wage index and instead implement a market-level wage index for use across other prospective payment systems that would use wage data from all employers and industry-specific occupational weights, and adjust for geographic differences in the ratio of benefits to wages. Additionally, many commenters recommended that CMS develop and implement a wage index model that is consistent across all provider types, incorporates some means by which providers are protected against substantial payment reductions due to dramatic reductions in wage index values from one year to the next, allows hospices and other post-acute providers to utilize a reclassification board and guarantees that wage index values do not drop below the rural wage index value applicable in the state of operation. Finally, one commenter recommended that CMS implement a policy similar to that of the FY 2020 IPPS final rule which increased the wage index for hospitals with a wage index value below the 25th percentile in order to address the discrepancies between counties whose wage index falls below the statewide rural wage index.

Response: We appreciate the commenters' recommendations; however, these comments are outside the scope of the proposed rule. Any changes to the way we adjust hospice payments to account for geographic wage differences, beyond the wage index proposals discussed in the FY 2021 Hospice Wage Index and Rate Update proposed rule, would have to go through notice and comment rulemaking. While CMS and other stakeholders have explored potential alternatives to the current CBSA-based labor market system, no consensus has been achieved regarding how best to implement a replacement system. We believe that in the absence of hospice specific wage data, using the pre-floor, pre-reclassified hospital wage data is appropriate and reasonable for hospice payments.

Additionally, the regulations that govern hospice reimbursement do not provide a mechanism for allowing hospices to seek geographic reclassification or to utilize the rural floor provisions that exist for IPPS hospitals. The reclassification provision found in section 1886(d)(10) of the Act is specific to hospitals. Section 4410(a) of the Balanced Budget Act of 1997 (Pub. L. 105-33) provides that 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 rural floor provision is also specific to hospitals. Because the reclassification provision and the hospital rural floor applies only to hospitals, and not to hospices, we continue to believe the use of the pre-floor and pre-reclassified hospital wage index results in the most appropriate adjustment to the labor portion of the hospice payment rates. This position is longstanding and consistent with other Medicare payment systems (for example, SNF PPS, IRF PPS, and HH PPS). However, the hospice wage index does include the hospice floor which is applicable to all CBSAs, both rural and urban. Pre-floor, pre-reclassified hospital wage index values below 0.8 are adjusted by a 15 percent increase subject to a maximum wage index value of 0.8. Finally, with regards to the wage index changes detailed in the FY 2020 IPPS final rule, we would like to note that the hospice wage index is derived from hospital wage data. As such, any changes in the wage data of hospitals extend to the hospice setting, as hospital data is used to establish the wage index for hospices.

Final Decision: After considering the comments received in response to the proposed rule and for the reasons discussed previously, we are finalizing our proposal to use the FY 2021 pre-floor, pre-reclassified hospital wage index data as the basis for the FY 2021 hospice wage index. The wage index applicable for FY 2021 is available on our website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/Hospice/Hospice-Wage-Index. The hospice wage index for FY 2021 is effective October 1, 2020 through September 30, 2021.

Section 4441(a) of the Balanced Budget Act of 1997 (BBA) (Pub. L. 105-33) amended section 1814(i)(1)(C)(ii)(VI) of the Act to establish updates to hospice rates for FYs 1998 through 2002. Hospice rates were to be updated by a factor equal to the inpatient hospital market basket percentage increase set out under section 1886(b)(3)(B)(iii) of the Act, minus 1 percentage point. Payment rates for FYs since 2002 have been updated according to section 1814(i)(1)(C)(ii)(VII) of the Act, which states that the update to the payment rates for subsequent FYs must be the inpatient market basket percentage increase for that FY.

In the FY 2021 Hospice Wage Index and Payment Rate Update proposed rule (85 FR 20958), we proposed the market basket percentage increase of 3.0 percent for FY 2021 using the most current estimate of the inpatient hospital market basket (based on IHS Global Inc.'s fourth-quarter 2019 forecast with historical data through the third quarter 2019). We also stated if more recent data became available after the publication of the proposed rule and before the publication of the final rule (for example, more recent estimates of the inpatient hospital market basket update and/or multifactor productivity (MFP) adjustment), we would use such data to determine the hospice payment update percentage for FY 2021 in the final rule. For this final rule, based on IHS Global Inc.'s (IGIs) second-quarter 2020 forecast with historical data through the first quarter 2020 of the inpatient hospital market basket update, the market basket percentage increase for FY 2021 is 2.4 percent. We note that the fourth quarter 2019 forecast used for the proposed market basket update was developed prior to the economic impacts of the COVID-19 pandemic. This lower update (2.4 percent) for FY 2021, relative to the proposed rule (3.0 percent), is primarily driven by slower anticipated compensation growth for both health-related and other occupations as labor markets are expected to be significantly impacted during the recession that started in February 2020 and throughout the anticipated recovery.

Section 1814(i)(1)(C)(iv)(I), as added by section 3401(g) of the Act, requires, starting with FY 2013 (and in subsequent FYs), that the market basket percentage increase be annually reduced by changes in economy-wide productivity specified in section 1886(b)(3)(B)(xi)(II) of the Act. The statute defines the productivity adjustment to be equal to the 10-year moving average of changes in annual economy-wide private nonfarm business MFP.

In the FY 2021 Hospice Wage Index and Payment Rate Update proposed rule (85 FR 20958), we proposed a MFP adjustment of 0.4 percentage point based on IGIs fourth quarter 2019 forecast. Based on the more recent data available for this final rule, the current estimate of the MFP adjustment for FY 2021 is projected to be -0.1 percentage point. This MFP adjustment is based on the most recent macroeconomic outlook from IGI at the time of rulemaking (released June 2020) in order to reflect more current historical economic data. IGI produces monthly macroeconomic forecasts, which include projections of all of the economic series used to derive MFP. In contrast, IGI only produces forecasts of the more detailed price proxies used in the inpatient hospital market basket on a quarterly basis. Therefore, IGI's second quarter 2020 forecast is the most recent forecast of the inpatient hospital market basket update.

We note that it has typically been our practice to base the projection of the market basket price proxies and MFP in the final rule on the second quarter IGI forecast. For the FY 2021 Hospice Wage Index and Payment Rate Update final rule, we are using the IGI June macroeconomic forecast for MFP because it is a more recent forecast, and it is important to use more recent data during this period when economic trends, particularly employment and labor productivity, are notably uncertain because of the COVID-19 pandemic. Historically, the MFP adjustment based on the second quarter IGI forecast has been very similar to the MFP adjustment derived with IGI's June macroeconomic forecast. Substantial changes in the macroeconomic indicators in between monthly forecasts are atypical.

Given the unprecedented economic uncertainty as a result of the COVID-19 pandemic, the changes in the IGI macroeconomic series used to derive MFP between the second quarter 2020 IGI forecast and the IGI June 2020 macroeconomic forecast is significant. Therefore, we believe it is technically appropriate to use IGI's more recent June 2020 macroeconomic forecast to determine the MFP adjustment for the final rule as it reflects more current historical data. For comparison purposes, the 10-year moving average growth of MFP for FY 2021 is projected to be -0.1 percentage point based on IGI's June 2020 macroeconomic forecast compared to a FY 2021 projected 10-year moving average growth of MFP of 0.7 percentage point based on IGI's second quarter 2020 forecast. Mechanically subtracting the negative 10-year moving average growth of MFP from the market basket percentage increase using the data from the IGI June, 2020 macroeconomic forecast of the FY 2021 MFP adjustment would have resulted in a 0.1 percentage point increase in the FY 2021 hospice payment update percentage. However, under sections 1886(b)(3)(B)(xi)(I) and 1814(i)(1)(C)(v) of the Act, the Secretary is required to reduce (not increase) the hospice market basket percentage increase by changes in economy-wide productivity. Accordingly, we will be applying a 0.0 percentage point MFP adjustment to the market basket percentage increase. Therefore, the hospice payment update percentage for FY 2021 is 2.4 percent.

The labor portion of the hospice payment rates are as follows: For RHC, 68.71 percent; for CHC, 68.71 percent; for GIP, 64.01 percent; and for Respite Care, 54.13 percent. The non-labor portion is equal to 100 percent minus the labor portion for each level of care. Therefore, the non-labor portion of the payment rates are as follows: For RHC, 31.29 percent; for CHC, 31.29 percent; for GIP, 35.99 percent; and for Respite Care, 45.87 percent.

A summary of the comments we received regarding the payment update percentage and our responses to those comments appear below:

Comment: Nearly all commenters noted their support of the proposed hospice payment update percentage.

Response: We appreciate the comments in support of the hospice payment update percentage.

Comment: MedPAC recognizes that CMS is required by statute to update the hospice payments rates for FY 2021 (an increase of 2.4 percent as outlined in this final rule), however, they noted that in their March 2020 report to Congress, they recommended that Congress eliminate the payment update for FY 2021 (that is, hold the payment rates for FY 2021 at the FY 2020 levels).

Response: We appreciate the comment, however, we do not have the statutory authority to eliminate the annual payment updates to the hospice payment rates for FY 2021.

Final Decision: We are finalizing the 2.4 percent hospice payment update percentage for FY 2021. Based on IHS Global, Inc.'s updated forecast of the inpatient hospital market basket update and the MFP adjustment, the hospice payment update percentage for FY 2021 will be 2.4 percent for hospices that submit the required quality data and 0.4 percent (FY 2021 hospice payment update of 2.4 percent minus 2.0 percentage points) for hospices that do not submit the required data.

There are four payment categories that are distinguished by the location and intensity of the services provided. The base payments are adjusted for geographic differences in wages by multiplying the labor share, which varies by category, of each base rate by the applicable hospice wage index. A hospice is paid the RHC rate for each day the beneficiary is enrolled in hospice, unless the hospice provides CHC, IRC, or GIP. CHC is provided during a period of patient crisis to maintain the patient at home; IRC is short-term care to allow the usual caregiver to rest and be relieved from caregiving; and GIP is to treat symptoms that cannot be managed in another setting.

Additionally, in the FY 2016 Hospice Wage Index and Payment Rate Update final rule (80 FR 47172), we implemented two different RHC payment rates, one RHC rate for the first 60 days and a second RHC rate for days 61 and beyond. In that final rule we also implemented a SIA payment for RHC when direct patient care is provided by a RN or social worker during the last 7 days of the beneficiary's life. The SIA payment is equal to the CHC hourly rate multiplied by the hours of nursing or social work provided on the day of service (up to 4 hours), if certain criteria are met. In order to maintain budget neutrality in the first year of implementation, as required under section 1814(i)(6)(D)(ii) of the Act, the new RHC rates were adjusted by a service intensity add-on budget neutrality factor (SBNF). The SBNF is used to reduce the overall RHC rate in order to ensure that SIA payments are budget-neutral. At the beginning of every fiscal year, SIA utilization is compared to the prior year in order calculate a budget neutrality adjustment. For FY 2021, we calculated the SBNF using FY 2019 utilization data. For FY 2021, the SBNF that would apply to days 1 through 60 is calculated to be 1.0002 and the SBNF that would apply to days 61 and beyond is calculated to be 1.0001.

As discussed in the FY 2021 Hospice Wage Index and Payment Rate Update proposed rule (85 FR 20958), there have been very minor SBNF adjustments over the past several years suggesting that the utilization of the SIA from one year to the next remains relatively constant. Because the SBNF remains stable, we proposed to remove the factor to simplify the RHC payment rate updates.

In the FY 2017 Hospice Wage Index and Payment Rate Update final rule (81 FR 52156), we initiated a policy of applying a wage index standardization factor to hospice payments in order to eliminate the aggregate effect of annual variations in hospital wage data. In order to calculate the wage index standardization factor, we simulate total payments using the FY 2020 hospice wage index and FY 2020 payment rates and compare it to our simulation of total payments using the FY 2021 wage index with a 5 percent cap on wage index decreases and FY 2020 payment rates. By dividing payments for each level of care (RHC days 1 through 60, RHC days 61+, CHC, IRC, and GIP) using the FY 2020 wage index and payment rates by payments for each level of care using the FY 2021 wage index and FY 2020 payment rates, we obtain a wage index standardization factor for each level of care. The wage index standardization factors for each level of care are shown in the tables 5 and 6.

The FY 2021 RHC payment rates are shown in Table 5. The FY 2021 payment rates for CHC, IRC, and GIP are shown in Table 6.

Sections 1814(i)(5)(A) through (C) of the Act require that hospices submit quality data, based on measures to be specified by the Secretary. In the FY 2012 Hospice Wage Index and Payment Rate Update final rule (76 FR 47320 through 47324), we implemented a HQRP as required by section 3004 of the Affordable Care Act. Hospices were required to begin collecting quality data in October 2012, and submit that quality data in 2013. Section 1814(i)(5)(A)(i) of the Act requires that beginning with FY 2014 and each subsequent FY, the Secretary shall reduce the market basket update by 2 percentage points for any hospice that does not comply with the quality data submission requirements with respect to that FY. The FY 2021 payment rates for hospices that do not submit the required quality data would be updated by the FY 2021 hospice payment update percentage of 2.4 percent minus 2 percentage points. These rates are shown in Tables 7 and 8.

A summary of the comments we received regarding the payment rates and the elimination of the SBNF and our responses to those comments appear below:

Comment: Several commenters did not support CMS's proposal to sunset the SBNF and believes the SBNF recalibration should continue on an annual basis. They suggested that the SBNF serves an important purpose to retain budget neutrality going forward if visits in the last seven days of life increase. They stated that the SIA payments have served to align payment with costs of care and that the SIA payments help balance the cost of short-length-of stay patients for whom hospices receive very little reimbursement, but may provide many hours of intense care by professional staff. A few commenters stated that the FY 2020 payment rule's recalibration of the payment rates has resulted in a considerable increase in the hourly rate for CHC, and could have an impact on SIA utilization going forward; that is, the significant increase in the CHC rate may incentivize an increase in visits made during the last 7 days of life. On the other hand, several commenters were supportive of CMS' efforts to simplify Medicare payment calculations where warranted, and understands CMS' rationale for eliminating the SBNF. They stated that the removal of the SBNF from RHC payment updates would result in a more administratively simple application of the RHC payment rate updates. One commenter recommended that CMS wait to implement this change. Many commenters requested that CMS continue to monitor visits in the last 7 days of life to ensure that current trends do not change in light of the increased payment amount associated with the CHC rate.

Response: After considering the comments received in response to the proposed removal of the SBNF, we are not finalizing the removal of the SBNF for FY 2021. As noted by commenters, we rebased the CHC payment amount in FY 2020. Given the increase to the CHC hourly rate in FY 2020, we agree that it is prudent to evaluate FY 2020 utilization data prior to eliminating the SBNF. We will continue to analyze data on visits in the last 7 days of life and whether there are changes in utilization that could affect overall budget neutrality. If there continues to be very minor SBNF adjustments in the future, suggesting that the utilization of the SIA from one year to the next remains relatively constant, we may propose to remove the factor to simplify the RHC payment rate updates in future rulemaking.

Comment: While outside the scope of the proposed rule, two commenters noted their support of the suspension of the sequestration reduction due to the public health emergency (PHE) in response to the COVID-19 pandemic. One commenter recommended that quality reporting be suspended for the duration of CY 2020 and that hospices be held harmless from a negative payment adjustment for the remainder of the 2020 performance period.

Response: While the HQRP is statutorily mandated under section 1814(i)(5)(A)(i) of the Act, we provided an exemption under its extraordinary and extenuating circumstances policy for the COVID-19 pandemic as discussed in the FY 2016 Final Rule (80 FR 47194). We may grant exemptions or extensions to hospices without a request if it determines that an extraordinary circumstances exemption (ECE), such as an act of nature including a pandemic, affects an entire region or locale. Accordingly, to allow all Medicare-certified hospices to focus on patient care during the start of the COVID-19 pandemic, we granted such an exemption that ended on June 30, 2020. This limited timeframe allowed hospices time to address issues and continue with submitting quality data for public reporting starting on July 1, 2020. Further, in coordination with other provider-types who have also been given blanket waivers, CMS expects to suspend penalties for Quarter 1 (Q1) and Q2 of 2020 (January 1 through June 30, 2020). Therefore, the calendar year 2020 data used for meeting the HQRP requirements include July 1 through December 31, 2020. This means that even if hospice providers submit the Hospice Item Set and CAHPS® Hospice Survey data for Q1 and Q2 2020, we will not include any of that data for purposes of calculating whether a hospice meets the HQRP requirements impacting FY 2022 payments. We provided a tip sheet to assist providers with this issue that can be accessed at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Hospice-Quality-Reporting/HQRP-Requirements-and-Best-Practices.

Final Decision: We are finalizing the FY 2021 payment rates in accordance with statutorily-mandated requirements. We are not finalizing the removal of the SBNF at this time; the SBNF will be applied to the payment rates as shown in Tables 6 and 8.

As discussed in the FY 2016 Hospice Wage Index and Payment Rate Update final rule (80 FR 47183), we implemented changes mandated by the IMPACT Act of 2014 (Pub. L. 113-185). Specifically, for accounting years that end after September 30, 2016 and before October 1, 2025, the hospice cap is updated by the hospice payment update percentage rather than using the CPI-U. The hospice cap amount for the FY 2021 cap year will be $30,683.93, which is equal to the FY 2020 cap amount ($29,964.78) updated by the FY 2021 hospice payment update percentage of 2.4 percent.

A summary of the two comments we received regarding the hospice cap amount and our responses to those comments appear below:

Comment: MedPAC recommended reducing the hospice aggregate cap by 20 percent and wage adjusting the hospice aggregate cap.

Response: We appreciate the commission's recommendation, however, we do not have the statutory authority to wage adjust or reduce the hospice cap amount.

Comment: Another commenter suggested that the cap amount is an area that CMS could explore under its program integrity authority using available claims and quality data to target enforcement activities to hospices that regularly come close to or go over their aggregate cap amount.

Response: We appreciate the commenter's suggestion to consider looking into the practices of hospices that regularly come close to or exceed their aggregate cap to target further program integrity efforts. We will continue to closely monitor this issue and address any identified concerns, if necessary.

Final Decision: We are finalizing the update to the hospice cap in accordance with statutorily-mandated requirements.

In the FY 2020 Hospice Wage Index and Payment Rate Update final rule (84 FR 38484), we finalized modifications to the hospice election statement content requirements at § 418.24(b) to increase coverage transparency for patients under a hospice election. In addition to the existing election statement content requirements at § 418.24(b), we finalized that hospices also would be required to include the following on the election statement:

• Information about the holistic, comprehensive nature of the Medicare hospice benefit.

• A statement that, although it would be rare, there could be some necessary items, drugs, or services that will not be covered by the hospice because the hospice has determined that these items, drugs, or services are to treat a condition that is unrelated to the terminal illness and related conditions.

• Information about beneficiary cost-sharing for hospice services.

• Notification of the beneficiary's (or representative's) right to request an election statement addendum that includes a written list and a rationale for the conditions, items, drugs, or services that the hospice has determined to be unrelated to the terminal illness and related conditions and that immediate advocacy is available through the Beneficiary and Family Centered Care Quality Improvement Organization (BFCC-QIO) if the beneficiary (or representative) disagrees with the hospice's determination.

Also in the FY 2020 Hospice Wage Index and Payment Rate Update final rule, we finalized the requirements as set forth at § 418.24(c) for the hospice election statement addendum titled, “Patient Notification of Hospice Non-Covered Items, Services, and Drugs” to include the following content requirements:

1. Name of the hospice.

2. Beneficiary's name and hospice medical record identifier.

3. Identification of the beneficiary's terminal illness and related conditions.

4. A list of the beneficiary's current diagnoses/conditions present on hospice admission (or upon plan of care update, as applicable) and the associated items, services, and drugs, not covered by the hospice because they have been determined by the hospice to be unrelated to the terminal illness and related conditions.

5. A written clinical explanation, in language the beneficiary and his or her representative can understand, as to why the identified conditions, items, services, and drugs are considered unrelated to the terminal illness and related conditions and not needed for pain or symptom management. This clinical explanation would be accompanied by a general statement that the decision as to whether or not conditions, items, services, and drugs is related is made for each patient and that the beneficiary should share this clinical explanation with other health care providers from which they seek services unrelated to their terminal illness and related conditions;

6. References to any relevant clinical practice, policy, or coverage guidelines.

7. Information on:

a. The purpose of addendum; and

b. the patient's right to Immediate Advocacy.

8. Name and signature of Medicare hospice beneficiary (or representative) and date signed, along with a statement that signing this addendum (or its updates) is only acknowledgement of receipt of the addendum (or its updates) and not necessarily the beneficiary's agreement with the hospice's determinations.

While we finalized that the election statement modifications apply to all hospice elections, the addendum is only required to be furnished to beneficiaries, their representatives, non-hospice providers, or Medicare contractors who requested such information. Additionally, we finalized a policy that if the beneficiary (or representative) requested an addendum at the time of hospice election, the hospice has 5 days from the start of hospice care to furnish this information in writing. Furthermore, if the beneficiary requested the election statement at the time of hospice election, but died within 5 days, the hospice is not required to furnish the addendum as the requirement would be deemed to have been met in this circumstance. If the addendum was requested during the course of hospice care (that is, after the date of the hospice election), we finalized a policy that the hospice has 72 hours from the date of the request to provide the written addendum. The election statement modifications and the election statement addendum requirements will be effective for hospice elections beginning on and after October 1, 2020 (that is, FY 2021).

While we finalized the content requirements for the election statement addendum, we did not mandate that hospices use a specific form. Hospices are to develop and design the addendum to meet their needs, similar to how hospices develop their own hospice election statement (84 FR 38507). Additionally, we finalized a policy that the signed addendum (and any signed updates) are a new condition for payment. However, this does not mean in order to meet this condition for payment that the beneficiary (or representative), or non-hospice provider needs to agree with the hospice's determination. For purposes of this condition for payment, we finalized the policy that the signed addendum is only an acknowledgement of the beneficiary's (or representative's) receipt of the addendum (or its updates) and this payment requirement is met if there is a signed addendum (and any signed updates) in the requesting beneficiary's medical record with the hospice. This addendum is not required to be submitted routinely with each hospice claim. Likewise, the hospice beneficiary (or representative) does not have to separately consent to the release of this information to non-hospice providers furnishing services for unrelated conditions, because the Health Insurance Portability and Accountability Act of 1996 (HIPAA) Privacy Rule allows those doctors, nurses, hospitals, laboratory technicians, and other health care providers that are covered entities to use or disclose protected health information, such as X-rays, laboratory and pathology reports, diagnoses, and other medical information for treatment purposes without the patient's express authorization. This includes sharing the information to consult with other providers, including providers who are not covered entities, to treat a different patient, or to refer the patient (45 CFR 164.506).

We delayed the effective date of the election statement content modifications and the hospice election statement addendum until FY 2021 to allow hospices adequate time to make the necessary modifications to their current election statements, develop their own election statement addendum, and make any changes to their current software and business processes to accommodate the requirements. Additionally, with publication of the FY 2021 Hospice Wage Index and Payment Rate Update proposed rule, we posted a modified model election statement and addendum on the Hospice Center web page to give hospices an illustrative example as they modify and develop own forms to meet the content requirements and best meet their respective needs.

While we did not make any proposals in the FY 2021 Hospice Wage Index and Payment Rate Update proposed rule to the finalized election statement and election statement addendum content requirements at § 418.24, or the October 1, 2020 effective date, we solicited comments on both of these model examples to see if they are helpful in educating hospices in how to meet these requirements effective for hospice elections beginning in FY 2021. We received 45 comments from primarily hospices and industry associations. Below is a summary of those comments and our responses.

Comment: In general, commenters had many suggested revisions for the modified election statement and the election statement addendum. Comments on the modifications to the model election statement and the addendum included formatting changes and reordering the required items for ease of use and readability. Some commenters suggested language revisions to make some of the content requirements more clear. Other suggestions included the removal of certain statements because they are not content requirements, outlined in regulation, and a few commenters suggested adding additional language to further explain the purpose of the addendum.

Several commenters questioned what recourse the hospice has if the patient/representative refuses to sign the addendum, given the beneficiary signature is a content requirement. These commenters suggested a process similar to the Notices of Medicare Non-Coverage (NOMNC) where CMS has stated that “[i]f the beneficiary refuses to sign the NOMNC the provider should annotate the notice to that effect and indicate the date of refusal on the notice.” And finally, one commenter requested an example of a completed addendum as they stated that it would be helpful for hospices to understand what CMS expects in terms of the way to write the rationale for an unrelated condition, item, service, or drug that is considered to be communicated in a language the beneficiary can understand.

Response: We appreciate commenters taking the time and thoroughly reviewing the model examples of the modifications to the election statement and the election statement addendum posted on the Hospice Center web page. As noted in the proposed rule and in this final rule, these examples are only meant to be illustrative and are not required to be in the exact format as provided. We have accepted the majority of commenters' suggestions and have incorporated them into the model examples, which we will post on the Hospice Center web page with this final rule. We removed language and checkboxes that are not content requirements at § 418.24(b) or (c) for the election statement or the addendum. We did not accept those recommendations to add language that are not regulatory requirements. The model examples of the election statement and the addendum posted with this final rule include only those content requirements set forth at § 418.24(b) and (c). However, as we noted in the proposed rule, hospices can develop their election statement and election statement addendum in any format that best suits their needs as long as the content requirements at § 418.24(b) and (c) are met. The examples were intended to assist hospices in understanding how they could format their election statement and addendum to meet the content requirements.

To address the comment of beneficiary (or representative) refusal to sign the addendum, we again point to the statement that must be included on the addendum that the signature is only acknowledgement of receipt and not a tacit agreement to its contents. Additionally, if the beneficiary (or representative) requests the addendum, we believe that hospices would conduct due diligence that the beneficiary (or representative) has been informed about the purpose of the addendum and the rationale for the signature. However, we recognize that there may be those rare instances in which the beneficiary (or representative) may refuse to sign the addendum, even though he or she has requested the form. We did not make any proposals addressing situations in which the beneficiary (or representative) refuses to sign a requested addendum. While we believe that this would be a rare occurrence given this is primarily a beneficiary (or representative) request to receive such form, we will consider whether this issue needs to be addressed in future rulemaking.

We do not believe that providing an example of a completed addendum would be particularly helpful because of the unique clinical conditions of hospice beneficiaries and given that determinations regarding what is related versus unrelated to a patient's terminal illness and related conditions are made on a case-by-case basis.

As mentioned previously in this final rule, we did not propose any new policies as they relate to the modifications to the hospice election statement or the addendum requirements. These policies were finalized in the FY 2020 Hospice Wage Index and Payment Rate Update final rule with a delayed effective date of October 1, 2020. However, we still received comments on various aspects of the finalized policy and we have summarized these and responded below.

Comment: One commenter questioned if there is any impact on the election statement if non-covered items, services, or drugs are requested after the initial admission to hospice. That is, whether there are any additional documentation requirements to note that the addendum was requested. Another questioned whether there is a different form to sign, other than the election statement, if the patient requests the addendum after the effective date of the election acknowledging that the addendum was requested.

Response: If a beneficiary (or representative) requests the addendum after the effective date of the election, there is no impact on the election statement. Similarly, there is no separate form or additional documentation required if the beneficiary does request the addendum after the effective date of the election. As we stated in the FY 2020 Hospice Wage Index and Payment Rate Update final rule, we would expect hospices to document that the addendum was discussed with the patient (or representative) similar to how other patient and family discussions are documented. However, we did not propose a specific format in which to document such conversations and hospices can develop their own processes to incorporate into their workflow. This could be done however the hospice determines best meets its' needs.

Comment: A commenter stated that the regulations for the election statement addendum do not include language addressing the issuance of a requested addendum at the time of hospice election but where the beneficiary dies within the first 5 days of hospice care. This commenter stated that the preamble of the FY 2020 Hospice Wage Index and Payment Rate Update final rule addressed this particular issue. Specifically, CMS stated that if a beneficiary requests the addendum at the time of hospice election and dies within 5 days from the start of the hospice election and before the hospice can furnish the addendum, the hospice would not be required to furnish such addendum after the patient has died, as this requirement would be deemed as being met in this circumstance.

Response: Commenters are correct that, in the FY 2020 Hospice Wage Index and Payment Rate Update final rule (84 FR 38511), we stated that if the addendum is requested on the effective date of the hospice election (that is, the start of care date) and the beneficiary dies within the first 5 days from the start of hospice care and before the hospice is able to furnish the addendum, the addendum would not be required to be furnished after the patient has died, and this condition for payment would be considered met. While this was not codified in the regulations, we will issue sub-regulatory guidance to this effect and we will consider including this in the regulations in future rulemaking.

Comment: Several commenters remarked that there is conflicting language in § 418.24(c) as to who can request the addendum. Specifically, commenters referenced § 418.24(c)(6), which states that the beneficiary or representative should request the addendum and share the information with other health care providers. However, commenters stated that § 418.24(c) requires that the hospice provide the addendum to not only the requesting individual (or representative), but also to requesting non-hospice providers or Medicare contractors. One commenter expressed concern that the regulatory language at § 418.24(c) allows non-hospice providers and Medicare contractors to request the addendum absent the beneficiary (or representative) requesting such information from the hospice and this violates the rights of the patient to have control over their protected health information. A few commenters expressed concern that any lack of clarity regarding the addendum requirements could result in non-payment for hospice services given the addendum is a condition for payment.

Response: The regulations at § 418.24(c) reference who can request the addendum, that is the beneficiary (or representative), non-hospice provider, or Medicare contractor. Whereas, the regulations at § 418.24(c)(6) refer to one of the specific content items required on the addendum form, along with the statement that the individual should share this clinical explanation with other health care providers from which they seek items, services, or drugs unrelated to their terminal illness and related conditions.

We note that it is not a violation of patient rights to have control over their health information in the scenario where a non-hospice provider or Medicare contractor requests the addendum absent the beneficiary (or representative) requesting such information. As discussed previously in this final rule, the hospice beneficiary (or representative) does not have to separately consent to the release of this information to non-hospice providers furnishing services for unrelated conditions, because the Health Insurance Portability and Accountability Act of 1996 (HIPAA) Privacy Rule allows those doctors, nurses, hospitals, laboratory technicians, and other health care providers that are covered entities to use or disclose protected health information, such as X-rays, laboratory and pathology reports, diagnoses, and other medical information for treatment purposes without the patient's express authorization (45 CFR 164.506).

Though non-hospice providers and Medicare contractors can request the addendum even in the event that the beneficiary (or representative) did not request this information, we remind commenters that this condition for payment is met only in those circumstances in which the beneficiary (or representative) has requested the addendum and there is a signed form in the hospice's medical record. In the event that a non-hospice provider or Medicare contractor requests the addendum, but the beneficiary (or representative) did not already request and sign the addendum, this would not be a violation of the condition for payment as described previously. Hospices can develop processes (including how to document such requests from non-hospice providers and Medicare contractors) to address circumstances in which the addendum was requested by a non-hospice provider or Medicare contractor but where there was no previous beneficiary (or representative) request to receive the addendum.

Comment: One commenter requested that CMS clearly delineate in the final rule the differences between the election statement addendum and the Advance Beneficiary Notice (ABN) and provide guidance on when each document should be used as there are concerns that hospices may be confused as to each documents' purpose.

Response: We agree that it is important to ensure that hospices do not conflate these two documents and their respective purposes. We note that we provided detailed information on the purpose and use of the ABN in the FY 2020 Hospice Wage Index and Payment Rate Update final rule (84 FR 38512).

The ABN, Form CMS-R-131, 3 is issued by providers (including independent laboratories, home health agencies, and hospices), physicians, practitioners, and suppliers to Original Medicare (Fee-for-Service) beneficiaries in situations where Medicare payment is expected to be denied. The ABN is issued in order to transfer potential financial liability to the Medicare beneficiary in certain instances, and its use is very limited for hospices. The three situations that would require issuance of the ABN by a hospice are:

• Ineligibility because the beneficiary is not determined to be “terminally ill” as defined in section 1879(g)(2) of the Act;

• Specific items or services that are billed separately from the hospice per diem payment, such as physician services, that are not reasonable and necessary as defined in either sections 1862(a)(1)(A) or 1862(a)(1)(C) of the Act; or

• The level of hospice care is determined to be not reasonable or medically necessary as defined in sections 1862(a)(1)(A) or 1862(a)(1)(C) of the Act.

Guidelines for issuing the ABN are published in the Medicare Claims Processing Manual, chapter 30, section 50. An ABN is not required to be given to a beneficiary for those items and services the hospice has determined to be unrelated to the terminal illness and related conditions, as these still may be covered under other Medicare benefits. Additionally, an ABN cannot be issued to transfer liability to the beneficiary when Medicare would otherwise pay for items and services. The purpose of the ABN is to inform beneficiaries of the listed items and services that Medicare in general, is not expected to approve, and the specific denial reason (that is, not medically reasonable and necessary). The hospice election statement addendum is intended to inform beneficiaries of items and services that the hospice benefit will not cover as the hospice has determined them to be unrelated to the terminal illness and related conditions. However, these items, services, and drugs may be covered under other Medicare benefits it eligibility and coverage conditions are met. Table 9 provides a quick reference as to the type of document that can be issued to Medicare hospice beneficiaries, the purpose of each document, the timing of when the document must be provided to the beneficiary, and when hospices would use the respective documents.

Comment: A few commenters urged CMS to encourage the use of an electronic format for both the hospice election statement and the addendum given the shift of most hospice providers to electronic platforms. Several other commenters questioned whether the addendum could be provided via an electronic patient portal and whether there could be an electronic version for potential use in communicating with other non-hospice providers. Another commenter recommended that CMS provide additional guidance for the hospice community and Medicare contractors on patient/representative electronic signatures and include in such guidance the ability to print an electronically signed document to provide a hard copy to a patient or representative. Other commenters stated that they are hopeful that if the election statement is in an electronic format then the electronic exchange of same data elements can be used to provide hospice election information to Part D plans more timely.

Response: We agree with these commenters that the use of electronic platforms can help facilitate more timely notification of hospice elections and can be expanded to increase interoperability. As noted in the FY 2020 Hospice Wage Index and Payment Rate Update final rule (84 FR 38511), hospices are free to develop their modified election statement and addendum to best meet their needs. This includes those hospices who develop these forms in an electronic format. As long as the content requirements at § 418.24(b) and (c) are met, there is nothing precluding a hospice from having an election statement and addendum in an electronic format.

While we did not specifically address the provision of the addendum via electronic patient portals or whether the addendum could be developed as an electronic version, we note that the requirement is that the information must be provided to the beneficiary (or representative), in writing. While we envisioned a hard copy document for ease of use and sharing with non-hospice providers, we note that we did not explicitly prohibit the use of an electronic patient portal or provision of the addendum as an electronic version, as we recognize information can be provided in a written, electronic format. We want hospices to be able to furnish such information in the least burdensome way to facilitate the communication of this information to hospice patients and their families, and even potentially for communicating with non-hospice providers as suggested by the commenters. We also recognize that hospices may already have their existing election statements in an electronic format and hospices may prefer to have the addendum incorporated into their Electronic Medical Records (EMRs) as well. As long as the content requirements at § 418.24 (b) and (c) are met, including securing the beneficiary's (or representative's) signature acknowledging receipt of the addendum, there is nothing precluding a hospice from leveraging such technology. However, we require that the information be provided in a language and format that the beneficiary (or representative) understands. Therefore, if the beneficiary (or representative) receives the addendum in an electronic format but requests to have a hard copy version for their records, we expect that the hospice would accommodate such request.

The commenter is correct that there is no specific guidance addressing beneficiary (or representative) electronic signatures on the hospice election statement. Generally, it is at the contractor's discretion as to how they address patient (or representative) electronic signatures in their review of medical records. However, we will consider future guidance, if warranted, to address any issues as they relate to electronic signatures.

Finally, we are aware of some of the issues where Part D Plans are not aware of a beneficiary's hospice election in a timely fashion. We understand that delayed notifications of a hospice election prevent the Part D plan from placing patient-specific prior authorization on the drugs in the four classes commonly paid by the hospice providers; analgesics, anti-nauseants (antiemetics), laxatives, and antianxiety drugs (anxiolytics). Currently, hospices are encouraged to use an OMB approved form entitled “Hospice Information for Medicare Part D Plans” (OMB NO 0938-1269) to communicate hospice election and drug use to Part D plans. 4 However, since OMB form NO 0938-1269 was first approved, hospices have begun to use electronic health records (EHRs) in growing numbers. This development has opened the door to electronic transactions from the hospice to part D plans. The National Council for Prescription Drug Plans (NCPDP) convened a diverse task group which included payers, hospice organizations and processors to see if they could leverage hospice EHR capabilities to produce standard electronic transactions that can be used by Part D plans. CMS was pleased to learn that the NCPDP hospice task group is embarking upon a pilot project which extract data from a hospice's EHR and route that information to the correct Part D plan in real-time, thereby minimizing delays in the prior authorization process. We encourage hospices, their software vendors and Part D plans to participate in the pilot project and we await its outcome.

Comment: Most commenters still disagree with CMS's decision to make the election statement addendum a condition for payment. One commenter stated the addendum is redundant to existing obligations and that there is no basis for the addendum to be treated as a condition for payment for hospice services. This commenter added that the Social Security Act only authorizes the condition for hospice payment based on a patient's having made an election to receive hospice care and that an addendum, provided after the election, cannot and should not legally alter the election or make the election retroactively invalid for purposes of payment. Concerns about any errors to the addendum or an unreturned addendum could give rise to non-payment of hospice services for what CMS implies could be the patient's entire election period.

Response: We disagree with commenters that the election statement addendum should not be a condition for payment given the enormity of the decision of a Medicare beneficiary electing to receive hospice services. In fact, the content requirements for the hospice election statement at § 418.24 specifically state that there must be the individual's or representative's acknowledgement that he or she has been given a full understanding of the palliative rather than curative nature of hospice care, as it relates to the individual's terminal illness and related conditions, as well as beneficiary acknowledgement that certain Medicare services are waived by the election. Moreover, section 1812(d)(2)(A) of the Act makes it clear that “except in such exceptional and unusual circumstances as the Secretary may provide . . . if an individual makes such an election for a period with respect to a particular hospice program, the individual shall be deemed to have waived all rights to have payment made by Medicare” for services that are related to the treatment of the individual's condition for which a diagnosis of terminal illness has been made. The Secretary has not provided for any “unusual and exceptional circumstances” and in the 1983 hospice final rule (48 FR 56010) we stated that hospices are required to provide virtually all the care needed by terminally ill patients. Our position remains the same today.

We do not believe that the decision to elect hospice services can be made without full information and disclosure as to what items, services, and drugs the hospice will and will not be covering based on their determinations of what is and what is not related to the terminal illness and related conditions. As detailed in the FY 2020 Hospice Wage Index and Payment Rate Update final rule (84 FR 38518), we believe making the hospice election statement addendum a condition for payment is necessary to ensure that hospices are diligent in providing this information to Medicare hospice beneficiaries on request. We regard this addendum as a means of accountability for hospices to provide coverage information to beneficiaries electing the hospice benefit.

In the FY 2020 Hospice Wage Index and Payment Rate Update proposed and final rules (84 FR 17570 and 84 FR 38484), we provided examples from OIG reports  5 6 that highlight the issues with a patient's lack of knowledge regarding hospices' limitation on their coverage, and the potential for hospice non-coverage of certain expected items, services, and drugs. Also, as described in the preamble of the FY 2020 Hospice Wage Index and Payment Rate Update proposed rule, the impetus for this policy was not only from these various OIG reports, but from numerous anecdotal reports received by CMS describing situations in which hospice beneficiaries and their families had to continually seek items, services, and drugs outside of the hospice benefit to receive needed care that they expected the hospice would cover and provide.

One commenter remarked that requiring an addendum is redundant, implying that because hospices are already making determinations of relatedness, the beneficiary (or representative) is already being informed of these determinations in order to allow them to make treatment decisions that best align with their preferences and goals of care. While we are encouraged that many hospices are already providing this important coverage information to hospice beneficiaries, both the OIG reports and anecdotal reports, as mentioned previously in this final rule, indicate that a lack of coverage transparency continues to be an issue for hospice beneficiaries.

Comment: A few commenters requested clarity regarding transfer situations; when to update the addendum; situations where a beneficiary requests the addendum but where the hospice has determined that there are no unrelated conditions, items, services, or drugs; whether specific QIO language must be used; the timeframe for providing the addendum if requested after the effective date of the election but within the first 5 days of hospice care; handling situations in which the beneficiary elects hospice care but with a future hospice date; the timing to obtain a signature on the addendum; and whether the addendum must be provided to all individuals receiving hospice care, including non-Medicare patients.

Response: Regarding the timeframe for providing the addendum to a requesting beneficiary who has transferred from one hospice to another, we remind commenters that a transfer does not change the effective date of hospice election. That means, if the beneficiary (or representative) requests the addendum from the receiving hospice, the hospice would have 72 hours (or 3 days) to furnish this information in writing. As to when hospices should update the addendum, in the FY 2020 Hospice Wage Index and Payment Rate Update final rule, we stated that hospices have the option to make updates to the addendum, if necessary, to include such conditions, items, services and drugs they determine to be unrelated throughout the course of a hospice election. This could also include updating the addendum in situation where a condition, item, service or drug was previously considered unrelated, and therefore included on the addendum, is now considered related, and therefore would be covered by the hospice and removed from the addendum. Given that hospices develop their own addendum, hospices may add additional language to inform beneficiaries that the addendum reflects the most accurate information that the hospice has at the time the addendum is completed and that updates would be provided, in writing, if there are any changes that would need to be included based on any new information. Additionally, if the beneficiary (or representative) requested the addendum but the hospice has determined that all conditions, items, services, and drugs were related, and thereby covered by the hospice, the hospice could explain to the beneficiary (or beneficiary) that it is furnishing all care or the hospice can provide the addendum noting that at the time of the request, the hospice has determined that there were no unrelated conditions, items, services, and drugs. Hospices are free to develop any process for addendum updates to distinguish whether any updates are additions, deletions, or modifications, similar to processes hospices have in place for updates to the hospice plan of care.

As for the comment regarding specific BFCC-QIO language, we note that we did include specific BFCC-QIO language in the FY 2020 Hospice Wage Index and Payment Rate Update proposed rule. We finalized a requirement that the election statement itself must include information on the BFCC-QIO (including the BFCC-QIO contact information), and both the election statement and the addendum must include a statement about the beneficiary's right to Immediate Advocacy. Hospices can use whatever language they choose as long as this information is included in accordance with the requirements at § 418.24.

If the beneficiary does not request the addendum on the effective date of the election (that it, the start of care date), but within the 5-day timeframe after the effective date, the hospice would have 72 hours (or 3 days) from the date of the request to furnish the addendum as the regulations are clear that the 5-day timeframe relates to whether the beneficiary (or representative) requested the addendum on the effective date of the election (that is, the start date of hospice care). Regarding those situations in which the beneficiary elects hospice care, but with a future effective date, we remind commenters that the addendum would be furnished to the beneficiary (or representative) within 5 days of the effective date of the election. For example, if the beneficiary elects hospice on May 1st with an effective date of May 7th, the addendum, if requested, would be provided within 5 days of May 7th. And because the beneficiary signature is an acknowledgement of receipt of the addendum, this means that the beneficiary would sign the addendum when the hospice provides it, in writing, to the beneficiary (or representative). We note that these finalized policies relating to the election statement modifications and the addendum are for beneficiaries receiving services under the Medicare hospice benefit. While the addendum is not required to be provided to non-Medicare patients, hospices can choose to do so.

Comment: One commenter recommended that to effectively address inappropriate spending outside of the Medicare hospice benefit, CMS must take steps in addition to the addendum policy, to identify the breadth of issues that are contributing to the problem. The commenter suggested analysis of the spending data to determine what proportion of this spending is occurring within the first weeks of hospice care when CMS systems have not been updated with Medicare election information and what proportion of this spending is a result a hospice informing the provider that the item, service, or drug is unrelated. Finally, this commenter stated that CMS must look at any additional systems issues, as well as any other delays that slow the posting of new beneficiary status information. This commenter also stated that a large proportion of non-hospice spending is a result of related items, services, or drugs but which are not reasonable and necessary under a hospice plan of care.

Response: We appreciate the suggestions made by this commenter and we note that we continue to analyze hospice utilization data, including analyzing data on live discharges, lengths of stay, pre-hospice spending, and non-hospice spending. We have previously shared these results through rulemaking and other mechanisms of communication. We also note that we have made every effort to enhance the processing time of the hospice NOE to ensure that Medicare systems are updated in a timelier fashion. Specifically, effective January 1, 2018, hospices can submit the NOE via Electronic Data Interchange (EDI). EDI transmission and receipt of NOEs would reduce, and potentially eliminate, problems with NOEs that result from Direct Data Entry (DDE) keying errors. Hospices could export data from their electronic medical record or other software system into the EDI format without human intervention. We continually look at ways to further streamline these processes and appreciate commenter suggestions. We will consider the commenter's recommendations moving forward as we continue to analyze the effects of current hospice policies and for any future rulemaking and other efforts.

Comment: Most commenters recommended that CMS delay the October 1, 2020 effective date because of the public health emergency declared by the Secretary in response to the COVID-19 pandemic. Specifically, commenters recommended a delay of at least one full year beyond the end date of the COVID-19 public health emergency because of concerns that hospices have shifted their operational priorities to address the pandemic and have not had time to complete the modifications to the election statement, develop the addendum, or establish new processes and train new staff on the new content requirements. Commenters also expressed concerns over EMR software readiness citing that EMR vendors have not provided any deliverables related to the modifications to the election statement and the addendum, and that hospices need delivery of software modifications in order to test the software, as well as develop processes and prepare for implementation.

Commenters also stated that, based on their research and inquiries to the Medicare contractors and the BFCC-QIOs, there has been no communication from CMS to the contractors related to the addendum as a condition for payment, or to the BFCC-QIOs related to a patient/representative request for Immediate Advocacy if the beneficiary (or representative) disagrees with the hospices determinations as to those items, services, and drugs the hospice has determined to be unrelated to the terminal illness and related conditions. These commenters cited the delayed implementation of OASIS-E as a result of the public health emergency as precedent and requested a similar delay for the addendum requirements as this would allow for adequate time for hospices, EMR vendors, Medicare contractors, and BFCC-QIOs to be fully prepared for these changes.

Response: We appreciate the magnitude of efforts undertaken by hospice providers as our country responds to the public health emergency for the COVID-19 pandemic. The effective date for the election statement modifications and the addendum implementation are effective for hospice elections on and after October 1, 2020 and this finalized policy already reflects a delayed effective date of 1 year. We note that there were no proposed changes to the election statement modifications or the addendum in the FY 2021 Hospice Wage Index and Payment Rate Update proposed rule, therefore, all of the content requirements were finalized in the FY 2020 Hospice Wage Index and Payment Rate Update final rule. We expect that hospices have already begun making the modifications to their election statements and developing their addendums in anticipation of a FY 2021 effective date and well before the start of the public health emergency. We also anticipate that hospices already have engaged with their EMR vendors to start making the necessary changes resulting from a policy that was finalized in the FY 2020 Hospice Wage Index and Payment Rate Update final rule but with a delayed effective date. The expectation was that hospices would start making these modifications when these requirements were finalized in the FY 2020 Hospice Wage Index and Payment Rate Update final rule (published on August 6, 2019). The public health emergency underscores the importance of providing the “Patient Notification of Hospice Non-Covered Items, Services, and Drugs” to requesting hospice beneficiaries to ensure they are able to make treatment decisions to best meet their needs during this time.

We continue to have ongoing discussions with the MACs and BFCC-QIOs and will continue to provide education throughout the upcoming months leading up to the effective date of this policy. This will include the release of sub-regulatory guidance, and MLN® articles to ensure education is furnished to all relevant stakeholders. We assure hospices that all parties will be aware of the policies and their respective roles. And with any new policy, we will continue to monitor and communicate with stakeholders to determine if any future changes are warranted. The goal is to ensure the least amount of burden to providers while also ensuring beneficiary protection and engagement.

In summary, the hospice election statement modifications and the hospice election statement addendum requirements at 42 CFR 418.24(b) and (c) will be effective for hospice elections beginning on and after October 1, 2020 as finalized in the FY 2020 Hospice Wage Index and Payment Rate Update final rule (84 FR 38520). The hospice election statement addendum will remain a condition for payment and as finalized, this condition for payment would be met if there is a signed addendum (and its updates) in the requesting beneficiary's hospice medical record. The signed addendum is only acknowledgement of the beneficiary's (or representative's) receipt of the addendum and not agreement with the hospice's determination. To assist hospices in understanding these content requirements and based on comments received, we have posted with this final rule, the modified model examples of the hospice election statement and hospice election statement addendum on the Hospice Center web page as illustrative examples. As finalized in the FY 2020 Hospice Wage Index and Payment Rate Update final rule, hospices will make the election statement modifications and develop the addendum to best suit their needs as long as the content requirements are met.

Although CMS did not propose any changes to the HQRP for FY 2021, some therapy associations commented and encouraged the agency to continue to provide adequate provider training to ensure accuracy and consistency in linking care planning and services with data collection to allow the data to effectively promote improved care planning and service implementation. Another commenter stated that CMS should require quality performance be factored into payment and determinations of any performance-based incentives for hospice providers. We thank commenters for their suggestions. While these comments are outside the scope of this rule, we assure commenters that we continue to consider ways to inform and educate hospices regarding quality reporting, data collection, and processes to ensure that hospice beneficiaries continue to receive high quality hospice care. We agree that quality performance should factor into performance-based incentives for hospice providers and the HQRP is one mechanism to promote such performance.

This final rule does not impose any new or revised “collection of information” requirements or burden. For the purpose of this section of the preamble, collection of information is defined under 5 CFR 1320.3(c) of OMB's Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501 et seq. ) implementing regulations. Since this rule does not impose any new or revised collection of information requirements or burden, the rule is not subject to the requirements of the PRA.

This final rule meets the requirements of our regulations at § 418.306(c) and (d), which require annual issuance, in the Federal Register , of the hospice wage index based on the most current available CMS hospital wage data, including any changes to the definitions of CBSAs or previously used MSAs, as well as any changes to the methodology for determining the per diem payment rates. This final rule also updates payment rates for each of the categories of hospice care, described in § 418.302(b), for FY 2020 as required under section 1814(i)(1)(C)(ii)(VII) of the Act. The payment rate updates are subject to changes in economy-wide productivity as specified in section 1886(b)(3)(B)(xi)(II) of the Act. Lastly, section 3004 of the Affordable Care Act amended the Act to authorize a quality reporting program for hospices, and this rule discusses changes in the requirements for the HQRP in accordance with section 1814(i)(5) of the Act.

We estimate that the aggregate impact of the payment provisions in this rule will result in an increase of $540 million in payments to hospices, resulting from the hospice payment update percentage of 2.4 percent for FY 2021. The impact analysis of this rule represents the projected effects of the changes in hospice payments from FY 2020 to FY 2021. Using the most recent data available at the time of rulemaking, in this case FY 2019 hospice claims data as of May 12, 2020, we apply the current FY 2020 wage index. Then, using the same FY 2019 data, we apply the FY 2021 wage index to simulate FY 2021 payments. Finally, we apply a budget neutrality adjustment so that the aggregate simulated payments do not increase or decrease due to changes in the wage index.

Certain events may limit the scope or accuracy of our impact analysis, because such an analysis is susceptible to forecasting errors due to other changes in the forecasted impact time period. The nature of the Medicare program is such that the changes may interact, and the complexity of the interaction of these changes could make it difficult to predict accurately the full scope of the impact upon hospices.

We have examined the impacts of this 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.

A regulatory impact analysis (RIA) must be prepared for major rules with economically significant effects ($100 million or more in any 1 year). We estimate that this rulemaking is “economically significant” as measured by the $100 million threshold, and hence also a major rule under the Congressional Review Act. Accordingly, we have prepared a RIA that, to the best of our ability presents the costs and benefits of the rulemaking.

The Regulatory Flexibility Act (RFA) requires agencies to analyze options for regulatory relief of small businesses if a rule has a significant impact on a substantial number of small entities. The great majority of hospices and most other hospice-related health care providers and suppliers are small entities by meeting the Small Business Administration (SBA) definition of a small business (in the service sector, having revenues of less than $7.5 million to $38.5 million in any 1 year), or being nonprofit organizations. For purposes of the RFA, we consider all hospices as small entities as that term is used in the RFA. HHS's practice in interpreting the RFA is to consider effects economically “significant” only if greater than 5 percent of providers reach a threshold of 3 to 5 percent or more of total revenue or total costs. The effect of the FY 2021 hospice payment update percentage results in an overall increase of hospice payments of 2.4 percent, or $540 million. The distributional effects of the final FY 2021 hospice wage index do not result in a greater than 5 percent of hospices experiencing decreases in payments of 3 percent or more of total revenue. Therefore, the Secretary has determined that this rule will not create a significant economic impact on a substantial number of small entities.

In addition, section 1102(b) of the Social Security Act requires us to prepare a regulatory impact analysis if a rule may have a significant impact on the operations of a substantial number of small rural hospitals. This analysis must conform to the provisions of section 604 of the RFA. For purposes of section 1102(b) of the Act, we define a small rural hospital as a hospital that is located outside of a MSA and has fewer than 100 beds. This rule will only affect hospices. Therefore, the Secretary has determined that this rule will not have a significant impact on the operations of a substantial number of small rural hospitals.

Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) also requires that agencies assess anticipated costs and benefits before issuing any rule whose mandates require spending in any 1 year of $100 million in 1995 dollars, updated annually for inflation. In 2020, that threshold is approximately $156 million. This final rule is not anticipated to have an effect on state, local, or tribal governments, in the aggregate, or on the private sector of $156 million or more.

Executive Order 13132 establishes certain requirements that an agency must meet when it promulgates a proposed rule (and subsequent final rule) that imposes substantial direct requirement costs on state and local governments, preempts state law, or otherwise has Federalism implications. We have reviewed this rule under these criteria of Executive Order 13132, and have determined that it will not impose substantial direct costs on state or local governments.

If regulations impose administrative costs on private entities, such as the time needed to read and interpret this rule, we should estimate the cost associated with regulatory review. Due to the uncertainty involved with accurately quantifying the number of entities that will review the rule, we assume that the total number of unique commenters on last year's proposed rule will be the number of reviewers of this rule. We acknowledge that this assumption may understate or overstate the costs of reviewing this rule. It is possible that not all commenters reviewed last year's rule in detail, and it is also possible that some reviewers chose not to comment on the proposed rule. For these reasons we believe that the number of past commenters would be a fair estimate of the number of reviewers of this final rule. We also recognize that different types of entities are in many cases affected by mutually exclusive sections of the proposed rule, and therefore, for the purposes of our estimate we assume that each reviewer reads approximately 50 percent of the rule.

Using the wage information from the May 2019 Bureau of Labor Statistics (BLS) for medical and health service managers (Code 11-9111), we estimate that the cost of reviewing this rule is $110.74 per hour, including overhead and fringe benefits ( https://www.bls.gov/oes/current/oes_nat.htm ). This rule consists of approximately 23,000 words. Assuming an average reading speed of 250 words per minute, it would take approximately 0.77 hours for the staff to review half of it. For each hospice that reviews the rule, the estimated cost is $85.27 (0.77 hour × $110.74). Therefore, we estimate that the total cost of reviewing this regulation is $4,519.31 ($85.27 × 53 reviewers).

The FY 2021 hospice payment impacts appear in Table 10. We tabulate the resulting payments according to the classifications (for example, provider type, geographic region, facility size), and compare the difference between current and future payments to determine the overall impact. The first column shows the breakdown of all hospices by provider type and control (non-profit, for-profit, government, other), facility location, facility size. The second column shows the number of hospices in each of the categories in the first column. The third column shows the effect of using the FY 2021 updated wage data. This represents the effect of moving from the FY 2020 hospice wage index to the FY 2021 unadjusted hospice wage index with the old OMB delineations. The fourth column shows the effect of moving from the old OMB delineations to the new OMB delineations with a 5 percent cap on wage index decreases. The aggregate impact of the changes in columns three and four is zero percent, due to the hospice wage index standardization factor. However, there are distributional effects of the FY 2021 hospice wage index. The fifth column shows the FY 2021 hospice payment update percentage of 2.4 percent as mandated by section 1814(i)(1)(C) of the Act, and is consistent for all providers. The 2.4 percent hospice payment update percentage is based on an estimated 2.4 percent inpatient hospital market basket update, reduced by a 0 percentage point productivity adjustment. It is projected that aggregate payments would increase by 2.4 percent, assuming hospices do not change their service and billing practices. The sixth column shows the estimated total impact for FY 2021.

We note that simulated payments are based on utilization in FY 2019 as seen on Medicare hospice claims (accessed from the CCW in May of 2020) and only include payments related to the level of care and do not include payments related to the service intensity add-on.

As illustrated in Table 10, the combined effects of all the proposals vary by specific types of providers and by location.

In the FY 2020 Hospice Wage Index and Payment Rate Update final rule (84 FR 38553), we finalized modifications to the election statement content requirements at § 418.24(b) and (c) to include a hospice election statement addendum, effective for hospice elections beginning on and after October 1, 2020. This effective date reflects a 1-year delay to allow hospices to make the necessary modifications to their existing election statement, develop their own addendum to best meet their needs, and establish processes for incorporating the addendum into their work flow.

In the FY 2020 Hospice Wage Index and Payment Rate Update final rule (84 FR 38532), we estimated that the addendum requirement would generate an annualized net reduction in burden of approximately $5.2 million, or $3.7 million per year on an ongoing basis discounted at 7 percent relative to year 2016, over a perpetual time horizon beginning in FY 2021.

While we did not re-estimate this burden in the regulatory impact analysis in the FY 2021 Hospice Wage Index and Payment Rate Update proposed rule, we received the following comment regarding the hospice election statement burden estimate as described and calculated in the FY 2020 Hospice Wage Index and Payment Rate Update final rule.

Comment: One commenter noted that there was no updated burden estimate in the FY 2021 Hospice Wage Index and Payment Rate Update proposed rule even though we stated in the FY 2020 Hospice Wage Index and Payment Rate Update final rule (84 FR 38533) that we would re-estimate the burden estimate using more current data for 2021 rulemaking. The commenter stated that the previous burden estimate underestimates the amount of time it takes to complete the addendum and requested an updated estimate in the FY 2021 Hospice Wage Index and Payment Rate Update final rule with an opportunity for stakeholder comment.

Response: We apologize for any oversight in providing an updated burden estimate in the FY 2021 Hospice Wage Index and Payment Rate Update proposed rule. The calculated burden for completion of the hospice addendum is only an estimate using the most current data at the time of rulemaking. Hospices are already required to make determinations as to the items, services, and drugs that are to be included in the individualized hospice plan of care; therefore, this means they are also making decisions as what items, services, and drugs it will not be covering as the hospice has determined them to be unrelated to the terminal illness and related conditions. We do not believe that a hospice can make a determination of what is related to the terminal illness and related conditions without also determining what is unrelated. Therefore, this decision making process is already occurring; the addendum is only requiring to furnish this information, in writing, to the beneficiary (or representative). We believe that hospices are developing their respective addendums to incorporate into their work flow processes in the most efficient way possible to ensure that the communication of these determinations is done in the most unobtrusive and least burdensome way possible.

We recalculated the overall burden using the May, 2019 BLS wage data and 2019 hospice claims data for this final rule. To calculate this burden estimate, we used the same methodology described in the FY 2020 Hospice Wage Index and Payment Rate Update final rule (84 FR 38532). We calculated this updated estimate based on 1,387,331 hospice elections in FY 2019. Of these hospice elections, 27 percent of beneficiaries died within the first 5 days of hospice care, leaving 1,012,752 eligible hospice elections for this burden estimate (1,387,331 x 0.73). We remind commenters that the addendum would not need to be furnished if the beneficiary dies within 5 days of the hospice effective date. For FY 2021, we estimate the annualized net burden for hospice providers with the one-time form development and completion of election statement addendum to be $12.8 million. This is slightly higher than the estimated $11.3 million in the FY 2020 Hospice Wage Index and Payment Rate Update final rule primarily because there were more eligible hospice elections using FY 2019 hospice claims data compared to the FY 2017 hospice claims data used in the previous calculation. We estimate the annualized monetized net reduction in burden for non-hospice providers with the regulations change at § 418.24, Election Statement Addendum, to be $19.3 million. This would result in a total annualized net reduction in burden with the election statement addendum in FY 2021 to be $6.5 million. Because we included these burden estimates in the accounting statement in the FY 2020 Hospice Wage Index and Payment Rate Update final rule (84 FR 38543), this updated estimate is not included in accounting statement in this FY 2021 Hospice Wage Index and Payment Rate Update final rule.

As required by OMB Circular A-4 (available at: https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/circulars/A4/a-4.pdf ), in Table 11, we have prepared an accounting statement showing the classification of the transfers and costs associated with the provisions of this final rule. This table shows an estimated $540 million in transfers to hospices in FY 2021. All expenditures are classified as transfers to hospices. The costs for the hospice election statement addendum were accounted for in the FY 2020 Hospice Wage Index and Payment Rate final rule (84 FR 38543) and therefore these are not accounted for in this FY 2021 final rule accounting statement.

Executive Order 13771, entitled “Reducing Regulation and Controlling Regulatory Costs,” was issued on January 30, 2017 (82 FR 9339, February 3, 2017) and requires that the costs associated with significant new regulations “shall, to the extent permitted by law, be offset by the elimination of existing costs associated with at least two prior regulations.” It has been determined that this rule is an action that primarily results in transfers and does not impose more than de minimis costs as described above and thus is not a regulatory or deregulatory action for the purposes of Executive Order 13771.

We estimate that aggregate payments to hospices in FY 2021 will increase by $540 million, or 2.4 percent, compared to payments in FY 2020. We estimate that in FY 2021, hospices in urban areas will experience, on average, 2.4 percent increase in estimated payments compared to FY 2020, while hospices in rural areas will experience, on average, 2.6 percent increase in estimated payments compared to FY 2020. Hospices providing services in the Middle Atlantic region would experience the largest estimated increases in payments of 2.9 percent. Hospices serving patients in areas in the New England and Outlying regions would experience, on average, the lowest estimated increase of 1.7 percent and 1.6 percent, respectively in FY 2021 payments.

In accordance with the provisions of Executive Order 12866, this regulation was reviewed by the Office of Management and Budget.

The Board's regulations at 49 CFR 1002.3(a) provide for an annual update of the Board's entire user-fee schedule. Fees are generally revised based on the cost study formula set forth at 49 CFR 1002.3(d), which looks to changes in salary costs, publication costs, and Board overhead cost factors.

Pursuant to the Congressional Review Act, 5 U.S.C. 801-808, the Office of Information and Regulatory Affairs has designated this rule as non-major, as defined by 5 U.S.C. 804(2).

Additional information is contained in the Board's decision, available at www.stb.gov.

For the reasons set forth in the preamble, title 49, chapter X, part 1002, of the Code of Federal Regulations is amended as follows:

The Mid-Atlantic Fishery Management Council manages the Illex squid fishery under the Atlantic Mackerel, Squid, and Butterfish (MSB) Fishery Management Plan (FMP). Section 302(g)(1)(B) of the Magnuson-Stevens Fishery Conservation and Management Act (Magnuson-Stevens Act) states that the Scientific and Statistical Committee (SSC) for each regional fishery management council shall provide its Council ongoing scientific advice for fishery management decisions, including recommendations for acceptable biological catch (ABC), preventing overfishing, ensuring maximum sustainable yield, and achieving rebuilding targets. The ABC is a level of catch that accounts for the scientific uncertainty in the estimate of the stock's defined overfishing level (OFL). The regulations implementing the MSB FMP require the Council's MSB Monitoring Committee to develop specification recommendations for each species based upon the ABC advice of the Council's SSC. The regulations at 50 CFR 648.22(e) allow the Regional Administrator, in consultation with the Council, to adjust specifications during the fishing year.

At its May 2020 meeting, the Council's SSC reviewed preliminary work by its Illex Squid Working Group and concluded that the species continues to be lightly exploited and the fishery footprint is small relative to the entire management unit. The SSC recommended increasing the 2020 ABC from 26,000 mt to 30,000 mt. The Council recommended this specification adjustment at its June 2020 meeting.

On March 1, 2018, we published Illex squid specifications for 2018-2020 (83 FR 8764), and the National Environmental Policy Act (NEPA) analysis for that rule considered a range of ABCs from 18,000-30,000 mt, and the final rule adopted an ABC of 24,000 mt for 2019 and projected the same ABC for 2020. On February 27, 2020, we revised these specifications to implement a 26,000 mt ABC (85 FR 11309) for 2020 based on the SSC's updated recommendation. The revised specifications implemented by this temporary final rule increase the 2020 Illex squid ABC to 30,000 mt.

The changes to the initial 2020 Illex squid specifications included in this action were analyzed during the development of the original 2018-2020 specifications. A 30,000 mt ABC was included in the range of alternatives. The public had an opportunity to comment on the 30,000 mt ABC during the development of the original 2018-2020 Illex specifications. These revised specifications will increase the 2020 commercial quotas by 14 percent by implementing a 28,644-mt domestic annual harvest (DAH).

We are implementing the revised 2020 specifications recommended by the Council and its SSC. The Council recommended that the status quo discard rate of 4.52 percent be reduced from the ABC, which results in a DAH amount of 28,644 mt for 2020 that would be maintained for the 2020 fishing year. Table 1 summarizes the recommended changes to the revised 2020 Illex squid specifications. This action makes no changes to the current commercial management measures.

Pursuant to section 304(b)(1)(A) of the Magnuson-Stevens Act, the NMFS Assistant Administrator has determined that this temporary final rule is consistent with the MSB FMP, the national standards and other provisions of the Magnuson-Stevens Act, and other applicable law.

This final rule is exempt from review under Executive Order 12866.

This temporary final rule does not duplicate, conflict, or overlap with any existing Federal rules.

This temporary final rule is exempt from the procedures of the Regulatory Flexibility Act because the rule is issued without opportunity for prior notice and opportunity for public comment.

The Assistant Administrator for Fisheries, NOAA, finds it is unnecessary and contrary to the public interest to provide for prior notice and an opportunity for public comment, pursuant to 5 U.S.C. 553(b)(B). This action increases the 2020 specifications ( i.e., annual catch limits) for the Illex squid fishery based on new information, which is allowed pursuant to our regulatory in-season authority at 50 CFR 648.22(e). Implementing a 30,000-mt ABC was anticipated during development and implementation of the original specifications action (83 FR 8764, March 1, 2018), as well as at the June 2020 Council meeting. Where the public has had an opportunity to review a range of specifications that included the amount considered in this action, a delay in its effectiveness would not serve any legitimate purpose, while unnecessarily disadvantaging fishermen who wish to take advantage of the fishing opportunity that this action provides with increased quotas. A delay would be contrary to the public interest for this loss of potential economic opportunity, and it could also create confusion in the Illex squid fishery. This rule is being issued at the earliest possible date. We received the Council's Supplemental Information Report for this action on June 29, 2020. The revised specifications increase the quota and allow this predominantly summer fishery to benefit from the quota increase and achieve optimal yield. This rule should be effective as soon as possible to fully realize the intended benefits to the fishery.

Additionally, unlike actions that require an adjustment period to comply with new rules, Illex squid fishery participants will not be required to purchase new equipment or otherwise expend time or money to comply with these management measures. Rather, complying with this rule simply means adhering to the higher (less restrictive) catch limits set for the remainder of the Illex squid fishing year. Fishery stakeholders have been involved in the development of this action and are anticipating this rule. Therefore, there would be no added benefit to delaying the implementation of these specifications. For these reasons, a 30-day delay in effectiveness would be contrary to the public interest. As a result, we are waiving the requirement.

For the same reasons, the Assistant Administrator finds good cause under 5 U.S.C. 553(d)(3) to waive the 30-day delay in effectiveness and these specifications shall be made effective on August 4, 2020.

The purpose of this action is to establish long-term conservation and management measures for Atlantic chub mackerel off the U.S. Atlantic coast by integrating this species as a stock in the fishery under the Atlantic Mackerel, Squid, and Butterfish Fishery Management Plan (FMP). The FMP will now be referenced as the Mackerel, Squid, and Butterfish FMP to reflect the management of two species of mackerel (Atlantic mackerel and Atlantic chub mackerel). This action is needed to ensure the sustainability of the targeted Atlantic chub mackerel fishery, prevent overfishing, and resolve competing interests that have emerged since landings of Atlantic chub mackerel substantially increased in 2013. The measures implemented through this final rule replace temporary measures to regulate Atlantic chub mackerel catch implemented as part of Amendment 18 to the FMP (82 FR 40721; August 28, 2017). Those temporary measures, including a 1,297-mt annual landing limit, a 40,000-lb (18-mt) possession limit once the annual landing limit is reached, and permitting and reporting requirements, became effective on September 27, 2017, and expire on August 4, 2020.

On March 7, 2019, the Mid-Atlantic Fishery Management Council (Council) adopted final measures under Amendment 21 to the FMP. The Council reviewed the proposed regulations to implement these measures, as drafted by NMFS, and deemed them to be necessary and appropriate, as specified in section 303(c) of the Magnuson-Stevens Fishery Conservation and Management Act (Magnuson-Stevens Act) on December 20, 2019. NMFS published a Notice of Availability (NOA) in the Federal Register on February 14, 2020 (85 FR 8534), informing the public that the Council had submitted this amendment to the Secretary of Commerce for review and approval. NMFS published a proposed rule that summarized the background for this action and outlined regulations implementing measures approved by the Council, corrections to existing regulations, and new Atlantic chub mackerel fishery exemptions proposed by the Regional Administrator (Item 13 of this preamble) on March 9, 2020 (85 FR 13603). The public comment period for the proposed rule ended on April 8, 2020, while NOA comments were accepted through April 14, 2020. After considering public comment on both the NOA and proposed rule, NMFS approved Amendment 21 on May 4, 2020.

NMFS approved all measures proposed in Amendment 21, as described below. For a more detailed description of each measure, see the proposed rule prepared for this action.

This action adds goals and objectives specific to managing Atlantic chub mackerel to the FMP's current list of goals and objectives. NMFS will use the following goals and objectives to evaluate if changes to Atlantic chub mackerel management measures are consistent with the FMP when deciding whether to approve a future management action:

• Goal 1: Maintain a sustainable Atlantic chub mackerel stock.

○ Objective 1.1: Prevent overfishing and achieve and maintain sustainable biomass levels that achieve optimum yield in the fisheries and meet the needs of Atlantic chub mackerel predators.

○ Objective 1.2: Consider and account for, to the extent practicable, the role of Atlantic chub mackerel in the ecosystem, including its role as prey, as a predator, and as food for humans.

• Goal 2: Optimize economic and social benefits from utilization of chub mackerel, balancing the needs and priorities of different user groups.

○ Objective 2.1: Allow opportunities for commercial and recreational Atlantic chub mackerel fishing, considering the opportunistic nature of the fisheries, changes in availability that may result from changes in climate and other factors, and the need for operational flexibility.

○ Objective 2.2: To the extent practicable, minimize additional limiting restrictions on the Illex squid fishery.

○ Objective. 2.3: Balance social and economic needs of various sectors of the Atlantic chub mackerel fisheries ( e.g., commercial, recreational, regional) and other fisheries, including recreational fisheries for highly migratory species.

• Goal 3: Support science, monitoring, and data collection to enhance effective management of Atlantic chub mackerel fisheries.

○ Objective 3.1: Improve data collection to better understand the status of the Atlantic chub mackerel stock, the role of Atlantic chub mackerel in the ecosystem, and the biological, ecological, and socioeconomic impacts of management measures, including impacts to other fisheries.

○ Objective 3.2: Promote opportunities for industry collaboration on research.

This action defines Atlantic chub mackerel essential fish habitat (EFH) as follows:

• Eggs: Pelagic waters throughout the exclusive economic zone (EEZ) from North Carolina to Texas, including intertidal and subtidal areas, at temperatures of 15-25 °C;

• Larvae: Pelagic waters throughout the EEZ from North Carolina to Texas, including intertidal and subtidal areas, at temperatures of 15-30 °C; and

• Juveniles and adults: Pelagic waters throughout the EEZ from Maine to Texas, including intertidal and subtidal areas, at temperatures of 15-30 °C.

The Atlantic Chub Mackerel Management Unit is defined as Federal waters from Maine to North Carolina. Management measures, including the permitting and reporting requirements, possession limits, annual catch limit (ACL), and accountability measures (AM) discussed below only apply to vessels operating within the Atlantic Chub Mackerel Management Unit. Annual estimates of expected Atlantic chub mackerel catch from South Carolina through the east coast of Florida ( i.e., the area outside of the management unit, but within the geographic area over which the acceptable biological catch (ABC) applies) will be deducted from the overall Atlantic chub mackerel ABC, as discussed further below under Item 6 of this preamble (the specifications process).

Under this action, overfishing is assumed to have occurred if more than 3,026 mt (6,671,188 lb) of Atlantic chub mackerel are caught from Maine through the east coast of Florida in a given year. This will serve as the Atlantic chub mackerel overfishing limit (OFL). If catch exceeds the OFL in 3 consecutive years, then the stock would be presumed to be overfished and the Council would need to develop a rebuilding plan. These status determination criteria will remain in effect until updated criteria are available based on an accepted stock assessment.

This action sets Atlantic chub mackerel optimum yield (OY) and maximum sustainable yield (MSY) equal to the ABC (2,300 mt, or 5.07 million lb) until otherwise revised by the Council. Based on available information, the Council may set OY equal to or less than the ABC in future years through the specifications process described in the next section of this preamble.

The annual specifications process used for other species managed under the FMP, as described at 50 CFR 648.22, also applies to Atlantic chub mackerel. Specifications could be set for up to 3 years at a time, subject to annual review. Under this action, all Atlantic chub mackerel catch counts towards one catch limit for the entire fishery; there is no separation of catch limits into commercial and recreational components. The Atlantic chub mackerel ABC, management uncertainty, discard estimate, and expected Atlantic chub mackerel catch from South Carolina through Florida could be adjusted through the specifications process.

As part of this process, the Council's Scientific and Statistical Committee (SSC) will recommend a stock-wide ABC that must be equal to or less than the OFL after considering scientific uncertainty. Each year, the Monitoring Committee will review fishery catch, survey data, and other available information to provide the Council with the following recommendations:

• An ACL that is calculated by deducting an estimate of expected catch from South Carolina through the east coast of Florida from the ABC;

• An overall annual catch target (ACT) that is equal to or less than the ACL to account for management uncertainty related to the ability of management measures to constrain catch and prevent the ACL from being exceeded; and

• A total allowable landing (TAL) limit derived by subtracting an estimate of expected dead discards from the ACT.

Table 1 summarizes the final Atlantic chub mackerel specifications for 2020 and projected specifications for 2021 and 2022 based on a fishing year that runs from January 1 through December 31 of each year. The 2,261.7-mt (4,986,132-lb) ACL results from deducting an estimate of South Carolina—Florida catch (38.3 mt or 84,500 lb) from the ABC. Deducting a 4-percent management uncertainty buffer from the ACL results in a 2,171.2-mt (4,786,687-lb) ACT for catch from Maine through North Carolina. Deducting a 6-percent discard estimate from the ACT results in a 2,040.9-mt (4,499,486-lb) TAL. As noted above, these specifications will be evaluated annually, and the Monitoring Committee could recommend adjustments to South Atlantic catch, management uncertainty, and discard rates based on updated data.

At the beginning of each fishing year, all commercial vessels and recreational anglers are not subject to a possession limit for Atlantic chub mackerel. As Atlantic chub mackerel landings approach the TAL, NMFS will implement more restrictive commercial vessel possession limits through the AMs detailed in the next section of this preamble.

This action implements two in-season AMs and one post-season AM. To prevent the Atlantic chub mackerel ACT from being exceeded, NMFS will implement an 18.1-mt (40,000-lb) commercial vessel possession limit once 90 percent of the TAL is landed and a 4.5-mt (10,000-lb) possession limit once 100 percent of the TAL is landed. If the ACL is exceeded based on total catch by both the commercial and recreational fisheries within the Management Unit, NMFS will reduce the ACT by the amount of the overage as soon as possible in a subsequent fishing year.

Any vessel fishing for, possessing, landing, or selling Atlantic chub mackerel from the Atlantic Chub Mackerel Management Unit must be issued either a valid Federal commercial or party/charter permit for any species managed by the FMP (Atlantic mackerel, Illex squid, longfin squid, or butterfish). The operator of any such commercial vessel fishing must obtain and retain on board a valid operator permit issued by the Greater Atlantic Regional Fisheries Office (GARFO). Similarly, a dealer purchasing and selling Atlantic chub mackerel must obtain a valid seafood dealer permit issued for these same species from GARFO. Finally, vessel operators must report the catch of Atlantic chub mackerel weekly on existing vessel trip reports (VTR, or logbooks) and comply with any applicable vessel monitoring system (VMS) declaration and reporting requirements for commercial vessels issued a permit under the FMP. Dealers purchasing Atlantic chub mackerel must report such purchases via existing weekly dealer reports.

A vessel issued a Federal commercial fishing permit from GARFO that possesses Atlantic chub mackerel in excess of the proposed possession limits may transit the Management Unit in certain circumstances. Transit through the Management Unit is allowed provided Atlantic chub mackerel was harvested outside of the Atlantic Chub Mackerel Management Unit and all gear is stowed and not available for immediate use.

The Council's current ABC control rule and risk policy documented in the regulations at §§ 648.20 and 21, respectively, now apply to Atlantic chub mackerel, along with the standardized bycatch reporting methodology regulations specified at § 648.18. This action clarifies that any changes to Atlantic chub mackerel measures must be made through an FMP amendment and cannot be made through the framework adjustment process outlined in § 648.25.

This final rule adds Atlantic chub mackerel to the species exemption specified at § 648.80(b)(3)(i) and creates a new Atlantic chub mackerel fishery exemption at § 648.80(c)(5)(iii). These revisions exempt vessels from the Georges Bank and Southern New England (SNE) Regulated Mesh Area gear restrictions and allow vessels to fish for, harvest, possess, and land Atlantic chub mackerel when using small-mesh gear within both the SNE and Mid-Atlantic Exemption Areas defined at §§ 648.80(b)(10) and 648.80(c)(5)(i), respectively. Vessel operators must comply with the Mackerel, Squid, and Butterfish FMP gear restrictions and possession limits specified at §§ 648.23 and 26, respectively, along with the possession restrictions for other species outlined in § 648.80(b)(3)(ii).

NMFS consulted with the New England Council about these proposed changes to exempted fishing regulations on April 14, 2020, as required by the current regulations at § 648.80(b)(8). The New England Council considered information regarding the bycatch of regulated groundfish species by vessels that catch more than incidental amounts of Atlantic chub mackerel, including vessels targeting Illex squid. As summarized in the proposed rule and in the EA prepared for this action, available information indicates the bycatch of regulated groundfish species by vessels catching Atlantic chub mackerel is minimal. Despite expressing some concern regarding the limited data available on Atlantic chub mackerel trips, the New England Council did not oppose the proposed changes to exempted fisheries to facilitate the Atlantic chub mackerel fishery. The Regional Administrator determined that this information is sufficient to demonstrate bycatch levels are below thresholds for authorizing exempted fisheries, and that the exemptions implemented by this final rule would not jeopardize fishing mortality objectives of the Northeast Multispecies FMP.

References to “mackerel” are revised to reference Atlantic mackerel throughout part 648 when appropriate; references to “squid” are revised to “ Illex squid” and “longfin squid” when appropriate; and references to the “Atlantic Mackerel, Squid, and Butterfish” FMP or associated entities such as the Monitoring Committee are revised to the more general “Mackerel, Squid, and Butterfish” reference that is inclusive of both Atlantic mackerel and Atlantic chub mackerel.

Existing regulations at §§ 648.4(a)(5)(v) and 648.14(g)(4) are revised to make such text consistent with similar text for other fisheries and to incorporate Atlantic chub mackerel.

In § 648.4(a)(15), revisions to existing text ensure that a commercial fishing vessel must be issued a Federal permit for any commercial fishery of the Northeastern United States under part 648 instead of a specific forage species permit under § 648.4(a)(15), which does not actually exist.

In §§ 648.5 and 6, revisions to existing text ensure that the vessel operator and dealer permit requirements adopted by the Council under Amendment 18 are reflected in these sections.

In § 648.22, paragraph (a)(2) is revised to spell out the first use of the term “annual catch limit” and “annual catch target.”

In §§ 648.22(a)(2), 648.22(b)(3)(v), 648.23(a)(2)(ii), and 648.24(c)(3), references to the butterfish “mortality” cap are revised to the butterfish “discard” cap upon the request of Council staff to more accurately reflect how such measures are implemented. Similarly, references to the Atlantic mackerel Tier 3 “allocation” in §§ 648.22(a)(3), 648.22(b)(2)(iv)(A), 648.22(c)(6), 648.24(b)(1)(i)(B), and §§ 648.26(a)(1)(iii) and (a)(2)(i)(B) are revised to reference “catch cap” instead.

During the public comment periods for the NOA and the proposed rule for this amendment, we received 5 comment letters from 6 individuals and organizations, including a letter from Pew Charitable Trusts (Pew) referencing 14,957 form letters submitted before final Council adoption of this action. All comments generally supported integrating this species into the FMP, but specific comments opposed setting OY equal to the ABC and certain deductions for setting catch levels, as detailed below. The following discussion summarizes the issues raised in the comments that were relevant to this action and associated NMFS's responses. Please note that, pursuant to section 304(a)(3) of the Magnuson-Stevens Act, when NMFS considers the responses to comments, NMFS may only approve or disapprove measures proposed in a FMP amendment, and may not change or substitute any measure in a substantive way.

Comment 1: Pew supported implementing conservation and management measures for Atlantic chub mackerel by integrating this species into the FMP, suggesting the Council take a precautionary approach to managing this species until sufficient scientific information is available to understand this species' role in the ecosystem. A joint letter from Wild Oceans and Conservation Law Foundation (Wild Oceans/CLF) noted this action demonstrates the Council's commitment to implementing its Ecosystem Approach to Fisheries Management policies by maintaining an adequate forage base to support ecosystem productivity. Lund's Fisheries Incorporated suggested the Council should collect data to better understand the stock throughout its range, including in the Gulf of Mexico and in waters outside of U.S. jurisdiction, to estimate the potential of the stock as ocean temperatures rise.

Response: This final rule implements Atlantic chub mackerel conservation and management measures based on the best scientific information available and integrates this species into the renamed Mackerel, Squid, and Butterfish FMP. As more information becomes available, the Council can revise such measures as appropriate.

Comment 2: Wild Oceans/CLF suggested the list of goals and objectives are comprehensive and appropriate, reflecting the role the species plays as prey for predators. Lund's and SeaFreeze Limited supported Objectives 2.1 and 2.2, indicating their vessels need operational flexibility and depend on access to the Illex squid fishery.

Response: This final rule implements the goals and objectives, as proposed.

Comment 3: Lund's and SeaFreeze supported EFH designations for all life history stages. Wild Oceans/CLF indicated that EFH should be based on the best scientific information available and that the proposed broad designations limit effective targeted conservation efforts. They suggest more information is needed on spatial/temporal interactions with predators to inform predator EFH and identify multispecies habitat areas of particular concern. Pew stated that EFH information is limited and should be augmented to accurately determine EFH for all life stages, including spawning times/locations.

Response: The Atlantic chub mackerel EFH designations implemented in this action are based on the best scientific information available and encompass the breadth of known distribution of all life stages for this species. EFH designations can be revised through a future action if additional information becomes available to more precisely define EFH for particular life stages. The Council considered depth-specific EFH designations, but adopted more general definitions to include a broader area due to the limited information available for this species. The Council has funded efforts to collect additional information on Atlantic chub mackerel predation by other species, but that information is not currently available. Because identifying predator EFH and multispecies habitat areas of particular concern are beyond the scope of this action and were not considered by the Council, this final rule implements only the proposed Atlantic chub mackerel EFH designations.

Comment 4: Wild Oceans/CLF suggested the Atlantic Chub Mackerel Management Unit should extend to the east coast of Florida consistent with the SSC's recommendation for the ABC. They state this would give the Council the authority to regulate Atlantic chub mackerel throughout its range consistent with an ecosystem-based approach to managing the species. They suggested the proposed Management Unit leaves the stock unmanaged south of North Carolina, stating that it is important to manage a species throughout its range due to climate change. Lund's and SeaFreeze supported the proposed Management Unit.

Response: Atlantic chub mackerel landings south of North Carolina all occurred in Florida and accounted for only 0.3 percent of total east coast landings from 1999-2018. Consistent with the National Standard 3 Guidelines at § 600.320, the Council determined that such catch was immaterial to proper management, and that excluding those states from the Management Unit would not impair the Council's ability to sustainably manage the stock or meet the FMP goals and objectives. Atlantic chub mackerel catch south of North Carolina is accounted for through the deduction of estimated catch from South Carolina through the east coast of Florida from the ABC as part of the specifications process. The Council can adjust this catch estimate if catch exceeds the current estimate to ensure total catch does not exceed the ABC specified by the SSC. If the stock shifts due to climate change, it will likely move north due to warming waters, which would result in a greater portion of the stock covered by the Management Unit. Based on the above, this final rule implements the proposed Atlantic Chub Mackerel Management Unit.

Comment 5: One member of the public suggested that Atlantic chub mackerel is subject to overfishing and that the catch limit (presumably ABC) should be reduced to 1,200 mt. Lund's supported the proposed 2,300-mt ABC, recommending the SSC should continue to evaluate the potential to increase the ABC in the future. PEW indicated the ABC should not exceed the 2,300-mt ABC recommended by the SSC.

Response: This final rule implements an Atlantic chub mackerel ABC of 2,300 mt, as recommended by the Council's SSC. In July 2018, the Council's SSC concluded that catch levels similar to those recently observed are unlikely to result in overfishing based on expert judgement that the low fishery capacity in this region and generally high productivity of this species in fisheries throughout the world. The SSC noted that it may recommend a lower future ABC if fishing under a 2,300-mt ABC proves too risky to the stock. Any adjustment to the ABC, including both increases and decreases recommended by the SSC and adopted by the Council, could be implemented through a future action.

Comment 6: Pew and Wild Oceans/CLF opposed setting Atlantic chub mackerel OY equal to MSY and ABC. Citing National Standard 1 Guidelines and the Council's Ecosystem Approaches to Fisheries Management Guidance Document, they indicated that the Council should set OY lower than the ABC to account for the role this species plays as forage within the ecosystem. Wild Oceans/CLF noted that such guidance suggests that OY should be set further from MSY when MSY estimates and management controls are lacking or unavailable. They also recalled that the SSC's ABC recommendation did not include ecosystem considerations. They opposed the argument that forage/ecosystem importance has to be quantified by highlighting that krill OY was set to zero in the Coastal Pelagic Species FMP in the Pacific without any quantitative basis. Pew recommended the Council consider the benefits of protecting Atlantic chub mackerel beyond food production and evaluate tradeoffs between the value of chub mackerel as forage for other predators and maintaining trophic balance against their market value. Wild Oceans/CLF indicated that OY should be set at 2.86 million lb (1,297 mt) consistent with the annual landings limit set by Amendment 18.

Response: In recommending an ABC, the SSC noted that there is insufficient information on predatory mortality and the role of Atlantic chub mackerel in predator diets to recommend an OY lower than the ABC. The Council acknowledged this deficiency and funded a study to determine the importance of Atlantic chub mackerel to the diets of recreationally-important highly migratory species. This study is expected to be presented to the Council at its August 2020 meeting and could inform future decisions on the appropriate level for which to set OY. Absent information to inform the Council's decision, the Council had no basis for which to set OY lower than the ABC specific to Atlantic chub mackerel's role as forage for other species. The Council considered setting OY at 1,472 mt (3.25 million lb), which would achieve a 1,293 mt (2.85 million lb) TAL similar to temporary measures. However, the Council did not adopt this alternative because it was not supported by analysis or evidence that the foregone yield would result in notable ecosystem benefits. Further, setting OY at a level below ABC without sufficient justification for that lower level would be inconsistent with National Standard 2 of the Magnuson-Stevens Act requirement to use the best scientific information available. Based on the above, this final rule sets Atlantic chub mackerel OY equal to the ABC, as proposed.

Comment 7: Both Lund's and SeaFreeze opposed deductions for Atlantic chub mackerel catch from South Carolina through Florida, stating the catch is negligible and outside of the Management Unit. Lund's also opposed the 4-percent management uncertainty buffer in setting the ACL, stating that it is unnecessary given the low likelihood of overfishing this species. Lund's supported not separating commercial and recreational catch at this time, suggesting that recreational catch could be used as an indicator of stock abundance trends. Citing concerns that the stock was overfished, one member of the public recommended that the maximum catch (presumably TAL) should be set at 1,000 mt.

Response: As noted in the response to Comment 4, it is necessary to deduct catch from South Carolina through Florida to fully account for all catch under the ABC. This deduction can be revised during the annual specifications process. Due to concerns regarding accurate species identification and under-reporting, the Council adopted a 4- percent management uncertainty buffer to reduce the likelihood that the ACL would be exceeded. The Council noted there is uncertainty about how the fishery would respond to management measures adopted in this action because they have never been used to constrain Atlantic chub mackerel catch previously. Historically, recreational landings have been less than 1e percent of total Atlantic chub mackerel landings, and discards are not well quantified in part based on difficulty differentiating mackerel species. The Council did not adopt separate commercial and recreational ACLs because recreational fishery sub-ACL would be quite small, difficult to monitor, and be based on uncertain data. Finally, as discussed above, the SSC does not think that recent catch levels would result in overfishing this stock. Based on the above, this final rule implements the 2020 and projected 2021-2022 catch limits as proposed, including a 4-percent management uncertainty buffer and one ACL that applies to both commercial and recreational catch.

Comment 8: Lund's and SeaFreeze supported the proposed possession limits, but one member of the public suggested that an 18,000-lb (8.16-mt) possession limit is sufficient without offering any explanation.

Response: This final rule implements the proposed possession limits, including those implemented as an AM. The Council did not consider an 18,000-lb (8.16-mt) possession limit and we cannot implement such a limit through this final rule. The Council can consider revising the possession limit through a future action, including via annual specifications.

Comment 9: Wild Oceans/CLF and SeaFreeze supported the proposed status determination criteria, with the former noting that alternative methods for developing these criteria are appropriate given the poor nature of existing science for Atlantic chub mackerel. Lund's, SeaFreeze, and Pew supported the proposed permit and reporting requirements, with Pew recommending collecting tow-by-tow information. Lund's and SeaFreeze supported the transiting provision, indicating that the flexibility is necessary to allow vessels to continue historic operations targeting Atlantic chub mackerel outside of the Management Unit. Lund's supported fishery/species exemptions for Atlantic chub mackerel, administrative measures, and corrections to existing regulations.

Response: This final rule implements the proposed status determination criteria, permitting and reporting requirements, transit provision, administrative measures, fishery/species exemptions for Atlantic chub mackerel, and regulatory corrections. This rule does not implement tow-by-tow data collections. Although the Council's Fishery Management Action Team noted that more information is needed to support the management of Atlantic chub mackerel and understand its role in the ecosystem, it did not recommend the Council adopt tow-by-tow reporting at this time. Because such reporting was not adopted by the Council and the commenter did not provide sufficient justification to warrant the increased time and cost burden to the public, this action implements the reporting requirements as proposed.

This final rule revises the introductory text in § 648.7(b)(1)(i) to accommodate regulatory changes made by a final rule implementing Amendment 6 to the Tilefish Fishery Management Plan (RIN 0648-BJ38). Reference to the expiration of temporary Atlantic chub mackerel measures on December 31, 2020, included in that paragraph are removed by this final rule. The paragraph header “Jigging exemption” was removed from § 648.23(a)(2)(ii) to maintain consistent format with paragraph (a)(2)(i) of that section which does not have a paragraph header.

Pursuant to section 304(b)(3) of the Magnuson-Stevens Act, the NMFS Assistant Administrator has determined that this final rule is consistent with Amendment 21 to the Atlantic Mackerel, Squid, and Butterfish FMP, other provisions of the Magnuson-Stevens Act, and other applicable law.

This final rule has been determined to be not significant for purposes of Executive Order 12866. This final rule is not an Executive Order 13771 regulatory action because this rule is not significant under Executive Order 12866.

A final regulatory flexibility analysis (FRFA) was prepared. The FRFA incorporates the Initial Regulatory Flexibility Act (IRFA) analysis, a summary of the significant issues raised by the public comments in response to the IRFA, NMFS responses to those comments, and a summary of the analyses completed in the Amendment 21 EA to support the action. The proposed rule for this action includes a summary of the IRFA. A description of why this action was considered, the objectives of and the legal basis for this rule is contained in Amendment 21 and in the preambles to the proposed and this final rule. All of the documents that constitute the FRFA are available from NMFS (see ADDRESSES ).

The public did not raise any significant issues in response to the IRFA, so no changes were made from the proposed rule.

For the purposes of the Regulatory Flexibility Act (RFA) analysis, the ownership entities (or firms), not the individual vessels, are considered to be the regulated entities. Ownership entities are defined as those entities or firms with common ownership personnel as listed on the permit application. Because of this, some vessels with Federal Atlantic mackerel, longfin squid, Illex squid, or butterfish permits may be considered to be part of the same firm because they may have the same owners. The North American Industry Classification System (NAICS) is the standard used by Federal statistical agencies in classifying business establishments for the purpose of collecting, analyzing, and publishing statistical data related to the U.S. business economy. For purposes of the RFA, a business primarily engaged in commercial fishing activity is classified as a small business if it has combined annual gross receipts not in excess of $11 million (NAICS 11411) for all its affiliated operations worldwide. A business primarily engaged in for-hire (charter/party) operations is characterized as annual gross receipts not in excess of $7.5 million. To identify these small and large firms, vessel ownership data from the permit database were grouped according to common owners and sorted by size. The current ownership data set used to determine the size of the business entity in this analysis is based on calendar years 2015-2017.

This action affects any commercial or party/charter vessel that catches Atlantic chub mackerel from Maine through North Carolina. Although there is the possibility that a vessel historically caught Atlantic chub mackerel without being issued a Federal permit, the number of such vessels is likely less than 10 based on dealer data. Therefore, for the purposes of this analysis, any vessel that reported any amount of Atlantic chub mackerel landings on VTRs submitted to GARFO during 2008-2017 would be potentially affected by this action. Based on this approach, 86 commercial fishing entities would be affected by this action, 85 of which (99 percent) were categorized as small business entities using the definition specified above. From 2015-2017, these entities averaged $1,343,855 in annual revenue from commercial fishing. Fewer than three entities depended upon Atlantic chub mackerel from more than 1 percent of total fishing revenues during 2015-2017. Seventy-seven party/charter entities would be affected by this action, all of which were classified as small businesses. These entities averaged $316,860 in annual fishing revenues during 2015-2017, with dependence on Atlantic chub mackerel assumed to be low based on available information and public input. Therefore, due to potential overlap between vessels conducting both party/charter and commercial operations, a maximum of 163 entities would be affected by this action, nearly all of which are small entities.

This final rule contains a collection-of-information requirement subject to the Paperwork Reduction Act (PRA) and which has been approved by the Office of Management and Budget (OMB) under control number 0648-0202. The proposed rule included reference to the burdens associated with vessel logbook reports under OMB control number 0648-0212. However, because we ultimately did not change logbook information collections or associated instructions, this final rule removes reference to that information requirement. Public reporting burden for these collections of information, including the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information, are estimated to average, as follows:

1. Initial Federal vessel permit application, OMB# 0648-0202, (45 minutes/response);

2. Initial Federal dealer permit application, OMB# 0648-0202, (15 minutes/response); and

3. Initial Federal operator permit application, OMB# 0648-0202, (60 minutes/response).

Notwithstanding any other provision of the law, no person is required to respond to, and no person shall be subject to penalty for failure to comply with, a collection of information subject to the requirements of the PRA, unless that collection of information displays a currently valid OMB control number.

As noted in the proposed rule, although the no-action alternatives for most measures in this action would minimize adverse economic impacts, they do not meet the objectives for this action and would not be consistent with the Magnuson-Stevens Act. This final rule implements long-term measures that enable fishery participants to catch Atlantic chub mackerel at or close to their historic levels, with the TAL implemented by this action representing a 57-percent increase compared to the temporary landing limit implemented by Amendment 18. This action reduces the Atlantic chub mackerel ABC by 84,500 lb (38.3 mt) to fully account for the expected Atlantic chub mackerel catch (landings plus discards) from South Carolina through Florida based on historic data. Similarly, the 6-percent discard rate implemented by this action reflects the long-term discard estimates from available observer data. These measures are necessary to ensure the fishery does not exceed the overall Atlantic chub mackerel ABC and ACL, minimize the potential for overfishing this stock, and prevent overfishing from occurring, as required by the Magnuson-Stevens Act.

Section 212 of the Small Business Regulatory Enforcement Fairness Act of 1996 states that, for each rule or group of related rules for which an agency is required to prepare a FRFA, the agency shall publish one or more guides to assist small entities in complying with the rule, and shall designate such publications as “small entity compliance guides.” The agency shall explain the actions a small entity is required to take to comply with a rule or group of rules. As part of this rulemaking process, we prepared a letter to permit holders that also serves as small entity compliance guide (the guide). Copies of the guide ( i.e., permit holder letter) will be sent to all entities issued a longfin squid, Illex squid, Atlantic mackerel, or butterfish permit. The guide and this final rule are available upon request from the Regional Administrator (see ADDRESSES ).

For the reasons set out in the preamble, 50 CFR part 648 is amended as follows: